As companies shift toward balancing cost efficiency and supply chain resilience, most remain unprepared to manage ongoing disruption, new research from Institute for Supply Management and Amazon Business indicated.
Although 71% of companies and other organizations polled said they are balancing cost and risk in driving procurement strategy, only 45% said they are prepared for supply chain disruptions. And 65% rely on manual reporting to gather data, highlighting a widening gap between strategy and execution, according to the white paper, “Balancing Cost and Risk: An Operating Model for Supply Chains.” The strategic gap exists at a time when organizations face continued geopolitical, economic and operational volatility.
In the research, 8% of the respondents said they are very prepared for disruption, and 37% said they are prepared. Otherwise, 43% said they are somewhat prepared, 9% said not they are very prepared, and 3% said they are unprepared.
The survey exposed uneven adoption of procurement technologies and risk evaluation practices in supply chains today. Even if most organizations use e-procurement platforms (58%) and supplier portals (51%), more advanced tools such as predictive analytics and risk monitoring remain less widely implemented. As things are, 64% of organization polled used business impact analysis, but fewer employed more advanced methods such as risk matrices (49%) and scenario planning (46%), underscoring gaps in capability maturity, the research maintained. Risk assessment continues to rely heavily on traditional measures such as financial health and quality performance, although broader risks such as cybersecurity and regulatory disruption are gaining importance.
Cybersecurity emerged as the leading risk concern in the research, which points to expanding scope of supply chain vulnerability. Organizations are prioritizing cost optimization, supplier diversification and risk management capabilities as they work to strengthen resilience. However, many continue to rely on familiar cost management tactics, with long-term contracts, cited by 71% of research participants, remaining the most common approach to dealing with costs during uncertainty. Larger organizations also are adopting pricing and hedging strategies.
Many organizations are moving toward a broader total cost of ownership approach incorporating service performance, process efficiency and disruption exposure alongside price, a model supported by four key practices:
- Diversifying supply sources
- Improving visibility across supply networks
- Accelerating decision-making cycles
- Expanding scenario planning capabilities
The research suggests that recognizing the importance of resilience is only the first step to supply chain improvement. Organizations need to align strategy with execution by improving data visibility, adopting advanced technologies and enabling faster, more coordinated decision-making across the enterprise.
“Organizations today are operating in an environment where disruption is no longer an exception. It is an ongoing reality,” said Debbie Fogel-Monnissen, ISM interim CEO. “Leaders recognize the need to balance cost with resilience, but our research shows many are still building the capabilities to act on that insight. Closing that gap is essential to protecting performance and ensuring continuity.”
