US manufacturers must invest to reduce supply chain risk

US manufacturers lack of investment in leadership and technology is putting their supply chains at risk, says a new survey by Accenture. As recent headlines show, supply chain disruptions can impact shareholder value and harm brand credibility; the report suggests that such supply chain disruptions can have a 7% impact on shareholder value. With global supply chains becoming increasingly splintered, with more suppliers and partners involved, there is a rising catalogue of risks ranging from political and social to regulatory and natural. As we have previously highlighted, there is also growing scrutiny of and warnings over litigation and reputational risk for firms that knowingly or unknowingly fail to implement safeguards in supply chains.

Supply chain disruptions draw big headlines. It’s no wonder that when manufacturers fall prey to such problems, then media, analysts, investors, customers, partners and other constituents all have reason to be concerned. Research by Accenture has shown a supply chain disruption can have a 7% impact on shareholder value . The impact on the brand can be even worse.

While the impacts remain harsh, the risks are rising. Global supply chains are growing more complex and convoluted as manufacturing is increasingly outsourced. More layers of partners and suppliers are involved. The lines reach across geographic regions and time zones, bringing a catalog of risks ranging from social, political, regulatory and natural (weather) causes.

In December 2015, GT Nexus and YouGov surveyed 250 senior US manufacturing executives to gauge their outlooks on supply chain in 2016. We set out to learn their top concerns, challenges, goals and opportunities. We have now published State of the Global Supply Chain and one message is clear from the study results: risk and uncertainty loom as a daunting concern, but leadership and innovation are missing.

A snapshot of the survey findings:

40% of manufacturers have been impacted by a supply chain disruption in the last 12 months

27% said keeping up with customer demands is their number one supply chain challenge

12% said their primary challenge is dealing with the high level of risk in global markets

11% said having a globally dispersed network of partners is their top challenge

Respondents identified the following as the top future challenges for their supply chain:

29% said currency fluctuations and geo-political risk

14% said labor strikes

8% said the Trans-Pacific Partnership

Lack of leadership

Despite such high levels of risk and uncertainty, it was surprising to find that only 24% of respondents currently have a Chief Supply Chain Officer in place. That leaves 76% without a strategic leader and visionary at the helm. Lack of a C-level leader limits innovation and strategic transformational initiatives.

A supply chain disruption, such as a factory collapse, brings massive impact to revenue and the brand. The supply chain touches every part of the organization, and hundreds of trading partners globally. It is an extension of the business that has to be managed and controlled. Visibility, transparency, and collaboration are essential to making this happen.

Unfortunately, without a strategic C-level leader, supply chain strategies are shorthanded or misguided. Initiatives are doomed to collapse without a champion of end-to-end visibility or a visionary who can move the enterprise towards a supply network strategy.

Tech deficiency

Survey respondents gave equally troubling answers when asked which technology they believed would most heavily impact their supply chain in 2016:

17% said they don’t know

38% believe their supply chain will not be impacted by technology

The lack of energy and knowledge around technology is problematic and disappointing. There is clearly a need for clarity and education around supply chain technology. If supply chain executives aren’t tracking the latest innovations in collaboration and execution, then their ability to evolve and transform to mitigate risk is greatly marginalized.

Consider the increasingly dispersed nature of supply chain networks today, and the challenges that arise from parties operating on different systems, workflows and processes. Data and visibility are extremely fragmented. Supply chain data that resides in a silo provides no value to the network. When manufacturers can collect and share data across the network and use it for greater visibility and execution, risk is mitigated and opportunities to drive growth spike.

Today’s supply chain leaders have an opportunity to be tech-savvy visionaries that grasp the power of cloud-based connectivity and networks. But they need to embrace that mindset – and win a presence at the C-level – to truly realize the potential of supply chain excellence in 2016.