What is the top strategy being planned to mitigate risk?

Will Green is news editor of Supply Management
25 January 2021

The top strategy firms are planning to implement to mitigate supply chain risk is increasing visibility, according to a survey.

The Hackett Group’s Key Issues Study for 2021 found 50% of manufacturing organisations and 48% of service organisations intended to increase visibility to tier two and three suppliers in the next year.

For manufacturers, the next most popular planned strategies were expanding sources for risk data and market intelligence (42%), ensuring ability to quickly change suppliers (40%), and strengthening supplier relationships (40%). For service providers it was ensuring ability to quickly change suppliers (43%) and expanding data sources (29%).

For manufacturers, the most popular strategies that were currently being practiced were optimising inventory to buffer against risk (60%), ensuring all or most categories are multi-sourced (60%), and qualifying alternate suppliers (58%). For service providers it was conducting regular supplier risk evaluations (76%), strengthening supplier relationships (71%), qualifying alternate suppliers (67%) and ensuring categories were multi-sourced (67%).

The report said volatility and uncertainty were expected to continue into 2021 and the top two key issues for procurement were spend cost reduction and reducing supply risk.

“Most importantly, procurement and supply chain organisations will need to work together to increase visibility across the supply chain,” said the report.

Hackett said procurement’s most critical enterprise support functions – cost efficiency and digital transformation – were the ones with the “largest capability gaps”.

The report said the biggest hurdles to progress were stakeholder resistance to change, procurement staff deficiency in critical skills, and organisational complexity.

Hackett said sustainable procurement had entered the top 10 key issues for the first time, “indicating a major shift at the executive and board level”.

“Many procurement organisations are now incorporating both sustainable procurement and supplier diversity into their 2021 strategies,” said the report.

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