NU Online News Service, Nov. 8, 9:59 a.m.EST

While a string of international catastrophes are makingcompanies more vulnerable than ever to supply-chain disruptions, 80percent of companies are vulnerable to a major disruption,according to a study by a management-consulting firm.

However, leading companies recognize the importance of theirsupply chains and manage these risks using risk-impact analysis;financial risk management, such as hedging; and disaster planningto protect against unforeseen threats, according to A.T. Kearney's“Assessment of Excellence in Procurement” (AEP) study.

The study, the seventh in a series, began in 1992 and includesinput from procurement and supply chain executives of more than 185leading companies from 32 different industries in themanufacturing, process industries and services sectors, withaverage annual revenues of about $12 billion.

As part of the analysis, 13 “leading companies” thatconsistently demonstrate high levels of procurement performancewere identified.

The study finds that just 1-in-5 followers of the leadingcompanies use risk management aids such a risk-impact analysis,financial risk management and disaster-planning in procurement.This means that about 80 percent of the companies are “a naturaldisaster away” from a major disruption.

According to the study, leaders see higher yields from theirsourcing efforts. Moreover, once contracts are in place, leadersachieve a 90 percent compliance rate compared to 79 percent forfollowers.

“A key finding from the [study] is that supply managementorganizations that once were focused on cost reduction andadversarial relationships with suppliers are now developinglong-term category management strategies where collaboration withsuppliers on joint process improvement, innovation and new productsis delivering top-line value to corporations,” John Blascovich,A.T. Kearney partner and leader of the study, says in astatement.

Seven leading practices were found that all 13 companiesshared:

• Leading companies align procurement strategy with theiroverall business goals. These companies also engage more with otherbusiness functions to address a larger percentage (94 percent) ofexternal spending. As a result, leaders were better prepared toreact to the 2008 financial crisis, delivering greater benefitsfaster.

• Leading companies consistently outperform other companies incontributions to top and bottom-line strategies. By working closelywith their suppliers these companies improve their new productdevelopment performance, reduce time-to-market for new products,and create new business opportunities—all top-line benefits fortheir companies.

• Leading procurement organizations excel at risk management byanticipating, tracking and planning mitigation strategies coveringa wide range of threats.

• Leading companies use supplier relationship management (SRM)processes more consistently than followers. A structured processdrives strategic value through improvements in innovation andgrowth, better managed risk and vastly improved supply chains.

• These leaders were distinguished from other companies by theiruse of more advanced approaches to tailor their category strategiesto each situation.

• Leading companies are far more advanced in their adoption oftechnology. They have more control over what they spend becausethey have technology that allows for more visibility into spending.Most leading companies are fully automated with real-time access todata and are ahead in the adoption of technology to supportcontract management and compliance.

• The leading companies are more forward-looking and bold intheir approaches to recruiting and retaining top talent. Thisincludes establishing relationships with universities and using asystematic approach to managing a more diverse and dispersedworkforce.