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

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

However, leading companies recognize the importance of their supply chains and manage these risks using risk-impact analysis; financial risk management, such as hedging; and disaster planning to 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 includes input from procurement and supply chain executives of more than 185 leading companies from 32 different industries in the manufacturing, process industries and services sectors, with average annual revenues of about $12 billion.

As part of the analysis, 13 “leading companies” that consistently demonstrate high levels of procurement performance were identified.

The study finds that just 1-in-5 followers of the leading companies 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 natural disaster away” from a major disruption.

According to the study, leaders see higher yields from their sourcing efforts. Moreover, once contracts are in place, leaders achieve a 90 percent compliance rate compared to 79 percent for followers.

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

Seven leading practices were found that all 13 companies shared:

• Leading companies align procurement strategy with their overall business goals. These companies also engage more with other business functions to address a larger percentage (94 percent) of external spending. As a result, leaders were better prepared to react to the 2008 financial crisis, delivering greater benefits faster.

• Leading companies consistently outperform other companies in contributions to top and bottom-line strategies. By working closely with their suppliers these companies improve their new product development performance, reduce time-to-market for new products, and create new business opportunities—all top-line benefits for their companies.

• Leading procurement organizations excel at risk management by anticipating, tracking and planning mitigation strategies covering a wide range of threats.

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

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

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

• The leading companies are more forward-looking and bold in their approaches to recruiting and retaining top talent. This includes establishing relationships with universities and using a systematic approach to managing a more diverse and dispersed workforce.

Special Reports /

Leaders Share Traits for Supply Chain Success, Study Finds

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