Two-thirds of companies say better collaboration with suppliers will help minimize supply disruptions, but many admit they are struggling to achieve the goal, according to a study from procurement software company Ivalua and Forrester Consulting.
Titled Chain Reaction–Holistic Supplier Management is Key to Business Success, the May report outlines strategies organizations are taking to minimize the frequency and impact of supply chain disruptions. More than half (56%) said they have implemented automated risk monitoring to notify them of disruption, while 54% said they have increased inventory levels. A further 46% said they have turned to onshoring or nearshoring to mitigate risk, while 44% said they have negotiated preferred supplier access to key goods.
Despite those efforts, barriers to success remain, including a lack of visibility into direct and sub-tier suppliers and an inability to collaborate efficiently and at scale, according to Alex Saric of Ivalua. Efforts to “digitalize” procurement can help “unlock the power of supplier collaboration and ensure supply chain resilience,” according to Saric.
“In an age when Black Swan events are becoming more commonplace, collaborating with your suppliers has never been more critical,” Saric said in a press release announcing the study’s findings.
In addition to risk mitigation, the study also found that improved collaboration between procurement teams and suppliers can help companies get closer to meeting sustainability and innovation goals. More than 70% of respondents said supply chain sustainability has become more of a priority since the onset of the Covid-19 pandemic in 2020, with many saying they have incorporated sustainability into their procurement key performance indicators (KPIs) and have begun setting minimum sustainability thresholds for suppliers to achieve. Although organizations are prioritizing investments in recycling, reducing their carbon footprint, and supporting diverse businesses, the report found that many are facing barriers to success. More than four-in-ten organizations (43%) are lacking systems that enable efficient collaboration with suppliers to improve sustainability, 41% lack the ability to measure progress on such goals, and 40% are unable to engage sub-tier suppliers, according to the report.
When it comes to innovation, 70% of respondents said they see opportunities to increase their organizational value by collaborating with suppliers on product innovation. But as with risk and sustainability, barriers persist. Respondents said innovation efforts are being hindered by an inability to assess supplier capabilities, a lack of supplier willingness to share innovations, and a lack of systems to enable collaboration with suppliers. To overcome those barriers, companies say they must: incorporate product/service innovation into procurement KPIs (57%); give suppliers more flexibility in how they meet requirements (56%); and reduce the pressure on cost savings (52%). Nearly 60% of respondents said they are also looking to implement systems that allow them to collaborate with suppliers on product innovations.
“A lack of collaboration has become a running theme for organizations, which is impeding them from realizing greater value from suppliers—whether it’s driving innovation, achieving sustainability goals, or improving supply chain resilience,” Saric also said in the release. “A smarter, more holistic approach to procurement and supplier management is needed. By digitalizing procurement processes, organizations can effectively discover, assess, engage, and monitor suppliers, enabling them to measure progress against key business priorities such as supply continuity, ESG [environmental, social and governance] performance and innovation.”
Forrester Consulting conducted the survey in March on behalf of Ivalua. The firm surveyed 462 procurement decision makers at companies with 1,000 or more employees in North America, Europe, and Asia Pacific.