Blog | June 10, 2014 | by Kate Freer

Supply Chain Disruption: Expect the Unexpected

A recent Aberdeen Group study tracks why best-in-class Chief Supply Chain Officers are better able to handle unplanned events. According to Murphy’s Law, “Whatever can go wrong, will go wrong.” The more complex the situation, the more likely this will occur. And what could be more complex than a company’s end-to-end supply chain?

In March, Aberdeen Group published a study, “The Chief Supply Chain Officer’s View of Supply Chain Disruptions: How the Best-in-Class Respond,” which identified the priorities and best practices that distinguish the top CSCOs from the rest of the pack. Market volatility and increasing supply chain costs were a major concern to all of the CSCOs surveyed, but after that, concerns diverged. 59% of Best-in-Class companies viewed raw material price volatility as the largest disruptor, while only 23% of all others ranked this as a major concern. Best-in-Class companies have so many of their internal functions under control; those functions that are a larger concern for all of the others. However, regardless of the internal control, even the Best-in-Class are affected by external forces beyond their control, like raw materials.

What makes a Best-in-Class CSCO? When tracking the responsibilities of each of those surveyed, what is clear is that the Best-in-Class have a much wider range of responsibility and control than those lagging behind, including responsibility for all core supply chain functions:

  • Supply Chain Planning: Best-in-Class 83%; All Others 67%
  • Procurement: Best-in-Class 77%; All Others 63%
  • Distribution/Warehousing or Logistics; Best-in-Class 77%; All Others 60%

The study indicates that this holistic view of the end-to-end supply chain gives them the edge when it comes to handling disruptions. This is evidenced by the following results:

  • Service Level: Best-in-Class 97%; All Others 84%
  • Total Logistics Costs: Best-in-Class costs are 50% less than those of All Others

By viewing the areas that Best-in-Class CSCOs target for improvement, you can see why they’ve achieved this rank:

  • Supply Chain Visibility: Best-in-Class 63%; All Others 42%
  • Supply Chain Collaboration: Best-in-Class 63%; All Others 46%
  • Sourcing/Procurement: Best-in-Class 53%; All Others 43%
  • Supply Chain Suppliers: Best-in-Class 650%; All Others 32%

The top CSCOs also grasp the importance of sustainability and how that affects corporate standings and profits. The supply chain is the area where oversight of sustainability goals and initiatives is most difficult. The Best-in-Class try to tackle every aspect. Here the difference between them and the rest of the pack couldn’t be starker:

  • Improving energy use efficiency: Best-in-Class 57%; All Others 26%
  • Changing the way products are manufactured:  Best-in-Class 43%; All Others 18%
  • Changing the way products are manufactured:  Best-in-Class 43%; All Others 18%
  • Using alternative fuels/sources of energy: Best-in-Class 39%; All Others 9%

The Best-in-Class CSCOs oversee the full spectrum of areas where things can go wrong, even those areas where they have limited or no control, like raw material volatility. The scope of their responsibilities gives them the ability to find ways to control or mitigate the damages these disruptions may cause. And this holistic view also exposes those areas most in need of improvement. The top SCSCOs may not be able to predict every disruption, but they are the most likely to find a way to effectively deal with any occurrence at any point in the supply chain.

Read the full study for more details.