Has the C-suite forgotten the lessons of the pandemic already?
Eighty-eight percent of US supply chain execs say that their C-suite sees their department as a cost centre and a quarter admit they are not ready should another pandemic hit
The lessons from the COVID-19 pandemic appear to be rapidly receding according to a survey of supply chain leaders, as the supply chain has gone back to be viewing as a cost centre by the overwhelming majority of company C-suites, even as are major gaps in measurement, communication and preparedness persist.
In the research from EY, which questioned US C-suite executives and senior supply chain executives, 88% of those on the supply chain side said that their C-suite views them as a cost centre and 78% think that the focus is now back on cost management and reduction.
Far from perfect
This data is problematic, as the results also note substantial gaps in preparedness for future crises, supply chain performance measurement and partner communication.
Although 87% of supply chain leaders pointed to significant investments made in enhancing supply chain resiliency over the last few years, 24% said they had limited or no preparedness for a future pandemic and a fifth (19%) said the same for supply shortages.
This substantial share reporting the latter is concerning in light of the current major port strike, which if it continues over the course of several weeks poses a risk of severely straining inventories.
Measurement and communication gaps
A return to focusing on costs within supply chains seems premature according to the results, as the majority of companies are struggling with visibility and measuring the performance of their supply chains.
The research found that the top challenge reported was the limited visibility and transparency companies have over their supply chains, a result which is reinforced by 22% reporting that they are restricted to digitally communicating with suppliers via spreadsheets and emails and 42% of organisations currently only at the early stages of adopting digital tools and moving over to the cloud.
This appears to be impacting business leaders’ ability to measure how effective their supply chain operations are. Nearly all – 97% – of those surveyed are facing challenges in their supply chain metrics, with the main focus in these metrics once again on the supply chain as a cost centre.
The most popular metrics reported are rates of return (49%), cash-to-cash cycles (46%) and supply chain costs as a percentage of sales (45%).
Measurement gaps are leading to misaligned outlooks and objectives as 39% of supply chain executives say that one of their top internal challenges is proving the value of cross-functional collaboration.
Labour shortages drive automation adoption
Another major challenge and high priority to address among participants is ongoing labour shortages.
This is driving investment into automation, with the most popular fields for technology investment being automated logistics (48%), driverless vehicles including forklifts and trucks (48%), control towers (47%), robotics (46%) and demand sensing (45%).
Despite this, just 25% of C-suite respondents think their supply chains will be mostly autonomous by 2030 compared to 39% of supply chain executives.