CPOs 'confusing risk with resilience', says Gartner report
A new Gartner report says too many chief procurement officers (CPOs) are endlessly firefighting day-to-day problems and challenges at the cost of forward planning and risk mitigation.
Gartner’s report - Shockproof Your Supply Chain for the New Age of Disruption - details how endless disruptions to global supply chains have left CPOs with insufficient time to recover between them, and that many “are confusing risk mitigation with resilience”.
“Their ability to respond effectively is depleted,” Gartner says. “The cost of recovery is constantly increasing and CPOs’ focus is misdirected to solving the most immediate and simplest issues, time and again.”
The report outlines further serious problems:
- As risks arise more frequently and with wider reach and urgency, CPOs lack the capacity to learn from past issues to prevent future disruptions causing similar issues.
- Amid continual disruptions, CPOs are unable to devise long-term innovative strategies, such as disruption-proof products investments in processes that provide a competitive edge
Gartner advice to CPOs to thrive amid supply disruption
The Gartner report goes on to offer three key pieces of advice for CPOs who want their supply chain to remain operational and competitive despite constant disruptions. These are:
- Manage and mitigate risks beyond just the impacted area, by taking a view of future fragilities across the entire organisation. Gartner says that business areas not affected “should also be evaluated and adjusted because unexpected developments could turn into vulnerabilities”.
- Feed back all disruption and response lessons into preventive measures designed to improve risk management’s response to future disruptions. “Connect supply chain risk management to business continuity management, and regularly review and test business continuity plans when risk management responses fail,” the report says.
- Invest in emerging technologies and digital business platforms that will augment operational excellence. “Adopt a practice of exponential investment,” Gartner says. “This creates an outside-in supply ecosystem that enables organisations to create their own markets and robust demand with innovation.”
The Gartner report concludes: “Over the past few years, supply chains have been disrupted by trade wars, Brexit, the semiconductor shortage, the coronavirus pandemic, the Russian invasion of Ukraine and global inflation.
Firms must adjust to disruption to create value - Gartner
“Organisations need to adjust to this reality if they are to create value in a turbulent future, yet they often confuse risk management with resilience.”
Resilience, says Gartner, is the capacity of organisations “to recover, absorb and avoid negative impacts from disruptions”. Risk, it says, is “the uncertainty that organisations face in their operations and from third parties”
The report goes on: “To thrive in the age of disruption CPOs must collaborate with stakeholders inside and outside their organisation, and begin thinking and acting like CEOs and chief supply chain officers, to influence and drive changes beyond the limitations of their current priorities, such as cost and operations management.
Gartner points out that resilience “is not achieved in a silo but requires timely and holistic strategy executions” - and investment.
The report says that, on average, supply chain risk management investment increased 30% from 2021 to 2022.
“Resilience does not come for free, but if done right it will be the most profitable investment an organisation can commit to in the age of disruption, where the unexpected is the new normal.”