Digital Supply Chain
EY: Senior Leadership Underestimates the Importance of Supply Chains
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Author: Tom Chapman
October 14, 2024
According to recent EY research, strategic achievements made by supply chain executives in collaboration with senior leadership teams during the pandemic may be eroding.
Although the COVID-19 pandemic is gradually becoming a thing of the past, EY’s study shows that the strategic gains achieved by supply chain leaders alongside executive teams during this period might be diminishing.
The consulting giant found that while 88% of supply chain executives report their company’s supply chains play a critical role in enhancing customer experience, an equal proportion of senior leadership team members view supply chain functions as cost centers—a revelation of several cognitive gaps.
Ashutosh Dekhne, EY Americas Supply Chain and Operations Practice Leader, explains: “A series of supply chain shocks since the onset of the pandemic elevated the status of supply chain leaders within executive teams. However, executives are increasingly inclined to see supply chains as cost centers rather than engines for growth.”
“Our research highlights cognitive gaps between supply chain leaders and senior leadership regarding the value of supply chains, digital maturity, and the benefits of cross-functional collaboration,” he added.
Supply Chain Risks Losing Executive Team Influence
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EY’s 2024 Supply Chain Survey, “Bridging the Disconnect in Senior Leadership,” studied supply chain leaders representing various industries with annual revenues of at least $500 million.
The study emphasizes the urgent need for businesses to change their perspective and investment approach towards supply chains to compete and succeed in an increasingly complex and volatile era.
Despite heightened awareness of supply chain importance, over three-quarters (78%) of supply chain leaders report that their companies have reverted to a focus on supply chain cost management post-pandemic. Among them, 28% cite cost-cutting as one of the top three priorities—contrasting sharply with pandemic-era strategies.
Moreover, while executive teams are keen on integrating technology across the organization, they seem to underestimate the role of supply chains in this transformation.
While both supply chain leaders and senior leadership prioritize modernization for supply chains, their levels of optimism differ. Supply chain executives are more likely to believe that by 2030, most of their company’s supply chains will be automated (39% compared to 25% among executive teams), while the latter is more inclined to think it would take another decade (27% compared to 12% for supply chain leaders).
In fact, about a quarter (26%) of executives believe that digital connectivity with suppliers in their companies is limited to email and shared spreadsheets—a figure significantly higher than the 16% reported by supply chain leaders. This highlights an underestimation of progress towards digital maturity in supply chains.
Additionally, there are clear cognitive gaps regarding the necessity for cross-functional collaboration within supply chains and with external partners and customers, as well as the benefits such greater collaboration brings to businesses.
About two-fifths (39%) of supply chain leaders acknowledge that demonstrating the value of cross-functional collaboration is one of their current major challenges.
Supply Chain: Strategic Growth Driver
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EY’s view is that supply chain leaders must reposition and elevate their role within organizations by showcasing how technology-enabled supply chain capabilities can drive growth beyond mere cost-cutting, enhance competitiveness, and support key business objectives.
“Differentiated supply chains are critical assets for driving revenue growth and organizational flexibility,” Ashutosh continued.
“Supply chain executives must bridge the disconnect with senior leadership to reassert their influence in decision-making and guide future innovation and expansion.”
Ashutosh and his team of EY Supply Chain and Operations experts recommend several steps to shift executive perceptions:
* **Align supply chain metrics with business goals:** Nearly all (97%) supply chain leaders report challenges with supply chain metrics, with only 44% currently using customer satisfaction as a key performance indicator (KPI). EY suggests: “Supply chain strategies should integrate metrics that reflect not just cost efficiency but also contributions to customer service, responsiveness, and innovation.”
* **Expand the impact of supply chains on customer experience:** Supply chain leaders overlook customer experience; 84% admit spending more time on internal operations than on customer needs, with 76% prioritizing new product innovations over creating optimal customer experiences. EY points out: “Supply chain leaders should integrate customer experience metrics into their reporting and communicate customer success to executive colleagues, emphasizing how improvements drive growth and revenue.”
* **Lead organizational integration through supply chains:** To enhance supply chain resilience, 80% of supply chain leaders are improving internal cross-functional collaboration, while 79% are enhancing external supplier cross-functional collaboration. EY urges: “Continue to encourage and demonstrate collaboration between supply chain functions and other departments as well as with external partners to increase transparency and align operations with business goals.”
* **Cultivate a future-ready supply chain workforce:** Addressing labor and skill shortages is one of the top three priorities for supply chain leaders. Bridging the perception gap on digital maturity in supply chains requires professionals skilled in the latest technologies and their applications within supply chains.
* **Go Beyond Resilience to Achieve Flexibility:** While 87% of supply chain leaders report significant investments by their organizations to improve supply chain resilience, one-fifth (19%) admit they are still unprepared for supply chain disruptions due to shortages. EY advises: “Enhance supply chain visibility and refine data and analytics capabilities; leverage AI to predict disruptions; keep business continuity plans up-to-date; diversify sources of supply, suppliers, manufacturing, and logistics partners.”
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