Supply disruptions top list of concerns for procurement leaders

Natural disasters, transportation-related issues, and other disruptions are the top concerns for procurement leaders according to a recently released survey from Gartner.

The survey of 258 sourcing and procurement leaders, conducted from June to July 2024, found that 42% named supply disruptions as their top concern.

“CPOs’ concerns about supply disruptions reflect the often unpredictable nature and potentially existential impacts of these events,” said Andrea Greenwald, senior director analyst in Gartner’s Supply Chain practice. “They are coming to understand that the reactive measures they have employed to manage risks over the past four years will not be sufficient for the next four.”

Disruptions were not the only concerns for procurement leaders. Macroeconomic factors (33%), geopolitical trends (32%) and compliance issues (32%) were also top concerns.

Macroeconomic and geopolitical trends are somewhat intertwined as President-elect Donald Trump floats widespread tariffs.

“CPOs’ concerns about supply disruptions reflect the often unpredictable nature and potentially existential impacts of these events. They are coming to understand that the reactive measures they have employed to manage risks over the past four years will not be sufficient for the next four.”

In a November LinkedIn post, Jason Miller, Eli Broad Endowed Professor of Supply Chain Management and Interim Chairperson of the Department of Supply Chain Management within Michigan State University’s Eli Broad College of Business, explained that tariff actions could ramp up inflation. As an example, he said a 10% universal tariff represents a 2.5% cost shock to goods.

“This will be made worse because many manufacturers will respond to receiving tariff protection by raising their own prices,” he wrote. “One challenge with looking at costs alone is that markups also need considered, and we don’t fully know how wholesalers and retailers will respond. Regardless though…universal tariffs will be inflationary for goods. Anyone who is telling you otherwise either has a political motive or doesn’t understand basic economics.”

(Photo: Gartner)

Researchers Dario Caldara and Matteo Iacoviello produce the Geopolitical Risk with Trade index. That index has increased 30% from 2020 to 2024, reflecting increased volatility in global trade relations due to the geopolitical landscape, explained Hugo Teophilo, a senior organizational readiness partner at Novo Nordisk, in a recent Supply Chain Management Review article. During the same time period, the New York Fed’s  Global Supply Chain Pressure Index has nearly tripled, highlighting the heightened stress and complexity that supply chains are experiencing worldwide.

The Gartner survey also found that “leading organizations are 2.2 times more likely to view energy availability and cost as a top risk; indicating a focus on future emerging risks.” The firm noted that as electrification demand increases, these companies are sensitive to the energy supply.

Recommendations

Gartner says firms can take three approaches to help minimize the risks they face. These include:

• Assess and prioritize risks: CPOs should evaluate the impact of all major risk factors and prioritize them based on their likelihood, impact, and velocity. This includes considering organizational maturity and industry-specific factors.

• Develop and/or strengthen partnerships: Segment suppliers that provide critical goods and services to the organization and implement techniques to proactively safeguard the organization.

• Navigate internal complexity: Collaborate with strategy, finance, and legal teams to address macroeconomic factors and compliance issues effectively.

Gartner clients can find the full survey and recommendations at: Prioritizing and Managing Risks to Procurement’s Future Success. Nonclients can access more information on the topic in: Connect to Your Chief Procurement Officer Community.

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