Supply disruption is the top threat to procurement’s future success, according to a new survey by Gartner, followed by macroeconomic, geopolitical, and compliance risks.
The survey, conducted from June through July 2024 among 258 sourcing and procurement leaders, was designed to help chief procurement officers (CPOs) understand and prioritise the most significant risks that could impede procurement operations – and what actions can be taken to manage them effectively.
“CPOs’ concerns about supply disruptions reflect the often unpredictable nature and potentially existential impacts of these events,” says 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.
“The necessity of establishing a strategic supplier risk management programme has never been more critical as companies that neglect to develop such a programme now will struggle significantly when the next crisis arises,” Greenwald adds.
Forty-two percent of the procurement leaders surveyed identified supply disruptions such as natural disasters and transportation issues as the foremost risk to procurement success. This prioritisation arises from the unpredictability and velocity of such disruptions as well as the magnitude of their impact.
Macroeconomic factors – which include economic downturns, inflation, and other economic factors – rank as the second most significant risk. These factors, while more predictable, can substantially influence long-term procurement strategies.
Geopolitical issues, including tariffs and regulatory changes, and compliance issues, including regulatory and contractual risks, tied for the third most significant risks.
The survey also highlighted that leading organisations are 2,2-times more likely to view energy availability and cost as a top risk – indicating a focus on future emerging risks. As electrification drives demand for power, brittle grid infrastructure raises concern about whether the energy supply can keep pace. Therefore, leading organisations recognise that access to energy will become a significant future risk.
Based on the survey analysis, Gartner recommends that CPOs:
- Assess and prioritise risks: CPOs should evaluate the impact of all major risk factors and prioritise them based on their likelihood, impact, and velocity. This includes considering organisational maturity and industry-specific factors.
- Develop and/or strengthen partnerships: Segment suppliers that provide critical goods and services to the organisation and implement techniques to proactively safeguard the organisation.
- Navigate internal complexity: Collaborate with strategy, finance, and legal teams to address macroeconomic factors and compliance issues effectively.