Procurement managers see supply disruptions as biggest risk

Supply disruptions are the biggest threat to Procurement. This is according to new research from analyst firm Gartner. The research is designed to give chief procurement officers (CPOs) insight into the key risks to procurement operations, and identify actions that can be taken to effectively manage these risks.

‘The concerns of CPOs about supply disruptions reflect the often unpredictable nature and potentially existential consequences of these events,’ says Andrea Greenwald, Senior Director Analyst at Gartner. ‘They are beginning to understand that the reactive measures they have taken to manage risk over the past four years will not be enough over the next four years. The need to establish a strategic vendor risk management programme has never been more important than now. Companies that fail to develop such a programme now will suffer badly in the next crisis.’

Of the 258 procurement managers surveyed, 42% identified supply disruptions – such as natural disasters and transportation problems – as the key risk to procurement success. This prioritization stems from the unpredictability and speed of such disruptions and the magnitude of their impact. Macroeconomic factors, including economic downturns and inflation, came second. While these factors are more predictable, they can still significantly affect long-term sourcing strategies. Geopolitical issues – including import tariffs and regulatory changes – and compliance issues, including regulatory and contractual risks, came third in the ranking of the key risks.

Energy supply concerns

The survey also found that leading companies are 2.2 times more likely to consider the availability and cost of energy as a key risk. According to Gartner, this indicates a focus on emerging risks in the future. And the more electrification increases the demand for energy, the more the fragile network infrastructure leads to concerns about whether the energy supply can keep pace. This is why leading companies recognize that access to energy will be a key risk in the future.

Evaluate the impact of risk factors

Therefore, according to Gartner, CPOs are advised to evaluate the impact of all key risk factors and prioritize them based on their likelihood, impact and speed. This should also take into account organizational maturity and industry-specific factors. In addition, CPOs should segment suppliers of critical goods and services, and implement techniques to proactively protect the business. Lastly, Gartner recommends collaborating with teams on strategic, financial and legal matters to effectively address macroeconomic factors and compliance issues.