Supply chain management: staying resilient during disruptions

Why business leaders should treat supply chain management as a competitive advantage, not just an operational task

In turbulent times, strong supply chain management helps companies grow and manage risk. This article shows business leaders how clear strategies, smart metrics, and the right technology can turn supply chains from a reactive expense into a driver of competitive advantage and sustainable growth.

Key Takeaways

• Supply chain problems hurt revenue at 94% of companies, making strong supply chain management a top priority for business leaders
• Companies with resilient supply chains can earn up to 55% more profit than competitors when disruptions happen
• Today's supply chain management balances low costs with being prepared for problems, moving from "just-in-time" to "just-in-case" planning
• Investing in digital supply chain tools delivers clear results: 20% lower operating costs and 11% higher profits compared to other companies
• Success requires leaders to agree on how to measure performance in four key areas: finances, customer service, operations, and risk management

When business becomes unpredictable, your supply chain determines whether your financial forecasts succeed or fail. The days of steady, predictable global trade are over, and instead, we face constant disruptions and instability. Major supply chain problems are no longer unusual events; they happen regularly, and businesses must be ready for them.

The financial impact is serious and direct. An overwhelming 94% of companies say supply chain disruptions have hurt their revenue. Accenture estimates that disruptions translate to US $1.6 trillion in missed annual revenue growth opportunities, with companies losing out on 7.4–11.0% of potential revenue growth due to operational shocks. At the same time, Hendricks & Singhal’s empirical research shows that disruptions tend to cause an approximate 11% increase in operating costs and a 7% drop in sales growth, reinforcing why strong supply chain management is absolutely critical for financial resilience.

What is supply chain management and why it matters

To use the supply chain as a strategic asset, business leaders must first agree on a modern, business-focused definition of supply chain management. This shared understanding provides the foundation for effective strategy, investment, and decision-making in an increasingly unpredictable global environment.

A plain-English definition of supply chain management

For a business leader, the answer to "what is supply chain management and why is it important?" goes beyond simple logistics. At its core, supply chain management (SCM) is the end-to-end coordination of three critical flows that determine business success:

1. The physical flow of goods from raw material to end customer
2. The digital flow of information that enables planning and visibility
3. The financial flow of cash that impacts working capital and profitability

This view elevates SCM from separate functions to an integrated business process. It controls how an organization creates and delivers value and connects market signals directly to the company's ability to take action.

Why supply chain thinking changed in a decade of disruptions

The importance of an updated definition for SCM has grown due to a decade of extreme disruptions. The old approach of minimizing costs and maximizing efficiency is no longer enough. A series of major shocks, including the COVID-19 pandemic, geopolitical conflicts, and extreme weather events have exposed serious weaknesses in lean global supply chains.

This has forced companies to completely rethink their strategy.

Supply chain excellence now requires balancing traditional cost efficiency with building resilience and backup systems. Boardroom conversations have shifted from the old "just-in-time" inventory approach that kept minimal stock to save money, toward "just-in-case" strategies that prepare for unexpected problems.

True modern efficiency means that you include in your calculations what it costs to be unprepared for disruptions. It requires specific investments to build stronger supply chains. These investments can include measures such as dual-sourcing and inventory buffers. Such strategies act like insurance policies, protecting against events that can cause major damage to the business.

The executive priority: safeguarding growth and cash while protecting service

Supply chain management serves as a strategic function that directly protects and enhances business value. Its primary objectives are clear and measurable:

• Protect revenue by ensuring business continues running and preventing the loss of sales
• Optimize working capital through smart management of inventory and cash flow cycles
• Guarantee customer service by ensuring products are available and deliveries are reliable

Why supply chain management is a CEO-level priority

Supply chain management has evolved from a behind-the-scenes task to a strategic priority that matters at the highest levels of the company. For the CEO and the board, a strong supply chain provides measurable competitive advantage and serves as a critical part of company oversight.

Competitive advantage you can measure

The most compelling reason for CEO-level focus is that supply chain resilience delivers measurable financial results. A major study by Boston Consulting Group found that companies identified as resilience leaders had gross profit growth 55 percentage points higher than companies that lagged behind.

This strong performance translates directly into better shareholder value. Another BCG study showed that during stable periods, the gap between top and bottom performers is 16 percentage points in total shareholder return, but during crisis periods, that gap nearly doubles to 30 percentage points. This proves that resilience delivers large returns when it matters most. Additional evidence shows that companies with procurement executives on their leadership teams as strategic decision makers see their share price outperform the market by over 130%.

Risk management as a board mandate

A McKinsey analysis found that over a decade, the average company in the consumer goods sector can expect to lose the equivalent of 30% of one year's EBITDA due to supply chain disruptions.

However, a significant gap in oversight continues. A 2023 McKinsey survey revealed that while risk and resilience dominate meeting agendas, fewer than half of companies report these risks to the board regularly, and only one in ten companies have a dedicated risk management budget. This is made worse by a lack of visibility deep in the supply network: just under half of executives understand the risks with their direct suppliers, and that figure drops to only 2% for third-tier suppliers and beyond.

This data points to a dangerous "strategic attention deficit" where 88% of senior executives now view the supply chain primarily as a cost center again. This assumption is a critical strategic error, as organizations that maintain focus on resilience are positioned to capture the 55-percentage-point gross profit advantage when the next disruption occurs.

From cost to customer: the measurable benefits executives expect

For any strategic initiative to gain the board's support, its benefits must be described in financial terms. This means using the language of profit and loss statements and balance sheets. Supply chain resilience and digitization investments must show clear, measurable financial returns.

Cost reduction without hurting service levels

A modern supply chain delivers significant cost savings through smart optimization, not thoughtless budget cuts. Top-tier companies that have embraced supply chain digitization report clear results with 20% lower operating costs and 11% higher EBIT compared to their peers.

Advanced technologies like artificial intelligence produce even more dramatic results. Based on McKinsey analysis AI-driven forecasting and automation can reduce logistics costs by 15%, lower inventory levels by 35%, and improve service efficiency by 65%. Supply management delivers a strong return. Recent data from CAPS Research shows an average ROI of about 731%, meaning companies save roughly $7.31 for every $1 invested.

Better customer satisfaction as a revenue driver

A resilient supply chain is a critical customer-facing function that has the power to keep customers. The COVID-19 pandemic provided a serious lesson when 77% of US consumers switched brands or stores, with two-thirds citing lack of product availability as the primary reason.

Customer tolerance for service failures is remarkably low. Studies show that 14% of customers will abandon a retailer completely after just one late delivery, while 16% will do the same after receiving a single incorrect order. A resilient supply chain that consistently delivers builds trust and reliability with customers, leading to lasting loyalty and sustainable revenue growth.

The five benefits every board cares about

When considering the five benefits of supply chain management from a strategic perspective, they align perfectly with the key performance indicators that every board examines:

1.     Enhanced Profitability: Digital tools and strategic management directly lower operating costs and improve profit margins. These savings flow straight to the bottom line.

2.     Protected & Accelerated Revenue: Strong supply chains prevent revenue loss. They also enable companies to capture market share from competitors during crises.

3.     Optimized Working Capital: AI-driven planning can reduce inventory levels. This frees up significant cash for reinvestment in other areas of the business.

4.     Increased Customer Lifetime Value: Reliable delivery and consistent product availability are critical drivers of customer retention. This prevents the high cost of losing customers to competitors.

5.     Reduced Enterprise Risk: Proactive risk management reduces the threat of major financial shocks. Strong risk management protects overall shareholder returns.

The following table summarizes the most powerful financial proof evidence, summarizing the business case for investment.

Why supply chain management drives growth beyond cost

Ultimately, the conversation must focus on growth. A strong supply chain is a platform for core business strategy. It allows companies to bring new products to market faster, enter new markets more quickly, and create premium service offerings. This makes it a primary engine of top-line growth.

Objectives and core functions that drive performance

For business leaders to manage the supply chain effectively, they must understand its core functions as an integrated system.

The five core functions leaders should understand

At a strategic level, SCM can be broken down into five primary functions:

1.     Plan: The strategic brain that handles demand planning and forecasting.

2.     Source: Strategic purchasing and supplier relationship management.

3.     Make: The value-creation engine of manufacturing and production.

4.     Deliver: The physical bridge to the customer through logistics and transportation.

5.     Service (and Return): Closing the loop with customer service and return processes.

From objectives to KPIs: aligning incentives across the primary functions

The link between strategy and execution is the set of metrics used to measure performance. Leadership must support a balanced scorecard of end-to-end KPIs to encourage cross-functional alignment. A board-level dashboard should provide a comprehensive view with:

• Financial KPIs:
  • Total cost to serve: The complete cost of fulfilling a customer order from start to finish
  • Cash-to-cash cycle time: How long it takes from spending money on inventory to receiving payment from customers
• Customer KPIs:
  • Perfect order percentage: The percentage of orders delivered complete, on-time, and undamaged
  • On-time in-full: Orders that arrive when promised with the correct quantities
• Operational KPIs:
  • Inventory turns: How often inventory is sold and replaced over a given period
  • Forecast accuracy: How closely demand predictions match actual customer demand
• Resilience KPIs:
  • Time-to-recover: How quickly operations return to normal after a disruption
  • Supplier risk scores: Ratings that measure the likelihood of supplier-related problems

Technology that shortens time to result: choosing SCM software wisely

Technology is essential for a resilient, data-driven supply chain. For business leaders, investing wisely in SCM software is a strategic decision that must drive measurable business outcomes.

What matters most in selecting a platform

An evaluation of SCM software must prioritize business outcomes over technical features. Key criteria include:

1.     Strategic Alignment: Direct support for the main business strategy.

2.     Integration Capability: Seamless integration with existing ERP systems.

3.     Scalability and Flexibility: The ability to support growth, often favoring cloud-based SaaS solutions.

4.     Vendor Strength and Partnership: A financially stable, long-term partner committed to innovation.

5.     AI and Advanced Analytics: Robust capabilities to transform data into a competitive advantage.

Building supply chain resilience: Conclusion

In an era of constant disruption, elevating supply chain management is a competitive necessity. It has moved from a behind-the-scenes function to a core driver of growth, resilience, and business value. For business leaders, this is fundamental to navigating uncertainty and securing a sustainable advantage.

The benefits are clear in executive terms: protecting earnings, optimizing working capital, enhancing customer loyalty, and reducing business risk. Resilient organizations significantly outperform their peers by turning volatility into an opportunity. The path forward is a strategic journey that begins with leadership alignment on clear objectives and KPIs, followed by careful measurement of current performance. By testing targeted, software-enabled improvements, organizations can prove the ROI and strengthen the business for the future.