The Need for Speed in the Face of Supply Disruptions

When an event disrupts your organization’s supply, how long does it take to identify your impacted materials, sites, commodities, and products? The answer to that question can impact your bottom line.

Speed Supply
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When an event disrupts your organization’s supply, how long does it take to identify your impacted materials, sites, commodities and products? The answer to that question can impact your bottom line.

APQC found that 41% of respondents in our recent Open Standards Benchmarking procurement research take one week to identify impacted materials, sites, commodities or products when a supply chain disruption occurs. Another 40% can identify the impact in only one day. Five percent take one month or longer—an amount of time that can be crippling in many industries.Apqcfig11APQC Fig. 1

Why this Measure Matters

Speed is critical when identifying the impacts of a disruption on your supply chain. Ideally, organizations facing disruption need to activate contingency plans and move materials, sites, commodities and products as needed—none of which can happen in a timely and effective way when organizations don’t yet understand the impact.

Organizations that are too slow to react open themselves to increased reputational risk because they may not be communicating the right information to customers. Taking a month or longer to inform customers of a disruption—while continuing to take orders in the meantime—could easily undermine the credibility and trustworthiness of a business with its customers, who are likely going to purchase from someone more reliable in the future.

Beyond heightened reputational risk, laggards also carry greater financial risk. APQC found that the median procurement cost for organizations that take a month to identify the impacts of a disruption is $19.57 per $1,000 revenue. Organizations that can identify the impacts of a disruption within a day, by contrast, spend $16.05 per $1,000 revenue. Assuming two organizations with a billion dollars each in annual revenue, the slower organization could spend around $3.5 million more for procurement than the faster organization.

Leverage Technology for Faster Response Times

This data on response times gets even more interesting when we look at how things have changed since the COVID-19 pandemic. In 2020, 20 percent of respondents reported that it took a month or longer to identify the impacts of a disruption, compared to just five percent who said the same in 2024. We found corresponding increases in the percentage of respondents who can identify the impacts of disruption within a week (up 12 percentage points from 2020) and within a day (up three percentage points).

Clearly, organizations learned important lessons from the pandemic and other disruptions that are enabling faster response times. What did they do to improve?

Organizations that lack any form of predictive risk management are only able to react to disruptions once they have occurred, which is critical time lost. Those with the ability to do basic monitoring with no information about impact may also lose valuable response time. Systems that quickly notify organizations of risks to their supply chains are available in the market today to meet these needs, enabling organizations to respond and activate contingency plans as quickly as possible.

In many respects, the challenge to respond quickly to disruption is a data management challenge. Ideally, supply chain organizations should be taking in data from sources including news alerts, customer feedback, weather forecasts, legal filings, and a lot more—and the status of each of these inputs can shift by the second. Supply chain risk notification systems can aggregate and normalize a vast number of these inputs, monitor them based on an organization’s specific concerns, and provide automatic alerts for any outlying trends.

It’s not enough to know that a change happened: You also need to know whether a given change impacts your organization specifically and your suppliers’ (and their suppliers’) materials, sites, commodities, and products. Mapping your supply chain (including second- and third-tier suppliers) helps to provide clarity about the impact of disruptions you’re facing and what it will take to get back on track.  

As these tools evolve to provide near real-time visibility into disruptions around the world, many of them:

  • include hundreds of thousands of suppliers, sites, parts, and raw materials
  • leverage AI to monitor millions of news feeds across languages and regions
  • evaluate security vulnerabilities and risks posed by external suppliers and vendors
  • enable easy reporting of supplier disruptions
  • include predictive analytics to help identify the impact of disruptions and predict performance months into the future

Risk Notification Systems have Automated Features but Still Need Humans

Supply chain risk notification systems are continually growing more sophisticated, and many have a lot of impressive features driven by automation and AI. However, organizations still need employees who can collaborate with vendors and other supply chain partners to get the full benefit of these tools.

Although systems can make reporting a disruption simple and intuitive, in most cases, a human still needs to handle the reporting of the disruption. For example, a natural disaster is likely going to impact every supplier in the area, but what about disruptions like extended equipment downtimes that involve only a single site? To gain faster visibility into these disruptions, supply chain leaders need to build a culture where supply chain partners act to report incidents as soon as they are identified. Doing so enables supply chains to kickstart their contingency plans faster and get the business back on track more quickly.

Key Takeaways

While many organizations have made significant progress in shrinking their response times, 46 percent of research respondents still need a week or longer to determine the impacts of a supply chain disruption.

Time is money. The slower an organization is to identify the impacts of a disruption, the higher their procurement costs. In a business environment where customers expect lightning-fast service and delivery, organizations that are slower to respond are also more likely to lose customers to faster and more reliable businesses.

Supply chain risk notification systems are growing increasingly more powerful and accessible to a wider range of organizations. These tools leverage AI and other capabilities that can take your response time to the next level—but you will still need to train and prepare the humans who will be using them. The resources spent on training and culture-building are a good investment if they enable you to move faster when disruption hits the business.

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