Strategic supply chain management: closing the C-suite disconnect

Strategic supply chain management means finding common ground on crucial aspects of technology, cost management and resilience.

Three questions to ask:

• What’s the role of digital and next-generation tech in strategic supply chain management?
• How do we reduce costs to manage margin pressure without compromising agility?
• How do we evolve our manufacturing footprint amid global trade shifts and restrictions?

Supply chains are the conduit through which strategy becomes reality, and the lifeline between the business and its customers. Yet, an EY survey shows that 88% of supply chain executives say that the C-suite views the supply chain primarily as a cost center — in contrast to the supply chain leaders themselves, among whom the same percentage say that their supply chain plays a vital role in enhancing customer experiences.

What explains this fundamental misalignment in strategic supply chain management — not only in mindsets about what role the supply chain plays, but also in how strategies are executed within internal functions and suppliers? After all, the same survey shows that 90% of supply chain leaders believe their CEO appreciates the supply chain’s impact on financial performance.

Operational effectiveness and the growth potential are two goals that don’t need to conflict. But the equation is complex: speed, quality and low cost are all aligned with board priorities around margin and customer satisfaction, but trying to capture all three qualities at once is difficult. In addition, supply chain executives also must factor in resilience and risk management.

Here are three questions worth posing to drive alignment with the C-suite and the board and rally everyone around the true potential of supply chains.

1. What’s the role of digital and next-generation tech in our supply chain strategy?

Artificial intelligence (AI) and automation are high on executive agendas, and for good reason. By leveraging technology, organizations can create frictionless end-to-end supply chains, a capability that is increasingly becoming possible with AI.

In demand forecasting, AI algorithms analyze historical data and market trends while automation tools track inventory levels in real time, alerting managers when stock is low. This ensures that products, data and financial transactions are orchestrated seamlessly and efficiently. AI can also evaluate supplier performance and optimize logistics, further enhancing supply chain effectiveness. The possibilities are seemingly endless and come together powerfully in digital twins, where scenarios like manufacturing changeovers and disruptions from natural disasters can be tested virtually.

Yet, in our survey, 42% of supply chain leaders report that their organizations are just starting to adopt digital tools and cloud-based platforms for supply chain functions, indicating a significant opportunity for further digital transformation. Chief supply chain officers (CSCOs) must advocate for investments in supply chain technology that yield tangible results for customers and the bottom line. These tools are essential for achieving speed, efficiency and lower costs — a rare trifecta when approached thoughtfully — and they play a vital role in addressing the two questions listed below.

2. How do we reduce costs to manage margin pressure without compromising agility?

The EY survey of supply chain leaders indicates that 84% prioritize internal operations over customer needs, often emphasizing cost reduction at the expense of a strategic advantage. However, achieving a balance between cost management and agility is essential for long-term success.

One effective approach is to drive supply chain innovation, particularly within procurement. By rethinking supplier segmentations and negotiation strategies, companies can establish contracts that incentivize performance and foster collaboration. This alignment not only reduces costs but also enhances the supply chain’s overall responsiveness to market demands.

In manufacturing, addressing product variations is crucial. Excessive complexity can lead to increased inventory and higher costs, which can erode margins. Implementing strategies such as design for manufacturability can streamline production processes, while teardown labs can provide insights into product design improvements and cost-saving opportunities.

Agility in strategic supply chain management is increasingly achievable through the integration of AI technologies. Enhanced planning and faster execution allow organizations to respond more effectively to shifting customer demands for personalization. Additionally, reassessing operating models — such as adopting shared services and outsourcing noncritical tasks — can lead to significant cost savings while maintaining operational flexibility.

By focusing on these areas, companies can effectively manage the margin pressure without sacrificing agility, ultimately positioning themselves for sustainable growth. 

3. How do we evolve our manufacturing footprint amid global trade shifts and restrictions?

Effectively responding to trade disruption ideally involves a step change in data analytics capabilities and even digital twins, referenced earlier. As potential changes in costs imposed on foreign products are regularly revealed and then sometimes delayed or withdrawn, companies must define trigger points at which already considered plans become implemented — including new locations in new geographies for manufacturing, logistics and sourcing.

Contingency plans are a must, with a focus on more efficient routes, suppliers and distribution centers that can optimize transportation costs and lead times and strengthen resilience. And there are implications for customer satisfaction and cost optimization here as well. Customers love expedited delivery options, which companies can enable by meticulously examining where manufacturing plants, distribution centers and supply bases are located, presenting possibilities for consolidation and streamlined shipping routes.

Redefining supply chains — and the CSCO role in an organization

Ultimately, these discussions center on priorities — which trade-offs are acceptable and which are not. But oftentimes the discussions aren’t really discussions at all, and everything is traded off in favor of low costs. CSCOs who change the dialogue are also changing their prominence in the organization, but as EY experience shows, getting the C-suite aligned is a hurdle that, when cleared, pays off dramatically.

For instance, a global industrial manufacturer faced such difficulties in aligning its goals and communicating them. The leadership team united around customer service and experience as priorities, committing to deliver on their promises of consistency and dependability — a strategy that runs through the supply chain.

Working with EY teams, the company established five key performance indicators centered on customer service and experience, creating an enterprise data platform and dashboard that provides real-time insights. The entire organization is aligned around enhancing customer trust, retention and revenue stability, with data-driven metrics steering collective efforts toward shared goals.

CSCOs who do not engage proactively with the C-suite and boards are limiting their organizations — and their own careers. Instead, they must advocate for the power of the supply chain to supercharge their competitive advantage. Because change flows from every direction, what customers want, what technology can deliver and what governments mandate have all evolved dramatically just in the past two years. Supply chain strategies that are aligned with that change, and broader company goals, will drive resilience and invigorate long-term success.

Special thanks to Brian Waits, Principal, Ernst & Young LLP, who also contributed to developing this article.