The opportunities offered by global, extended supply eco-systems can help companies uncover new sources of value. But there’s a flip side; their growing complexity means businesses could be vulnerable to a whole host of risks in their quest to deliver value. While you may have your own house in order for managing business risks, and bearing in mind that on average 70% of a corporation’s activities are outside of its control in its supply ecosystem, can the same be said of your suppliers?
Managing risk needs to go much further than analysis of the numbers. Investors, media and customers alike are looking deeper into corporate practices and supply chains when making judgements about businesses. Success in one area doesn’t guarantee good practice in another. In 2015’s HBR ranking of CEOs, Jeff Bezos of Amazon.com may have ranked first for financials – but only scrapped in at 828th out of 907 because of social and governance factors.
Increasingly forward thinking organizations realize that the focus both internally and externally among their supply chain partners needs to be on triple bottom line (TBL) outcomes – profit, people and planet – if they are serious about long term value creation for shareholders and other stakeholders alike.
A failure to embrace this holistic view of value creation has already caught many companies out, including several deemed by many to be infallible. Newspaper headline after newspaper headline illustrates all too clearly the implications of failing to align your operations with these broad outcomes. Get it wrong and your brand, reputation and market position are all at stake.
Moving beyond financial metrics is a must, not least because customers will punish companies they no longer trust. Research conducted by Proxima found that a staggering 45% of consumers said they would stop spending with a company whose supplier practices were called into question.
The triple bottom line may be more important than ever, however the vast majority of businesses are ill-equipped to gain visibility and control into that supply ecosystem. Risk aside, this also means they are failing to capture and exploit value creation from their suppliers.
Our recent research, conducted in association with The University of Oxford, found that a new approach to viewing and managing supplier relationships is needed.