Does the Supply Chain Deserve a Higher C-Level Priority?

Back-to-back hurricanes and the short-lived strike at East and Gulf Coast ports offered more evidence to some that the supply chain deserves a more prominent C-suite role.

Sustainability goals have also elevated the supply chain as a C-level priority, but supply chain disruption is expected to continue as climate change leads to natural disasters like droughts, hurricanes, and wildfires becoming more frequent and unfolding in more locations, while increasing instances of extreme heat destroys crops. Research from Duke professors further suggests that the chance of experiencing a pandemic similar to COVID-19 in one’s lifetime has increased to about 38%, in part due to climate change.

A more volatile geo-political environment also carries greater risks of frequently rerouted trade flow in the future as exemplified by Western tariffs and import restrictions facing China, Russia’s invasion of Ukraine, and shipping diversions caused by Houthi rebel attacks in the Red Sea.

Professors at the University of Virginia’s Darden School of Business stated in a recent Harvard Business Review article that CEOs with a supply chain background could help more proactively address potential supply chain challenges. Their research found that firms led by CEOs with supply chain management experience were more effective at the height of the COVID-19 crisis in driving profitability.

While rare, the number of CEOs with high-level work experience in supply chain roles has increased since 2010, the researchers found. Of those CEOs, the most prominent is Apple’s Tim Cook, who held supply chain management roles at Compaq and IBM. Other CEOs in the consumer space with supply chain leadership experience include Target’s Brian Cornell and Walmart’s Doug McMillon; David Taylor and AG Lafley, both former Procter & Gamble CEOs; and Mark Parker, Nike’s former CEO.

In recent years, many companies have elevated the position of supply chain officer to the executive level, placing it alongside traditional executive roles in finance, marketing, and IT. This shift is driven by supply chain disruptions and the reimagining of supply chains as revenue-generating “value drivers” rather than just cost centers. A Wall Street Journal article from 2021 said companies are using “advanced digital technologies, virtualized data, and cobots [collaborative robots] to transform supply chain cost centers into customer-focused, value-driving networks.”

On a McKinsey podcast last year, Radu Palamariu, managing director of Asia–Pacific and Europe at Alcott Global, an executive search firm specializing in the supply chain industry, said that traditionally, supply chain leaders were only called into board meetings when problems arrived, but greater attention at the C-level is required to build resilience, flexibility, and agility across supply chains. He said, “There are always going to be issues, and I think that will never go away — supply chain actually is a competitive advantage.”

In a column for IMD Business School, Carlos Cordon, professor of strategy and supply chain management at the institute, said companies might want to consider acquisitions to de-risk supply chain vulnerabilities, citing Amazon’s development of in-house supply chain and logistics operations as an example.

A recent EY Supply Chain Survey of 347 U.S. supply chain leaders, however, found 88% reporting that their C-suite considers the supply chain a cost center, signaling a shift in attitudes back to pre-pandemic views. Of the respondents, 28% cited cost reduction as one of the current top three priorities.

“The series of supply chain shocks that started with the pandemic elevated the role of supply chain leaders in the C-suite, but executive teams are increasingly reverting to outdated views of the supply chain as a cost center rather than a growth engine,” said Ashutosh Dekhne, EY Americas supply chain & operations practice leader. “Our research uncovered concerning perception gaps between supply chain and C-suite executives around the value of supply chain, the digital maturity of supply chains and the value of cross-collaboration.”