Every business, whether a micro-entity or a large corporation, depends on their supply chains for business continuity and sustainable profitability, but relatively few conduct reviews of their entire supply chain.

From a reputational perspective, investors want to know that a business’s supply chain adheres to global net zero standards and labour practices are ethical. It’s no longer an excuse to be ‘unaware’ of supply chain blind spots. Transparency is paramount.

But crucially, supply chain reviews can have significant financial and commercial benefits. They can identify areas of risk and potential disruption (for example, climate, market and economic), highlight inefficiencies and ultimately improve organisational resilience and competitive advantage. 

“It’s extremely important for businesses to look at their multi-tier supply chains from a risk perspective,” says Nick Wildgoose, supply chain risk management expert and fellow of ICAEW and CIPS. “If you don’t, you’re going to be hit by serious financial issues.” 

This is illustrated by a 2020 McKinsey study, which showed that companies risked losing more than 40% of their annual profits every 10 years due to supply chain disruption. More recently, the Business Continuity Institute Supply Chain Resilience Report 2024 revealed that approximately 80 per cent of businesses reported supply chain disruption over the past year.  

On the other side of the coin, supply chain reviews could lead to significant EBITDA uplift, says Wildgoose. For example, research from supply chain consultancy Proxima found that just 10% reduction in non-labour costs across Fortune 500 and FTSE 350 companies could, on average, result in a 27-32% boost in EBITDA.

Competitive advantage is key, too. By mapping multi-tier supply chains, businesses can anticipate market shortages and secure essential components and supplies ahead of competitors. 

The key components of supply chain reviews 

According to Wildgoose, reviews need to be holistic and focus on four key elements: cost, quality, delivery and risk. And as well as looking at the physical flow of goods and services, data flow is also critical. 

“Take a holistic approach and identify all the metrics like cost, quality and delivery. And always look beyond your direct suppliers to the sub-tiers.” 

Then there’s the risk piece: cyber-attacks, tariffs, physical threats, climate change, logistics and transport flow, financial stability, and so on. Yet despite this, the growing threat of cyber attacks and increasingly volatile economic climate is not always recognised in supply chain reviews.  “The risk element is not getting the focus it should have,” says Wildgoose. 

He provides three key pieces of advice for businesses:

AI could change the game

There is another, newly emerging area, which is transforming how companies conduct reviews. According to Wildgoose, software and data solutions that use AI can enable businesses to carry out an initial one-off review across multiple suppliers from a range of different data perspectives. 

“It might look at different risk factors or improving understanding of critical multi-tier supply chains and tariff implications,” Wildgoose says. “But importantly, these increasingly AI-supported solutions enable a more proactive, ongoing review of critical supply chains to optimise financial performance.”

For companies yet to undergo a holistic appraisal of their supply chains, this could be a potential game-changer. But, as Wildgoose points out, it should never be used in place of industry expertise and human insight.

As far as Wildgoose is concerned, the focus must remain on financial prioritisation and understanding where a company’s profits originate from. That, he says, is the most critical takeaway in all of this.