In recent years, supply chain management has evolved from a back-office function to a central player in enhancing customer experience and driving business growth. However, recent findings suggest that this transformative phase may be losing steam. A survey conducted by Ernst & Young LLP highlights a significant disconnect between supply chain executives and the C-suite regarding the value proposition of supply chain functions. Understanding these dynamics is crucial for organizations aiming to remain competitive in a rapidly changing market.

The research, which surveyed 347 U.S. supply chain executives from companies with at least $500 million in annual revenue, reveals that while 88% of supply chain leaders recognize the critical role of their function in meeting customer needs, an overwhelming 88% of their C-suite counterparts perceive supply chains as cost centers. This perception reflects a troubling trend as companies emerge from the pandemic. Many executives are shifting their focus back to cost management—78% report renewed emphasis on cutting expenses, with 28% identifying cost reduction as a top priority.

The roots of this perception gap are complex but can be traced back to historic views of supply chains as rigid structures that primarily control costs rather than agile systems that foster growth and innovation. Ashutosh Dekhne, the Americas supply chain and operations practice leader at Ernst & Young, articulates this issue aptly: “The pandemic elevated the role of supply chain leaders in the C-suite, but executive teams are reverting to outdated views of the supply chain.”

This regression in thinking poses significant challenges for organizations. When supply chains are viewed merely as cost centers, essential investments in technology and processes may be downgraded or neglected. For example, digital supply chains have the potential to enhance operational efficiency dramatically, but if executives fail to recognize this potential, they risk falling by the wayside in a competitive marketplace.

The findings also underscore the growing importance of digital supply chain management solutions. Supply chain managers are increasingly leveraging cutting-edge technologies, including generative AI, to improve decision-making processes, enhance logistics, and respond dynamically to market demands. AI applications can predict consumer behavior, couple supply-demand mismatches in real time, and bring forth insights that were previously unattainable. However, without C-suite advocacy and investment, these technologies may remain underutilized.

Many companies have already recognized the value of investing early in technology. Firms that successfully integrated digital supply chain solutions during the pandemic often reaped significant rewards, making operations more resilient and customer-centric. Notably, supply chain applications developers are also responding to this shift. One such innovator recently raised $140 million to enhance supply chain financing and relationship management, demonstrating the market’s belief in the digital supply chain’s potential to drive significant ROI.

Looking ahead to 2024, organizations must tackle persisting supply chain issues while ensuring that they remain customer-focused. As supply chain leaders pave the way for transformation, they must communicate effectively with the C-suite to realign perceptions about their role. This collaboration is vital not only to secure the necessary investment but also to foster a shared vision that views supply chains as engines of growth rather than simply cost centers.

To reposition supply chains in the eyes of executive leadership, organizations should focus on demonstrating their direct impact on customer satisfaction and revenue growth. Case studies of successful companies that have enhanced their supply chain processes through strategic investments can serve as powerful tools. For instance, consumer goods companies that responded quickly to fluctuating customer preferences during the pandemic saw significant gains, directly attributing these successes to an agile supply chain infrastructure.

Furthermore, robust measurement frameworks are essential in demonstrating the ROI of supply chain investments. By showcasing metrics related to customer satisfaction, time-to-market, and overall sales performance, supply chain leaders can make a compelling case for the strategic importance of their function.

In conclusion, the shift in perception regarding supply chains poses both risks and opportunities for businesses. As supply chain executives work to bridge the gap with their C-suite peers, they must champion the narrative of supply chains as essential components of strategic growth. The focus should not merely be on cost reduction but rather on recognizing and amplifying the value supply chains bring to the overall business model.

To navigate these challenges successfully, it is imperative for both supply chain and C-suite executives to engage in open dialogue, redefining their shared understanding of value in a post-pandemic world.