Supply chain management has never been more central to businesses’ ability to survive and prosper than in today’s market environment. In an increasingly complex and interdependent world, C-suite leaders recognise that good supply chain management can drive competitive advantage—and that failures can lead to delay and disruption.

Against this backdrop, a new white paper, researched and produced by Board Agenda in conjunction with Forvis Mazars, proposes that it is specifically the board that must step up and augment its strategic oversight of supply chains.

The challenge is significant. Forvis Mazars’ recent C-Suite Barometer 2024 found that the supply chain is now one of the top three strategic priorities for senior executives. They are focused on the resilience, efficiency and responsiveness of the supply chain—but also on its impact from an environmental, social and governance (ESG) perspective.

Set a strategy

For boards, the responsibility in this context is to set out a strategic direction for supply chain activities, says Akash Patel, director, management consulting, Forvis Mazars. “This direction stems from the overall purpose, vision and strategy of the organisation as a whole,” he says. “It should be aligned with the business’s mission to fulfil demand and drive customer expectations.”

In practice, boards grappling with supply chain oversight for the first time—or keen to step up their work in this area—are likely to need some form of strategic review to clarify their thinking. This can be a sensible way to address core responsibilities: these include the risks and vulnerabilities of current supply chain arrangements, how to mitigate potential supply chain disruption, and supply chain governance. But it is also an opportunity to consider broader issues, from the impact of the Trump presidency to the need to reduce reliance on China.

ESG questions will also sit at the heart of a strategic review of the supply chain, argues Alice Strevens, director, human rights and social impact, Forvis Mazars. “Environmental risks linked to climate change and broader sustainability issues, as well as social risks such as human rights, forced labour, child labour and health and safety, loom large in the supply chain,” she points out.

Improve transparency

One critical challenge for boards is to secure greater supply chain transparency, with enhanced visibility both for the board itself and throughout the business. That requires agreement on clear metrics for every player in the supply chain—and a means through which those metrics can be reported. Boards should be ready to hold the business and its suppliers to account by these yardsticks.

Indeed, the extent to which the board is empowered to ask the right questions will be a vital driver of effective oversight. Many boards may lack supply chain experience and expertise. It may be necessary to support their knowledge through recruitment, third-party advice or learning and development.

Some boards may see supply chain oversight as the responsibility of key individuals or a particular committee, while others may take a whole-board approach. But there will be significant cross-over with the board’s work on sustainability; the board needs to be confident that the organisation’s supply chain activities are fully aligned with its sustainability goals and ethical standards.

That requires the board to interrogate how supply chain policy reflects the business’s environmental ambitions, but also to consider risks such as forced labour, unsafe working conditions and discrimination. The extent to which senior managers have robust processes to identify risk in all these areas—and to conduct robust supplier due diligence—will be a key area of focus.

Support third-party relationships

Indeed, boards are ultimately responsible for oversight of all third parties working on behalf of the business, including suppliers. In this context, the broader goal should be to support the organisation’s strategic sourcing decisions and to encourage executives to develop long-term relationships with key suppliers. Governance questions here include how supplier appointments are made, how critical contracts are awarded, and how supplier scrutiny is managed on an ongoing basis.

Importantly, this isn’t a standalone exercise. Rather, boards should focus on how supply chain activity reflects the business’s strategic objectives. “The board should be confident that procurement strategy is integrated into pursuing these goals in a way that maximises the potential for the business’s success,” says Forvis Mazars’ Akash Patel.

There is also the separate issue of compliance to consider, particularly as supply chain activity increasingly faces regulatory scrutiny in the UK, the European Union and beyond. The board needs to be confident that the organisation is well placed to meet its duties in areas such as operational resilience, financial crime and product safety, as well as in the ESG domain.

In practice, boards should be looking to executives for a proactive approach to regulatory risk management and scanning the horizon for new concerns. “Staying on top of regulatory developments can feel like a daunting task, particularly for companies with extensive international supply chains,” says Darya Oglezneva, director, forensic and investigation services, Forvis Mazars. “But boards need to be confident their organisations have processes and policies in place for rising to the challenge, including access to specialist support and compliance.”

Join the dots on risk

Still, regulatory compliance is merely one example of how risk runs throughout the supply chain—and dovetails with other risks that the organisation faces. Successful oversight requires boards to take a holistic approach, aligning their risk appetite to their organisational strategy, and monitoring key reporting accordingly.

“The key is to pinpoint the triggers that necessitate action,” says Sophie Lees, internal audit manager at Forvis Mazars. “Identifying risks is great, but without getting the right people informed before these risks materialise it is wasted.”

The bottom line? High-quality supply chain management can provide businesses with valuable competitive edge—but poor practices can prove disastrous. Forvis Mazars’ white paper covers these issues in more detail, with key recommendations for the board, including:

• Agree a strategic direction for supply chain activities
• Move to enhance transparency
• Put sustainability and ethics at the heart of supply chain activity
• Build relationships with key partners
• Focus on regulatory compliance
• Agree an approach to risk management.

Read or download a copy of Strategic Oversight in Supply Chain Management: A Guide for Corporate Boards here.