Supply Chain Risk Management Boosts Margins by 10 Points: Experts

In the current global business environment, Supply Chain Risk Management (SCRM) has evolved from a traditional operational function into a strategic tool capable of generating competitive advantages and improving financial performance. Data indicates that effective risk management can increase EBITDA margins by up to 10 points. 

During a SoyLogistico meeting, organized by PM STEELE, Raúl Méndez, COO, Grupo Quatro, noted that the distinction between companies that actively manage supply chain risks and those that do not is measurable across several KPIs. Organizations with established risk management protocols report annual cost savings of 6% to 12%, whereas those without such measures may experience cost increases of 8% to 18% due to disruptions.

Méndez stressed that the recovery speed following a disruption varies significantly depending on the strategies in place. Companies with risk management protocols typically recover in three to 10 days, approximately five times faster than those without these strategies, which take 15 to 45 days. In terms of inventory efficiency, managed supply chains achieve a turnover of eight to 14 times per year, compared to four to seven times for unmanaged chains, resulting in a 40 to 60% improvement in working capital. Service levels also differ markedly, as On-Time In-Full (OTIF) compliance ranges from 92% to 98% for companies with risk management, leading to higher customer retention, while those without risk management see OTIF levels between 70% and 85%. Additionally, the probability of stock-outs is reduced to between 0% and 5% with management, compared to 12% to 28% without it.

Méndez said that analysis suggests that disruptions lasting a month or longer occur on average every 3.7 years. The frequency and severity of these global disruptions have increased to the point where shocks are considered the norm rather than the exception in many industries. Financially, these disruptions result in approximately US$1.6 trillion in lost revenue annually worldwide. On average, organizations can expect to lose 42% of one year's EBITDA every decade due to supply chain issues. Consequently, he said supply chain stability has become the No. 1 risk concern for CEOs, with specific risks including pandemics, cyberattacks, commodity price fluctuations, and regulatory changes.

Vulnerability in the supply chain is often determined by specific structural factors such as concentration, where a high density of suppliers in a single geography increases risk. Other factors include substitution difficulty when switching suppliers is not easily achieved, interconnectivity where interdependent suppliers cause cascading effects, and the depth of multi-tier supply chains which are harder to track and manage.

The integration of advanced technology is central to modern risk mitigation strategies. Advanced analytics and AI are used to convert data into predictive intelligence, allowing organizations to detect early warning signals, model potential disruptions, and continuously assess supplier vulnerabilities. Blockchain technology is also being deployed to enhance transparency and security by facilitating end-to-end traceability, which mitigates risks related to counterfeiting, fraud, and quality failures. Smart contracts within blockchain networks can further automate risk mitigation by ensuring payments are only released when specific quality, timing, or sensor parameters are met.

Managing Operational, Regulatory Risks in Mexico

For operations involving Mexico, specific logistical and geopolitical risks have been quantified. Key projected annual costs include impacts from maritime freight volatility, tariff increases under USMCA or WTO frameworks, port congestion in Manzanillo and Lazaro Cárdenas, and security issues regarding cargo theft. 

Beyond these operational hurdles, regulatory compliance has emerged as a critical component of risk management. Manuel Farías, Deputy Director of Storage Systems, PM STEELE, highlighted the strict adherence required for the new seismic calculation laws enacted in 2023 and 2024 for Mexico City and other states. He noted that despite pressure from some clients to reduce costs by bypassing these standards, Farías emphasized that prioritizing legal and safety regulations is non-negotiable to protect the workforce operating under these systems.

Farías added that to mitigate global volatility in Mexico, PM STEELE diversifies its procurement of steel, sourcing materials with specific chemical characteristics and gauges from both domestic and international suppliers. According to Farías, by treating steel as a storable commodity and maintaining robust inventory levels, the organization creates a financial buffer that stabilizes costs, ensuring that price fluctuations are not passed on to the customer. 

Applying similar principles to the agro-industrial sector, Adriana Santana, Head of Construction and Compliance, Naturasol, provided a distinct perspective on raw material management regarding honey production. Describing it as a complex commodity, Santana explained that Naturasol mitigates geopolitical and logistical risks by sourcing 100% of its supply domestically from states such as Merida, Veracruz, Chiapas, and Oaxaca. 

Santana said that, to address biological risks, such as bee illnesses caused by improper feeding, the company has established a strategic partnership with the Inter-American Development Bank (IDB). This collaboration focuses on providing investment and education to local beekeepers, ensuring the safety and quality of the product from the initial stage of the supply chain. Additionally, Naturasol utilizes a dedicated processing plant and maintains significant inventory levels year-round to buffer against seasonality, further demonstrating how supplier development and strategic alliances serve as critical tools for risk mitigation in Mexico.