70% of Businesses Have Faced Critical Supplier Failure – But Most Don't See It Coming

A new report from Ivalua, the enterprise AI platform for procurement, has found that in the past 12 months, 70% of organizations have had between one and five critical suppliers fail, while 41% say they’re one supplier failure away from a supply chain crisis.

Ivalua’s report: ‘Building Resilience from the Ground Up: Anchoring Supplier Risk in a Unified System of Record’ surveyed 800 supply chain and procurement decision makers. It found that organizations take 25 days on average to identify and onboard a replacement supplier, during which 74% are exposed to shortages or significant operational disruption. More concerning still, 57% of organizations admit they are reacting to these events rather than preventing them.

The way many organizations react to disruption has allowed much of this supply chain fragility to go undetected. Over half of organizations (53%) have little to no visibility into the cybersecurity posture of their suppliers, with 51% globally and 44% in the U.S. admitting that a major supplier cyber incident would catch them entirely by surprise. Other areas of limited visibility include ESG performance and risk (53%), financial health (44%), operational capacity and delivery performance (41%) and compliance status, including certifications and regulatory requirements (40%).

“Supplier failure is no longer an exception; it is a cost of doing business. The organizations suffering the most aren’t necessarily those with weaker suppliers, but those blind to risks until it’s too late,” says Jarrod McAdoo, Director at Ivalua. “With inflation, tariffs and rising costs already stretching operations, a single supplier failure can be the tipping point that pushes an already strained supply chain into collapse.” 

Closing the visibility gap

Organizations are also grappling with fragmented data, making it difficult to identify risks before they escalate. The findings show that 45% of organizations have no single, trusted view of supplier risk across the business. Crucially, 76% still rely on manual processes for due diligence and risk checks on critical suppliers, with 58% agreeing that their reliance on spreadsheets leaves them exposed to human error. As a result, blind spots remain: over half (53%) report low or no visibility into their sub-tier suppliers, a gap that widens to 65% among U.S. organizations. Almost three quarters (73%) say they would like to spot supplier distress earlier to prevent disruption; that desire rises to 83% in the U.S.

AI plays an important role in helping to predict and holistically plan for supplier failure, but only 39% of organizations are currently using AI in supplier due diligence or risk monitoring (though the U.S. leads slightly at 44%). Further, AI’s potential is limited by the quality of underlying data, with 50% agreeing that their supplier data is not AI-ready, limiting their ability to scale analytics and surface risk early.

“The goal is not to predict supplier failure. That is a pipe dream, considering the complexity of modern global supply chains. The goal is to build the capability to anticipate it by spotting early signals and to be ready to act on contingency plans with confidence,” says McAdoo. “AI can make a real difference, but is only as effective as the data it’s working with. Organizations without a strong, unified supplier data foundation will struggle to deliver meaningful value from AI investment, regardless of how sophisticated the tools are. The organizations that fix this will still be standing when future disruption hits.”

Find out more about how to build a proactive and anticipatory approach to supplier risk management in the full report.