Globalization

Getting Supplier Risk in Focus – Part Two

Getting Supplier Risk in Focus – Part Two

As I discussed in Part One, the last few years have shown business and consumers the often negative consequences of globalization, unrestricted trade, and all out web commerce. Businesses are facing increased risk across multi-tier supply chains, while at the same time struggling to get visibility into and management over the potential downsides. In Part Two, let’s look at methods to solve some of these issues.

What you can do to alleviate supplier risk

Supplier risk can lead to opportunityCompliance is not a dirty word. In fact creating transparency and information compliance can open worlds of visibility to opportunities (as well as protecting the company against fines and legal nightmares).[1]

Some upside thinking here, I think, is required. There is a value in transparency so you can seize opportunities where others see disaster. Understanding volatile markets and conditions better positions your firm to know when and if to take action—knowing when to buy-up scarce supply, when to hedge, when to relax. Today, firms spend so little on supply chain risk (figure 2) that at this point increasing investment here seems reasonable to expect.[2]

 

TSC-ann-grackin-figure2

Knowing how to maintain continuity even if things go wrong so your firm maintains sales, protects people and assets, as well as assures that working capital is not drained to deal with a crisis, seems awfully important.

Here are some approaches to consider:

Conclusion – Get Social

TSC social supply chain collaborationRelationship building—both from a technical and people perspective—is the key to risk reduction.

Today, even at a distance, relationships can be enabled and enhanced through social collaboration. In fact, look to incorporate a Social Supply Chain solution within your procurement system. Many of the key supply chain and procurement players are building these so the data and the people are on a common platform, sharing the same views of issues and data.

In the end, risk management is all about people—process, information and relationships. People just protect others they know.  Over the years I have heard repeatedly from suppliers that when there are shortages, they fulfill first to customers who are most fair and with whom they have the best relationships, for example.

Surely, trust but verify should be the foundation to managing supplier risk.

 


[1] Even on a day to day basis, OEMs and Retailers reward suppliers with fast lane status in receiving, preferred supplier status and even increased business for compliant suppliers. So compliance has a cash-back reward! Shorter cash cycle times means freeing up working capital. And increase business is a compelling   bottom line reward.

[2] Only a few Fortune 100-type firms spent more than $1 million on their supplier risk programs. These tended to be in Pharmaceuticals, Aerospace, a few global electronics firms, and a few global food brand companies.