Supply Risk: Top 10 learnings

Ariba lately published a whitepaper about Supply Risk management. Wide topic indeed, which obviously shouldn’t be seen as a one-off action but as a continuous effort over time and a board-level matter.  Supply risk emerged strongly  – as the current financial market turned unsecure – and  shall stay in CPO’s minds as the economy will never come back to what it was before: permanent financial unstability, Supply chain disruption related to Supplier or quality  failure, market shifts and material shortage related to China’s growing appetite…

We all know that and risk management is getting Board level attention (cf. ), but I’m afraid the financial crash hasn’t been clear enough to turn attention into action.

Remember this article @ CPO agenda by Nick Martindale , based on  a study of 100 organisations operating in Europe, Middle East and Africa:

The main risk management activities undertaken by the supply chain function were reviewing risks within contractual arrangements (73 per cent), better communicating expectations to suppliers (67 per cent) and auditing supplier performance (59 per cent).

But many organisations are ill-equipped to cope with the threat, the survey suggested.  Only 15 per cent of respondents said their company had complete visibility of suppliers’ supply chains and where they impacted their own operations, while 42 per cent reported that they had no specific metrics in place to measure the effectiveness of risk strategies.

“Companies seem to have business continuity plans in place but it tends to be more within their supply chain as opposed to looking right across their supply chain,” added Murray.  “To make this a success you need senior level sponsorship to address the lack of co-ordination between stakeholders and the disparate activities that are happening across the organisation. “The key challenges companies are facing are where to prioritise their focus and what practical steps they can take.”

The most common means of assessing risk were to conduct a business impact analysis, cited by 57 per cent, followed by better and more frequent communication with suppliers (48 per cent) and supply chain risk mapping (43 per cent).

Now,  here are the Top 10 lessons learned from Ariba:

Companies that aggressively attack risk now will gain not only a valuable insurancepolicy against disruptions to their business, but also competitive advantage andsubstantial bottom-line savings. But doing so requires a new breed of solutions thatcombine technology, expertise, information and best-practice processes to succeed.

1. Supply risk is not going away just because the economy is getting better.
2. Learn to operate in the “New Normal”.
3. The “old way” of managing risk won’t cut it anymore.
4. Agility and information are the keys to success in the New Normal.
5. Suppliers in all industries and geographies are in a very different position than they were just two years ago.
6. There are multiple risks that need to be managed.
7. Successfully tackling risk requires a structured and sustained approach.
8. No silver bullet exists to “solve” supply risk.
9. The value to be gained from tackling risk is substantial and comes in multiple forms.
10. Multiple other functions need to be engaged early and often.

2 Comments

  1. Clive juin 2, 2010
  2. ramakrishna février 4, 2011

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