The rapid embracing of globalization during last few decades has created an extremely profitable complex network business environment and on the other hand it has also made the global supply chain extremely vulnerable to any adverse event even in the remotest part of the world. You may ask any CPO and one of their biggest concerns today is supply continuity without disruptions and organization’s ability to manage any supply disruptions. While prevention is always better than cure, in managing supply risk you actually need a balanced combination of both. Today’s supply chain needs to be much more agile and adaptive to both external & internal events and should have the ability to react quickly to any negative signals popping up anywhere down the supply chain. With slow recovery though the number of bankruptcies have been abated and there’s an ease on liquidity, today’s global supply chain is bound to face newer kind of risks in the form of trade barriers, sustainability regulations, fluctuating currency rates, volatile commodity market etc, which mean that we need to gear up our supply chain eco-system beyond the myopic view of supplier monitoring alone. There’s also a need to evaluate supply risk from a multi-tier perceptive for any risk event at supplier’s supplier supply also that can impact our supply chain, and so access to diverse and fragmented sources of supply information is absolutely critical.
It’s a business imperative in today’s environment that organizations need to work much more closely with their supply base using collaborative tools and aspire to be closest to the supply base as a their top supply risk mitigation strategy so as to be proactive in capturing any distress signals in their supply chain. This of course will depend upon how integrated the underlying procurement technology is in terms of demand capturing, spend visibility, supplier transactions, supplier performance, external financial indicator, trade compliance, supplier accreditations etc. Though there’s much more matured procurement technology available now in terms of spend management system, supplier information management, analytical platform the key aspect will still lie in terms of ability to leverage this by collaborating and teaming with supplier in a structured way.
The second most important mitigation strategy has to be the continuous optimization of supplier portfolio by creating a lean supply base for driving the strategic level partnership. Having large nos of supplier will make the supplier risk management effort not only cumbersome but also difficult to manage. To rationalize the supply base it is necessary to have unified supplier data instead of it is fragmented across multiple disconnected purchasing systems. It is also important to enrich the procurement systems with necessary financial, supply commodity market information by collaborating with appropriate sources of external information.
While unified technology plays a crucial role in managing supply risk, the success factor still lies in affixing right priority to supply risk management program rather than running it as yet another strategic initiative with right knowledge and skilled folks. With increased emphasis on managing the supply continuity with lean supply base there’s a renewed focus on - how to best diagnose and manage supply risk in a structured way.
