Redefining Supply Chain Risks

This morning, I'd like to welcome back a regular guest columnist to Spend Matters. Brian Sommer is a Senior Fellow at Azul Partners, founder of Tech Ventive, and is author of the blog Services Safari. Brian's post is well timed, as supply risk management and sustainability have been two themes I've heard again and again from discussions with CPOs and other procurement executives at Ariba LIVE this week.

Chief Supply Chain Officer had a brief piece re: Deloitte Touche Tohmatsu’s CEO.

His remarks were particularly relevant for CPOs and others involved in extending their supply chains via LCCS, contract manufacturers, etc.

The gist of this piece centered all on this one quote: "86% said their companies were excellent or good at tracking financial results, which normally represents lagging indicators of past performance. But only 34% felt likewise about their ability to monitor non-financial factors which can be leading indicators of sustainability".

"Sustainability" is an excellent word as it more correctly explains the consequence of poor (or non-existent) supply chain risk management. (If you still need some convincing that supply chains are vulnerable, look at what happened to Bolivia's natural gas operations last week. For more information on the oil issue, see BusinessWeek's 5/15/2006 article "Why You Should Worry About Big Oil").

Sustainability is what CPOs at major airlines and trucking firms are worried about now particularly if they missed the opportunity to hedge fuel costs last year. Ditto for buyers of gold, urethane foam, plastic feed stocks, metals of all kinds and more. Supply chains are longer and more intricate today.

I'll give the last word on this to the Deloitte CEO who said "Clearly, there are additional expenses in defining risks more broadly and extending preparedness to address more possible events, but such an expenditure should be viewed as an investment that can reap great rewards when the unforeseen or expected happens".

Brian Sommer authors the blog: Services Safari.

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