Supply Risk: Beyond the Hype (and Beyond Supplier Viability)

Tomorrow, Wednesday 6/24 at 2:00 PM EST, I'll be presenting a webinar with Purchasing Magazine that examines supply risk in the context of the current environment many procurement organizations are finding themselves in. During the broadcast, I'll be sharing a number of brand new statistics on bankruptcy rates from D&B and other sources that are painting an increasingly grim picture (remember, supplier insolvencies are a trailing indicator of the economy, so even if we're beginning to emerge from the downturn or have hit bottom -- both of which are big ifs -- things are going to get worse before they get better). For example, did you know that "More than 14,000 businesses filed for bankruptcy protection in the first quarter of 2009, a 64 percent increase over the same period a year earlier," according to research published by the Administrative Offices of the US Courts on June 15th?

During the chat, I'll also be digging into other areas of supply risk as well. After all, when the combination of milk and cookies could prove fatal -- or at least require hospitalization -- it's pretty clear to me at least that supply risk is taking on a life of its own outside of just supplier viability. More alarming still, the supply risk cocktail that's brewing these days is becoming far more complicated than a tasty but deadly bedtime treat. When you factor in such areas as declining inventory levels, compliance and information risk and global trade risk, the plot and challenge begins to thicken further. What can companies do to reduce supply risk these days? The answer is more complicated than just a few months ago.

Supply risk management approaches today require not only new types of technologies and information services, but new ways of collaborating and sharing information internally and with supply chain partners. Still, there is good news in the equation -- a variety of factors are starting to converge which are making supply risk management platforms a reality and tackling supply risk that much easier. In part, the maturation of supplier information management systems and analytical tools (e.g., BI platforms) combined with expanding sources of third-party information are making it possible to tackle the many forms of supply risk that organizations face as holistically and proactively as possible versus on an individual firefighting basis.

In addition, I believe that leading organizations tackling the risk equation are beginning to get better not only at identifying potential risks, but also at steps to coordinate efforts in response to specific risks -- both when there's time to spare and when an alternative solution was needed yesterday. In large part, this requires enlisting support from the rest of the business -- and providing them with access to the right set information and tools when they need to take action.

Pardon the oversimplification of what's necessary, but based on looking at what separates out top performers from everyone else, I've come up with a simple acronym to remember: ILSE (Involve, Leverage, Share, Execute). I'll be fleshing out the details of this on the blog in the coming weeks, but the genesis of it starts by involving multiple functions -- with procurement driving the effort -- including finance, customs/trade/compliance, operations and lean/continuous improvement groups (if applicable). Once these groups are working towards the same goals, it becomes critical to leverage shared data -- both qualitative and systems-based. Then sharing and communicating this information to internal and external stakeholders (including customers) comes next, followed by the tight execution of coordinated mitigation steps.

Clearly, there's no one recipe for supply risk success. But I hope to hint at a few new recipes during tomorrow's webinar as well as in the coming weeks on Spend Matters.

Jason Busch

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