I know I sometimes sound like a broken RSS record when it comes to preaching the benefits of supply risk management, but I'd wager that the vast majority of non-procurement executives and line managers are still not prepared to tackle the issue head-on. Moreover, only some bring a full understanding of the types of top- and bottom-line risks that suppliers can pose to their business, even in an economic upswing. Fortunately, Industry Week keeps beating the supply risk drum, educating a broader audience -- in this case manufacturing -- about the dangers of supply risk. In a recent article titled, "What You Can't See Can Hurt You", Industry Week focuses on some of the essential elements of supply risk, all of which are relevant to procurement and non-procurement audiences alike, and goes past the basics of supplier financial risk.
The article begins by citing the case of a provider executive (Jim Lawton), who "recalls a conversation in which he told a client's chief procurement officer that a supplier of the client company had been slapped with an EPA violation for mismanaging radioactive material … The chief procurement officer promptly left the room [to address the matter, of which he had previously not known]." Situations like this, while rare, illustrate the power of supply risk intelligence to drive companies to action; moreover, they show how companies are focusing on more than just supplier financial viability. Industry Week captures it best in a quote by Tim Hanley, vice chairman and leader of Deloitte & Touche LLP's U.S. Process & Industrial Products group: "No one I'm working with isn't having a fresh look at their supply chain ... One of the things we're really seeing our clients do now is take on a more heightened focus on understanding all the risks in their supply chains."
Without question, supply risk has become the hot topic of the day inside many industrial companies. As companies become more aware of both financial risks in their supply chain as well as supplier infractions that might have previously gone unnoticed, they have a responsibility to customers and shareholders to take action. It's not just industrial companies that need to think about the potential blow-back that suppliers can present. Even in services industries -- and non-material categories -- suppliers have the potential to drag down earnings, hurt the top line, and cause permanent brand damage. From employing illegal workers to violating OSHA regulations to failing to renew or update insurance certifications, the risks that all suppliers pose are very real. Is your organization ready to address them? If not, perhaps a good place to start learning more about them Is with trusted advisors you've already engaged in the area of cost reduction.