This post is authored by Spend Matters Contributor, Sherry Gordon
With supply risk frequently in the headlines over the past few years, many companies want (and need) to address it, and there are many software solutions to help. Where do you begin? How do you choose the right solution? Just as there is not only one type of supply risk, there is no one solution to address supply risk. Like most complex business problems, a software solution will not help address supply risk problems without a business process in place to support it.
So how should a company go about choosing the right solution? This topic is part of a session I will conduct with Jason Busch at the ISM Conference in San Diego in April. Our topic will be “Understanding and Choosing Supply Risk Solutions: Software, Content and Analytics.” We’re soon going to give you a peek at our session to whet your appetite for our talk -- and also to entice you to stay at the conference until the last morning, when we present (April 28th at 9 am). Our session is the culmination of a supply risk track on which the conference organizers have placed a lot of effort and focus, and to which they have invited a number of well-known practitioners.
Because companies at different stages of supply risk maturity require different kinds of capabilities, we will be presenting a technology-oriented supply-risk capability maturity model to help organizations better evaluate how third-party solutions can map to their requirements and maturity levels. One important question: at what stage of maturity is your business process for risk management? Do you even have a process? We propose three levels of risk management business practices, reflecting the spectrum of maturity:
- Level 1: totally reactive, with no contingency plans in place
- Level 2: proactive
- Level 3: a cross-functional, well-developed formal approach
A firm’s level of purchasing-technology maturity can also be categorized in this manner. Success in using supply risk technology also depends upon a firm’s level of purchasing sophistication. Some firms have orchestrated proactive, multi-function approaches with resources dedicated to supply risk, while others behave reactively and do not have a history of planning and organizing responses to supplier problems. Many companies have no formal supply risk management processes, have dealt with supplier problems reactively, and therefore will not obtain the full benefit from supply risk software solutions. Creating a sustainable supply risk program depends upon using technology as an enabler, not as the solution to the business problem.