Spend Matters Compass: Supply Risk Management and Analytics

As Spend Matters readers know, supply risk is a topic I've been fascinated by for some time. Going back to an original white paper I wrote with FreeMarkets colleague, Mark Clouse (who is now at AT Kearney) back in 2002, I believed that most organizations failed to quantify the overall exposure they faced from multiple supply chain operating angles -- financial risk, operational risk, demand risk, brand/reputational risk, etc. Since that time, I've not written enough on the subject in an extended format, but the latest Spend Matters Compass Series 2, Spend Visibility and Beyond--Analytics Broader Role in Procurement and Supply Chain, gave me a chance to explore it in a free research brief that we're making available today: The Intersection of Analytics and Supply Chain Risk Management: Using Intelligence to Drive Early Intervention.

Supply risk is an area that requires advanced analytics and visualization, not only to gain intelligence about specific risk elements, but also to build a scalable and sustainable approach to any type of monitoring program. In today's climate, we've developed a moderately healthy appreciation for supply risk -- especially compared to a decade ago. Inside many organizations, procurement and finance executives have become generally aware of the potential impact of supplier insolvencies, supply disruptions, commodity pricing volatility and the impact that these -- not to mention a range of other dangers lurking within their supply chain (e.g., supplier CSR violations or non-compliance) -- can have on their business. Yet few organizations have begun to make a dedicated effort to target supply risk at the executive level in a concentrated way, by building comprehensive supply risk intelligence into their supplier management and supply chain planning efforts. And even fewer who may have started down this path have put analytics at the front and center of their strategy to model and predict risk within their comprehensive supply chain.

In short, simply having access to supply risk information does little to guarantee that an organization will avoid catastrophes in their supply chain. What is needed is a means to not only gain visibility into the right types of information to avoid risk elements from becoming a disruptive reality, but to analyze and present this information in a way that enables organizations to take decisive action. This Spend Matters Compass brief examines ways in which companies can leverage supplier intelligence and analytics to drive early intervention in potentially high-risk situations. It also provides a shortlist of different approaches to supply risk management, as well as vendors that companies should consider in each area.

Among other recommendations the paper concludes with, Spend Matters suggests that companies must:

  • Assess availability of key data sources, including what they use today in addition to what is possibly available, to improve risk-forecasting abilities
  • Consider data frequency / updates and overall data integrity as a key component of the supply risk analysis process, versus as an afterthought
  • Understand the power of supply risk mash-ups that include data from multiple sources, which an organization previously may not have considered examining in context (e.g., overall / specific performance, qualitative / quantitative supplier ratings, audit information, third-party data, spend analysis information, global trade / customs data, warranty claims information, etc.)

If you're curious and would like to learn more, you can download the latest Spend Matters Compass research brief here: The Intersection of Analytics and Supply Chain Risk Management: Using Intelligence to Drive Early Intervention.

Jason Busch

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