I recently caught up with D&B's Jim Lawton, who is without question the most expert supply risk practitioner working on the vendor side of the equation (there are many experts I've met who work as practitioners and consultants in the field, but everyone who has met him would agree Jim is without equal on the provider side from an applied knowledge standpoint). I've long respected Jim's opinions on the subject of supply risk and I was curious to get his take about who is buying supply risk tools and content inside companies today. Before our conversation, I must admit that I've not seen a consistent trend. Depending on who takes primary ownership of supply risk, that individual (and function) usually develops a budget for it. Depending on circumstance, this could either be procurement, internal audit (under finance) or an operational/supply chain element, at least as I've observed it.
Jim shared with me that in his recent experience, the most frequent owner for supply risk is "typically the most senior person on the procurement side -- this is the biggest locus. More often than not, we end up speaking with the CPO or Procurement VP." Jim further noted that the owner of supply risk -- and the customer for supply risk technology and content -- must be someone who cares intimately about how suppliers are having an impact on the company. "They (and their teams) are the ones who must be prepared to deal with ambiguity ... They must understand what they're trying to protect themselves from."
In some cases, Jim has seen others involved in budgeting and decision-making. In his words, the owner "could be a senior VP of supply chain or operations -- these folks also care a lot. The other place we've seen a lot in the past several months have been senior layers within finance and in some cases, even the CFO." Interestingly, finance appears most engaged in the discussion when the topic of supply risk extends beyond just the direct materials supply chain. "In a lot of cases, as companies have adopted outsourcing strategies, the exposure that the finance leader is feeling as a public company issuing guidance to Wall Street is significant," Jim notes. "This is exposure that they can't afford not to understand. The CFO must work with procurement to tie together supply base risk elements for a financial and equity research/shareholder audience. Also, our experience suggests that outside of the CPO, the CFO is expressing interest to have a control mechanism in place. Many companies are creating risk organizations and chief risk officers which fall under finance."
In the future, I'll continue to share the thoughts of experts in the supply risk sector on who should -- and are -- taking ownership of this emerging area inside both manufacturing and non-manufacturing companies and organizations.
- Jason Busch