Supply Risk Goes Academic: CAPS Guru Research Findings (ISM Dispatch 2 — Part 1)

Yesterday at ISM, I had the chance to sit on Professor Robert M. Monczka and Professor Phillip L. Carter's session at ISM: New Risk Management Strategies for the Extended Supply Chain. Hearing two famous academics lecture on a topic we've been digging into pragmatically at all levels (software, consulting, our own metals trading/sourcing activities, etc.) for roughly two decades was a bit of a hoot. I must admit, I entered the session with a bit of trepidation given that the history of academic research in procurement had tended to lag the most forward-reaching organizations and consultants by a few years. But the session was really excellent (if it a bit dry, given the topic). I definitely learned a thing or two myself despite really living on the edge of supply risk (we've published a ton of research on it ourselves, some of which you can download in our research library on Spend Matters).

The two began the session by noting that "supply chain is charged with risk management and not so much reward management," but this is likely to change. In other words, we spend far too much time trying to understand potential risks rather than attempting to look at the counter side of risk, reward, in the same context. As the two professors opine, it's "not all about avoiding risk -- the balance must be taken." This may seem like a mild evolution away from current supply chain risk management thinking, but it's really much more than that.

I also appreciated how Monczka and Carter separated two different elements of supply chain risk: events we "need to recover from" versus risk mitigation itself. We often look at the two as completely separate areas through our procurement eyes. Yet we've spent the bulk of the time on the latter in the past few years. What is really needed is focus on both areas dependently as well as at the intersections together.

Besides basic supply risk (e.g., supplier financial risk), the two professors suggested that companies must also consider sustainability (CSR), legal/regulatory, data protection and country as critical supply risk elements to monitor as well. This observation dovetails quite nicely with the nifty D&B country risk demonstration on display at ISM as well as some of the work LexisNexis is beginning to showcase as well (including a beta demonstration at the show of some interesting news and data mash-ups of supply risk stuff that is coming around the corner).

Stay tuned as we continue coverage from the show and share the latest from Dr. Carter and Dr. Monczka's research in the area, including the results of fifteen companies they recently surveyed in the area of supplier risk and supply chain risk.

- Jason Busch

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