Supplier and supply chain risk has been a boardroom level of conversation in just about all companies going back the downturn and credit crisis in 2008-2009, not to mention all of the code of conduct factory violations in China, Bangladesh, and other developing markets that have racked the headlines on a weekly basis for years. In the Deloitte paper, Charting the course: Why procurement must transform itself by 2020, the authors suggest that risk management will become one of the four pillars of the function in the coming decade.
But it’s already a key focus today, as Deloitte observes that “finance and procurement organizations are having early victories in the case of modeling and even predicting supplier financial risk and are starting to expand programs on a global basis” today. Yet “other types of risk factors, including reputational and customer risk, remain loosely connected to supplier risk management processes and programs, but largely go unmanaged by procurement.”
Looking ahead to 2020, Deloitte sees a much greater expansion of risk priorities (something we agree with wholeheartedly at Spend Matters). This includes having “commodity risk management linked with category management and multi-tier visibility,” as well having procurement take global responsibility for “supplier behavior, infractions and violations … [even] where local practices and regulations might be different than what is expected in other markets.”
Companies will increasingly have to contend with the court of public opinion when it comes to exposing supply chain infractions. As such, social media will become “the primary source of negative exposure” and “examples include supplier non-compliance for specific manufacturing, factory safety or labor practices showing up on social media channels rather than a private supplier audit.” In other words, any worker or outsider with a smartphone and access to facilities in a multi-tier supply chain could be the one to break an infraction on YouTube at the same time the ultimate buying organization finds out about it.
This post is based in part on content from Charting the course: Why procurement must transform itself by 2020. If you’re interested in learning more about how analysts see the future of procurement and supply chain, register for our upcoming conference, Commodity/PROcurement EDGE.