This post is based on the FreeMarkets white paper (published in 2003) that I co-authored with Mark Clouse, Global Supply Management: Strategies for Identifying and Managing Supply Risk. I recently dusted off the paper for my own research into supplier relationship management and found an analysis that was nearly every bit asrelevant then as now. Enjoy!
So far, we’ve talked about the forces driving supply risks (those within the buying company, the supplier, and the macro-economy), and the different types of supply risks (Strategy Risk, Demand Risk, Market Risk, Implementation Risk, and Performance Risk). See links to earlier posts at the end of this post.
While it may seem like an impossible task to mitigate and manage all of the risks we’ve discussed, the reality is that these different supply risks can be traced back to common drivers that the buying organization can manage.
The figure below highlights how the various types of supply risk—and factors—can impact an organization.
Improving the Odds Through Supply Risk Management Programs
Procurement teams can dramatically improve the way they manage and mitigate supply risks by understanding the various types of supply risk, assessing the probability and impact, and improving their supply risk management capabilities. These capabilities can be described in terms of the key functional activities:
- Supply Analysis and Strategy—understanding company spend and supply market dynamics
- Requirements Management—managing specifications, optimizing demand across sites/divisions
- Sourcing Management—aligning supplier capabilities with requirements, executing the right negotiation strategy, and making an optimal supplier award
- Supplier Implementation and Development—qualifying, implementing, and developing suppliers
- Supplier Relationship Management—monitoring and managing supplier performance and capabilities over time
Curious? Drop Sydney a line (firstname.lastname@example.org) and we’ll send you out a copy of this dusty old analysis! Some topics are timeless. And supply risk is one of them.
See related free research below: