Supply Risk Management: Understanding Cumulative Supply Risk

- December 17, 2013 10:28 AM
Categories: Learning / Research, Supply Risk Management | Tags: ,

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 as relevant then as now. Enjoy!

Mapping the types of supply risk to the typical sourcing and supplier management steps demonstrates that supply risk actually builds through the process. Indeed, by the time a supplier is selected, the majority of supply risk is locked in. The figure below describes how cumulative supply risk increases across supply management processes.

Chart

But while supply risk increases and is locked in over time, the good news is that companies that focus on improving their supply risk management capabilities can lower and then mitigate supply risk throughout the process.

Supply managers can improve their ability to manage strategy risk with supply risk management by improving the visibility into accurate spend and supplier information, gaining better access to information about new suppliers and supply market dynamics, and upgrading the skills and abilities of the organization.

Curious? Drop Sydney a line (slazarus@spendmatters.com) 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 additional Spend Matters research coverage below:

Sustainability in Procurement: Prevent the Next “Bangladesh Factory Fire” From Happening Again

Planning a Long-Term Response to the Bangladesh Factory Fire

Sustainability in Procurement: Why Do Sweatshop Scandals Occur?

How Do You Handle Underperforming Suppliers?

Supplier Management Market Landscape: Detailed Slide Download!

Supplier Management Data: 90+ Fields Finance and A/P Want Info On

Supplier Management Data Collection: 75+ Company Level Fields

Of Supplier Management…and Horsemeat

Beyond Bird Flu 2.0 – Inoculate Your Supply Base Against Supply Chain Risk

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