Quantifying the Savings: AGCO’s Approach to Global Supply Chain Risk Management

risk management

After AGCO built the business case for investment and aligned its internal functions and processes to support the global effort, the stage was set to engage with risk in a new way that managed to span several areas including country, logistical, performance, supplier, supply and additional risk factors.

AGCO's new approach, which integrates supply chain risk management (SCRM) and Supply Risk Network into its daily operations, is created by riskmethods. This model delivers:

  • 100% automation – with early warning signals
  • Multi-tier supply base visibility
  • Full visibility of all types of risks: by supplier, category and location, including natural disasters, 
legal and compliance, corporate social responsibility (CSR), cost and quality
  • Comprehensive approach: monitor the entire process from risk analysis and risk evaluation 
through risk management right up to residual risk control
  • Mobile technology and high user acceptance through ease of use

To manage the remaining risk exposure, AGCO created a supply chain risk strategy team out of
 the matrix organization, which in turn is supported by more operational risk managers, and finally with the all global commodity managers held to risk aspects in execution, supplier assessments and reporting.

Together with the new software solutions, the company now has a single place to go for information on its core supplier relationships – supplier development, performance management, cost analysis, other risks and sustainability.

AGCO's goals for its investment are mainly focused on cost avoidance:

  • Avoidance and reduction of crisis costs through reaction time advantage
  • Prevention of price increases
  • Prevention of revenue shortfall
  • Prevention of loss of goodwill and shareholder value through reputational damage
  • Identification of first- and second-tier supply chains, data updates, risk monitoring

That said, the company has also achieved hard savings from:

  • “Advanced sourcing” savings through supply chain risk transparency
  • Automation of manual risk data search, input and updating
  • Reduction of CBI insurance premium through supply chain transparency (coming soon)

Overall, a major benefit for AGCO has been removing the blinders from everyone in the company, letting all stakeholders see how its piece of the supply base puzzle fits in with others and creating awareness of the many risks that exist throughout.

Organizations that want an inside track on building or accelerating a business case for investment in SCRM are likely to find the Spend Matters paper,  A Case Study in Global Supply Chain Risk Management: How AGCO Implemented an SCRM Solution to Save Millions, useful in their efforts.

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