Lessons Learned From AGCO’s Global Supplier Risk Management Program

supply risk

In its global supplier risk management (SRM) journey, AGCO learned many lessons in building greater visibility into supply chain risk and how to quantify hard dollar savings from these initiatives. Insights AGCO and Spend Matters gained from profiling the program include:

  • An SCRM program must create and drive risk awareness at all corporate levels.
  • Include internal stakeholders – including engineering, finance, logistics and quality assurance – early to identify 
functional risks and align them with responsibilities.
  • Make risk management part of organizational design, roles and processes before implementing 
  • Spend time on master data management and cleanse supplier master data.
  • Understand the supply base – locations, industries, competition – and select a pilot group. (AGCO used its 
top 250 suppliers, which comprised 90% of spend.)
  • Invest in training to create awareness and change mindsets. (Buyers can be overly focused on purchase price reduction savings – consider PPR savings vs. risk reduction.)
  • Select one core SCRM content provider – AGCO chose riskmethods – and enrich content and 
monitoring capabilities using additional partners 

  • Deploy an easy to use tool for buyers, management and suppliers that promotes risk awareness through a positive user experience. 
(AGCO uses riskmethods combined with a supply lifecycle management solution.)

Finally, it is important to realize that supply chain risk management is still in its infancy. The solutions on the marketplace today are only scratching the surface of what is possible. Any company that has grown beyond a trivial size realistically has to be proactive about risk, not fighting fires only after emergencies strike. And it must stay on top of the latest technology and information sources capable of building visibility and awareness into incidents at all tiers in the supply base.

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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