A New Perspective for Procurement: Understanding RAP

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The double entendre and clever phrasing for which rap artists are known will forever remain confusing to most of us baby boomers — if not disturbing. But for those of us who know the rhythm of the procurement beat, there’s reason to take heart, as there’s still an opportunity to engage in a “hip” discussion that isn’t about a pending joint replacement.

Although I can’t be sure if risk-aware procurement (RAP) can rightfully claim this year’s mantle for most popular new supply chain management (SCM) acronym, it should be a leading contender. Not that it’s about acronyms, or that building a procurement-led and more structured supplier relationship management (SRM) capability isn’t meaty enough on its own, but when you add in the sizzle of supplier risk management (SRM), well, let me put it this way:

Chief procurement officers (CPOs) who “RAP” are embracing one of the more powerful hooks the profession has seen in more than a decade.

The scope of traditional SRM has exploded. Beyond traditional key performance indicators (KPIs), the integration of risk-relevant supplier information, including financial, political, reputational, and any and all pertinent social and location-related information, is poised to further elevate the stature of procurement. Driving organizational value “beyond the contract” made it inevitable. All of a sudden, the traditional supplier scorecard — a digital index card for recording historical supplier quality and delivery performance data — has become so outdated that it makes a Carpenters’ tune sound edgy.

Risk is “exposure to loss as a consequence of uncertainty.” Risk awareness has been defined as a company’s ability to recognize risks before they become a threat, mitigate them when they occur and recover from the damages they cause both quickly and effectively. Companies with mature supply and risk management practices are regarded as “resilient.” They are resistant to disruption, less vulnerable and recover faster than companies that aren’t.

But RAP done well isn’t about buffering against uncertainty, because from an operational perspective, “buffering” is an inherently suboptimal practice. Rather, risk management must be a continuous, proactive and dynamic process. And while the ability to predict a problem remains rarified territory, the inability to deal with one that is known, like a hurricane-induced production closure, seems almost silly.

More than fuel for strategic sourcing or a dedicated collection of processes organized to drive meaningful collaboration, RAP when done well not only creates obvious competitive advantage but also secures an organization’s ability to profit from unexpected events.

A RAP culture means the capability is woven into the routines and behaviors of the entire organization — not just with the procurement department but led by the procurement department. So the idea that CPOs have successfully lobbied to own and integrate this capability is nothing short of a coup. I’m not sure where I read it, but it goes something like this: “risk is inevitable, but remember, it’s the irritation that makes the pearl.”

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