AMR Publishes a Supply Risk Case Study

For those who wonder why Open Ratings seems to come up quite a bit on Spend Matters, it's because I find the topic of supply risk management incredibly interesting and relevant as part of the overall Spend Management environment. But the problem is that there really are not many vendors to talk about in the space. As far as I can tell, Open Ratings remains the only pure-play software / content vendor with material traction from their supply risk management solutions. That's why I refer to them quite often. As you can imagine, I was pleased to see that AMR Research published a case study that examines one of their customers, a "major aerospace and defense" company, which goes unnamed in the piece. According to the case study, which Open Ratings has made available on their site, the company manages supplier risk "by combining two distinct sources of supplier data that complement each other ... supplier estimated risk (SER) from D&B ... and [a] supplier stress indictor (SSI) scores generated by Open Ratings.” The former is "derived from financial data" and the later is "derived from financial, quality, and other predictive data".

But the company does not stop with predictive analytics and monitoring -- it also ensures that risk management is a distributed function which the entire procurement community inside the organization is jointly accountable for. In less than a year, it would appear this combined approach and Open Ratings / D&B insurance policy has more than paid off. Prior to implementing the new program, the manufacturer calculated that "two significant supplier failures cost the company $5 million or more." But after the risk management deployment, the company managed to isolate 15 specific risky suppliers and redirect 300 orders to lower risk producers. And "as an ancillary benefit, intimacy and knowledge of the supply base is greatly enhanced and no new $5M supplier blowups have occurred." Reading this, I'd reckon that this is one insurance policy that has paid dividends.

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