Hillman's Learnings from Stanford's Supply Risk Forum

If you have a minute, I'd strongly suggest that you check out Mark Hillman's dispatch from Stanford University's Global Supply Chain Management Forum's Risk Management Roundtable. This piece is currently available for free to non-AMR subscribers, so download it while you can. Mark was both a participant and observer in the event. In the write-up, Mark highlights supply risk management and advanced sourcing strategies that Spend Management leaders Apple, HP, Motorola, On Semiconductor, Intel, Boeing, Fresh Express, Andrew, and Genentech are deploying today.

As one of the examples of advanced supply risk management strategies, Mark points to Intel, who "pays an option-type premium to reserve capacity [which provides] visibility to a supplier to begin production of the non-unique components of a piece of manufacturing equipment. At an agreed upon point of time, say six months, Intel would be required to specify the specific design requirement more granularly." As a result, "Intel gains flexibility by guaranteeing spending with a supplier, but reserving and postponing certain decisions like delivery location and final specification. It's a win-win arrangement that gives suppliers more forward visibility to Intel's demand, and gives Intel more visibility of supply availability, more flexibility, and more choice through postponement and the ability to divert spending across supplier product lines."

Kudos to Mark for another great supply risk piece. If you're an AMR subscriber, you should also check out his recent in-depth feature report, Managing Risk in the Supply Chain -- A Quantitative Study. The study is based on interviews with 89 supply chain executives across industries and is an outstanding piece of research into a subject which deserves far more attention than it currently receives.

Jason Busch

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