Making Supply Risk Management Concrete

My old FreeMarkets colleague, Sundar Kamakshisundaram ("Sundar K." for linguistically challenged people like me), has been hard at work on an expert mini-series on Supply Risk over on Supply Excellence (you can read Part 1 and Part 2 of the series by clicking the previous links). What I like about his approach is that it is a prescription -- or in his words, a "concrete" way to tackle the issue. Sundar argues, for example, that companies should be more proactive in managing their suppliers. But managing should not be an abstract construct like an old Drucker tomb that sits on the shelf. Management concepts should be concrete. For example, active supplier management requires rolling out "performance measurement processes to measure supplier performance consistently in a good recurring cadence".

And it also requires putting your money where your mouth -- or scorecard -- is, awarding "more business to high performers based on quality, timeliness and other key performance indicators". In other words, supplier risk management is not just about getting a bunch of finance geeks together in a room and running Altman-Z scores or pouring over credit or risk information from third party vendors. Or for that matter, obsessing over spend analysis and supplier performance data in a vacuum. No, supply risk management must be about management! It must be about marshalling a process and driving change and action both internally and externally. And like all good managers, supply risk managers must lead by example that requires knowing where you are today and how to get to where you want to be tomorrow.

While I'm on the subject of Drucker -- may he rest in management peace -- I'll leave you with one of his quotations that I agree with. To wit, it's hard to argue that "Management by objective works -- if you know the objectives. Ninety percent of the time you don't." When it comes to supply risk can you afford to be wrong and to not know your objectives 90% of the time -- or even 10% of the time for that matter? If you can't, then focus on defining and pursuing clear goals, taking the advice of Sundar and many others who have good directive advice on the subject. And what ever you do, please don't think of slamming in a system (or buying content) to target supply risk until you know what the heck your primary goals are in making supply risk "concrete" in the first place.

Jason Busch

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