Should We Fire Procurement and Supply Chain From Supply Chain Risk Management? (Part 3)

Please click here for Part 1 and Part 2 of this series.

Earlier in this series, we explored Accenture's Carlos Alvarenga op/ed from a recent HBS blog that makes the argument that procurement and supply chain groups are under-skilled to tackle the realities of supply chain risk. Yet change is happening. Specifically, Alvarenga suggests that "leading thinkers in industry, academics and the insurance/risk industry itself rethink this topic from top to bottom ... [resulting in] any leading companies are already moving in this direction, adding finance PhD's and actuaries to procurement and supply chain teams. This new generation of risk leaders has an opportunity to transform the discipline of supply chain risk management from a reactive planning exercise to a day-to-day operational function. This is a strategic shift; insightful CEOs will move their companies in the same direction now rather than in years to come."

Our own view when it comes to building a strategy for supply chain risk and commodity management talent and executive context is that it's first important to develop an organizational point of view. Indeed, the world is no longer black and white ("no hedge" vs. "hedge"). More broadly speaking, what is our goal with a program? Is it to report on our performance and keep suppliers honest? Is it to take category or commodity risk off the table? Is it to engage in something more advanced (e.g., market timing)?

Next, we agree that you really do need to tackle the competency and skills challenge beginning with organizational structure and hierarchy. For example, a CPO without a background in quantitative methods really shouldn't oversee a function demanding nuanced skills that she must now manage. This is precisely why we need to consider bringing in new talent both at the top – and at the analyst, manager and director levels as well – if we're to take the exploration and management of risk seriously.

Here at Spend Matters, we'll be the first to dismiss the value of certifications or academic qualifications in favor of real world experience in the form of the right candidate who has been schooled in the school of hard buying and supply chain knocks. Yet given the expanding need to consider risk at the executive level – and the likelihood that most senior leaders in procurement have not had this experience in a hands-on capacity – perhaps a top-tier MBA programs will provide some comfort that future leadership has had at least some exposure to the topic and a network of peers that they can trade thoughts with externally, including those that manage risk for a living every day.

- Jason Busch

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First Voice

  1. Edith Simchi-Levi:

    Our company is engaged in several supplier risk management projects and also has strong ties to academia. We see an opportunity for companies to use the latest research on how to analyze risk and include flexibility on the planning side while improving processes and using control tower technology to better analyze real-time information. All this is coming together to becoming a very interesting area with high potential for improving operations in a smart way, as you indicate in this piece.

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