Spend Friends podcast: Supply chains need offense and defense to monitor risk, CEO Gary Lynch says

Spend Matters and CIPS

Offense and defense aren’t just terms relevant to sports. Business organizations are also looking for strong offense and defense in their supply chains, according to Gary S. Lynch, the CEO and Founder of The Risk Project.

Although this type of offense and defense is related to cost and value rather than a baseball situation, like the number of runners on base. This shift in mindset is one example of the ways organizations have placed a higher priority on supply chain risk management in the last year or so, Lynch said.

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Last week, Lynch was a guest on Spend Friends, a monthly video podcast hosted by Bill Michels, the VP of Operations — Americas at the Chartered Institute of Procurement and Supply (CIPS) USA, and Pierre Mitchell, Spend Matters’ Chief Research Officer. Its goal is to focus on all procurement matters under the sun, like spend management, supply chains and other topics.

The fifth episode of the podcast discussed risk management and how organizations have placed such a high value on it since the start of the Covid pandemic. Lynch said never before has the industry seen such a focus on value and impact in the marketplace. Some of that could be contributed to more digitally enhanced risk management options, he said.

“Creating a digital twin, a twin of the physical supply chain, and being able to use that to monitor and model failures at each node — all of that is great,” Lynch said. “But the mindset has changed. The mindset is ‘give me defense and give me offense.’ So in other words, give me cost and give me value on the other side. Or things that could affect my price. As you collect all this data and profile these instances in the supply chain, you’re also educating your underwriters, you’re playing into the ESG landscape as well.”

Although there has been no shortage of news surrounding various supply chain problems in the last year, Lynch said there is some good news as well. Organizations are finally viewing supply chains as an essential priority rather than just an operational task.

There has also been a much stronger focus on the human element and talent within the industry. Lynch said companies are acknowledging that there are skilled people involved in the supply chain, and they’re now being viewed as a resource.

One thing that hasn’t changed, or has maybe only gotten worse, is the fact that demand will always trump supply. There will always be overlapping industries, companies and regions that are vying for the same resources all at once. When an event hits the supply chain, panic often ensues, and that often leads to a trickle-down effect throughout the supply chain.

Risk management can step in to help some of these demand and supply issues. Michels said that by looking at events that could happen 3 or 4 years down the road, organizations can better monitor and advocate for risk management principles.

For Lynch, it’s all about calculating the return on investment of insuring your supply chain. It’s essential for supply chain managers to quantify risk to be able to manage it. They can do that through the use of data.

“When we look at what’s needed today, we need the data at that point in time,” Lynch said. “We need, what we’ve been talking about in other areas, is business intelligence. We need intelligence about the configuration of the supply chain, inventory at a particular location. … You really have to go through this relentless pursuit of the data. And then you have a place to put it, manipulate it, and use it especially when you have volatility. So I do think it’s data-driven, it’s not data-only.”

Spend Friends will return May 11 for more intriguing procurement discussions! Register here to attend the next live Zoom session. And listen to the fifth episode here.

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