A procurement professional’s guide to risk events and mitigation strategies — FMCG

As part of our theme this quarter on Procurement’s role and value in supply chain risk management, we are speaking with practitioners in the field to understand their perceptions of risk — clearly different industries perceive types of risk in different ways. We want to know what are their main concerns, how they intend to address them and how much they rely on tech to help.

Ashish Dhongde is Associate Director Procurement for Beauty and Wellbeing North America at the multinational FMCG giant Unilever, a frontrunner in corporate sustainability. He has spent about 20 years in supply chain and procurement, was involved in the sourcing of sustainable cocoa and confection for Unilever’s Ice cream brands and procured premium packaging and chemicals for Unilever’s Beauty and Wellbeing business. He has responsibility for several hundred million dollars of spend, experience leading large cost-savings projects for the business and a detailed understanding of value chains on food ingredients, feedstocks, packaging and chemicals.

We intend to cover his insights and learnings from these areas of expertise for our readers, but in this inaugural post, we wanted to talk to him about risk more generally, how he perceives risk threats and how to recognize them and mitigate their effects.

How do you perceive risk, who owns it in the organization and how do you approach it?

“Risk is complex, and comes in several varieties,” he says, “but in my personal view addressing the risk to a raw or pack material will often require short-term and long-term steps to ensure a truly resilient supply chain. It is also helpful to think about risk and resiliency in terms of the final product. A product that a company sells may be made up of tens if not hundreds or thousands of components and only derisking what seems to be the immediate high-risk material is an insufficient step.

“But risk management must not be limited to the procurement function; it requires inputs and decisions from other parts of the business especially where consumer perception or product efficacy is impacted. Risks can be introduced at several points in the production timeline (see table below). Therefore, to do risk management well requires constant gathering of data on new risks.

“And we must remember that one cannot escape supply chain risks. Due to the external-facing nature of risk, leadership must recognize that there will always be problems. A collaborative and positive mindset, one that expects and embraces problems as a part of doing business, helps remove destructive internal disputes on where the fault lies.

“Also, limited headway in resolving risk is possible, even without deep supplier connection that is built on several years of engagement. I have found speed of ideation and execution to manage risk to be crucial, as competing firms that may all be facing the same industry-specific risk may end up coming to the same conclusions. This may lead to the solution or mechanism to address the new risk becoming a much-desired commodity and rapidly disappearing as firms adopt the technique or technology to manage the problem at hand or become significantly more expensive than it was before.”

Ashish finds it is helpful to think of risks in three groups based on where they arise and how a company can manage them. He provides this succinct guide to types of risk and how to address them:

“One major area of interest for me is risk management in innovation stage gate process,” he continues. “Considering the long lead times to set up capacity of new materials in case of truly new innovation, risk introduction into the business can be significantly reduced by timely and ruthless decision making. From a supply chain perspective, preparation for a truly new innovation should happen two to three years in advance, with the support of a tested long-term supplier who is equally invested in the success.”

Many thanks to Ashish for this very informative insight into his perceptions on risk. We look forward to speaking with him further on more aspects of risk management in the business of procurement.