Ivalua Procurement Dinner – A Risky (Supply Chain) Business?

Last week, procurement software firm Ivalua held a dinner at Claridges which saw around 40 procurement folk get together to discuss some big topics - not least supplier and supply chain risk. I got the “between the starter and main course” speaking slot, which on reflection is perhaps the best time to perform.  You can have a couple of glasses of something fortifying before you speak, just enough for relaxation but not so much you forget your lines, and meanwhile the audience are somewhat relaxed and have also had some food so they’re not grumpily hungry!

Ivalua offers one of the broadest and most integrated suites of procurement software around, so from their point of view the whole risk-related issue of having full visibility of suppliers – from sourcing through contract and supplier management to spend analytics – plays well to their strengths. And of course, good data is essential in order to execute effective risk management.

But one of my central points was that whilst procurement has come a long way in terms of our approach to risk management, we can and should go much further. In some industries, risk analysis and management has become highly analytical and some of the best brains in those industries are involved with it – think financial services for instance. But even those organisations that do take supply chain risks seriously are not generally putting it into a real analytical framework – for example, modelling risk probabilities, quantifying the cost of risk, and so on.

If we want to show that our risk management activities are providing real value, we need that stronger analytical framework in order to be able to put hard numbers against our activities. The Board is not going to be impressed with simply a list of risks and a few mitigating actions – even if that is more than we had until recently. We need to put some “cost” numbers against the risks and then show how our actions have reduced those numbers in a meaningful way.

Anyway, I only had 15 minutes for my session and I don’t have all the answers to this, but it’s a topic we will return to. It would be good to see someone (smart consultants, or academics perhaps) think about how we might arrive at a robust methodology that could turn vague, qualitative risk management activities into hard, quantitative data – and prove the value that effective supply chain risk management can add.

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