The overall economic climate has driven supply risk up to new levels, jeopardizing company brands as well as relationships with shareholders and customers. Companies that are proactive in mitigating and managing risk will avert supply chain failures that become front-page news or adversely impact the bottom line.
In this supply chain risk management FAQ, IT managers can find answers to common supply chain risk management questions from Jason Busch, Managing Director of Azul Partners.
Who typically manages supply chain risk within a company?
Procurement, supplier development, and supply chain teams typically lead most aspects of supply risk management. Finance and internal audit groups often play essential roles as well, and are increasingly stepping in to provide skills, funding, and support for supply risk programs. In many situations, the largest contributing factor to the success of supply risk management is not which group is running the program, but whether the initiative has executive (e.g., CFO) board-level support and funding.
What is the role of IT to reduce, manage, or mitigate supply chain risk?
Technology is essential to drive the level of automation necessary to manage the (typically) thousands of suppliers that should be monitored as part of a supply risk program. Generally speaking, today's supply risk-management technology solutions fall into four categories:
- Spend-visibility solutions
- Supplier information-management toolsets
- Supplier performance-management software
- Stand-alone risk management solutions
The first three categories provide limited or batch-based visibility into specific types of supply risk (e.g., supplier financial risk, certification compliance, etc.). Stand-alone risk management solutions, take into account a variety of supply risk factors, and tend to rely on more current and timely information to drive insight and proactive intervention.
What role can content and data enrichment providers play in helping cut supply chain risk?
Third-party data and content providers (e.g., D&B, Equifax, Bureau Van Dijk, Coface, etc.) are essential components of any supply risk management program. Third-party content enriches internal supplier master information to provide current insight into supplier credit, financial, legal and related information. This information, however, is not a substitute for internal metrics that can indicate risk factors, such as supplier performance (e.g., on-time delivery, quality, adherence to service levels).
About the author: Obsessed with how companies manage, spend and save money, Jason Busch writes about procurement, trade and supply chain issues on his blog Spend Matters. He is also Managing Director of Azul Partners, an advisory firm.
This was first published in February 2010