Companies that invest in the emerging field of supply chain risk management technology are less likely to sustain costly supply disruptions or negative press as a result of the actions of their suppliers. While best practices are still evolving -- and many are specific to products, ingredient traceability or supplier auditing processes -- all forward-thinking manufacturers will benefit by following these five suggestions from Jason Busch and Sherry Gordon of Spend Matters.
- Automate the supply risk management process. Often, the largest benefit of supply risk-management technology is its ability to automate the process of collecting, analyzing, and managing supplier information. Supply risk management platforms enable companies to analyze risk factors across a broader supply base, for example, thousands of suppliers who may introduce risk factors versus only the top dozen or so a company can monitor using manual, Excel-driven approaches.
- Incorporate financial and supplier performance information into your analysis. Supplier performance is often the best leading indicator of potential supplier financial challenges. Performance management information is especially useful when it comes to small- and middle-market suppliers. This is because once suppliers drop below a relative revenue threshold, the quality and accuracy of third-party risk scores and available content declines.
- Use technology to identify red flags in your supply chain early on. Identifying potential supply disruptions with enough lead time to take action is challenging even under the best circumstances. Automated tools can streamline supply chain management activities such as lean-supplier development that will maximize your time to pursue a corrective-action request or procedure or avoid costly disruptions entirely.
- Integrate supply risk management platforms into broader procurement and supply chain solutions. When companies manage supply risk as a stand-alone activity, information is often limited to key individuals directly involved in the supply risk program rather than the extended procurement, supply chain, and finance team. It is essential to integrate supply risk information into broader procurement and supplier management technologies including spend visibility, e-sourcing, purchase-to-pay, contract management and compliance.
- Give your executive team visibility to dashboards that complement detailed, analyst-level insights. Making supply risk "real" requires more than just periodic reporting. In many cases, executives rarely have the time or desire to manipulate and analyze data in an OLAP or highly detailed environment. Business intelligence dashboards and reporting capabilities that track and report on supply risk metrics can rapidly provide company executives with real-time observations into risk factors that help oversee programs and to direct teams to take action.
About the authors: 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.
Sherry R. Gordon is President of the Value Chain Group. Sherry is an innovator in enterprise measurement and performance improvement techniques and a thought leader in supplier performance management. She brings many years of experience as a practitioner, management consultant, entrepreneur and business person.
This was first published in February 2010