To prevent supply risks spiralling out of control, procurement must improve the management of supply chain risks. With extended and complex supply chains in place procurement and supplier management are at the heart of organisations' survival. From a supply chain perspective as much energy is required in mitigating risks as for reducing working capital and cutting costs.
A survey by PA Consulting Group revealed: On the one hand many have made progress in adopting best practices and focusing on price leverage and overhead cost. On the other hand organisational constraints have meant that most are only half way along the journey towards realising the full potential benefits.
Procurement can offer the wider business greater control, lowered jeopardy and reduced cost by taking stock of the risk portfolio impacting entire businesses:
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Strategic – by definition, the most attractive sourcing deals carry the greatest risk, including intellectual property loss
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Operational – considering equally the potential consequences of supply disruption, from transport and supplier failure through to contingency
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Financial – changes in demand, commodity prices and currency rates have a drastic impact on revenue forecasting and margin profitability
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Qualitative – substandard workmanship, impure materials and faulty quality checks expose organisations to reputation and litigation issues
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Compliance – complicated regulatory obligations and heightened social, ethical and sustainability requirements affect both brand and trade.
PA Consulting Group’s approach to risk management is one of competitive advantage: identify and evaluate risks, assess for mitigation and prioritise for action - provide early warning, define governance and identify resources. A risk management framework protects the business and coordinates responses to changing risks, for example by a more reliable commodity price forecaster for a petrochemicals firm or redefining procurement for a consumer goods company.
To participate in the upcoming PA survey on risk management in extended supply chains, please contact us now.
