Managing risks and ensuring supply

There was a time when supply chain management was defined as solely the process of planning, implementing and controlling the operations of the supply chain. But with increased off-shoring and low cost country sourcing, global supply chains must now pay more attention to supply risks than ever before.

Hans Ahlinder, CEO IBX Group AB

Recent studies have shown that companies that have encountered disruptions in their supply chains have suffered not only in their operational income but also in sales and growth. But the damage potential is not only the damage that is directly visible on the bottom line – off-shoring and low cost country sourcing also increases the threats to intellectual property.

This means that purchase managers must take actions to deal with the increased risk and the threats that these risks pose to the supply chain.

Addressing supply risk

From our experience there are five key aspects that need to be addressed when creating a supply risk matrix.

Supplier quality
Supplier performance
Supplier financial viability
Logistics
Delivery risks

By focusing on these five aspects, supply chain managers can identify, measure and manage the risk of the supply base. It’s also a strong tool for measuring the total performance of the supply base.

But as any experienced supply manager knows, total risk elimination is an oxymoron, so the correct strategy should be to optimize prize, quality and delivery with a risk exposure that is in line you your company’s business strategy. This will enable you to develop a strategy that proactively minimizes the potential high-impact supply chain disruptions, be it in regard to the volatile aspects of the global economy, the supply of raw materials or intellectual property.

This is where a streamlined source to pay solution and spend analysis comes in handy. A full source to pay solution is the basis for speedy and accurate spend analysis, which paired with a business intelligence solution, provides you with a full risk management solution. With the information provided by these solutions purchasing can streamline reporting to increase the visibility of the company’s total spend and the performance of the suppliers, generating the foresight needed for agile and speedy decision making.

Ensuring the security of supply

If purchasing sufficiently addresses the risks in supply, it can excel in performance, grabbing the opportunities that arise in a volatile market. In an increasingly global market, risk management skills will definitely be regarded as core competences of purchasing. Acknowledging this fact is one of the key aspects that are re-shaping the purchasing function and the role of purchasing in the organization.

Best practice purchasing organizations are using risk management to increase their competitive advantage.

Designing supplier relationships so that they protect you in case of a crisis
Analyzing, prioritizing and valuing risks to minimize the potential damage

Remember that what you pay is what you get – acknowledge the fact that sometimes it’s better to pay more than risk the continuity of supply. In a risk aware organization, the glory that once was awarded the fire extinguishing purchase manager who bailed out suppliers with a briefcase full of cash to ensure supply is now rightfully being placed upon the shoulders of the proactive risk minimizer.

Hans Ahlinder, CEO IBX Group AB

IBX Group AB

As a pioneer in the field of e-purchasing, IBX delivers measurable impact to client’s bottom lines through its comprehensive Efficient Purchasing framework. IBX serves blue chip corporations globally through proven purchasing expertise, with a high value supplier network and best of breed e-sourcing and e-procurement technology. The company enables its customers to generate sustainable cost savings through better spend visibility, increased spend under management and contract compliance. IBX offices are located in Stockholm (HQ), Antwerp, Copenhagen, Frankfurt, Helsinki, Milan, Oslo, Oxford and Paris.