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Supply chains will always be vulnerable to risk. Natural disasters, geopolitical unrest or late deliveries can hit a supply chain at any moment and cause untold trouble for any procurement function not completely prepared.
While risk can cause untold disruption, its existence does present opportunities for procurement to deliver value and make its presence felt by ensuring the business is ready for any such events.
How does the function prepare for events that are near impossible to predict?
Here are three tips to make the function more resilient to supply chain risk:
To truly mitigate risk, you need to understand the exposure your business has to it and bring in stakeholders from across the company who have expertise that can help you better manage those threats. As an example, the legal department could help you better understand the terms and conditions of your contracts while research and development could help you find alternative products or materials to use.
Implementing a structured risk management framework and contingency plans is integral to building resilience. Once these plans have been established, the procurement team should continuously update them and look for areas to make improvements. Risks constantly shift and therefore plans should too.
For example, mapping and modelling exercises should be complemented with data discovery exercises to identify all the key moving parts within the supply chain. This information can help the function map out potential risks and make plans for mitigating them.
Most businesses have a plethora of different tools and systems. You may not know it but some of these will be holding information and data that can help you manage risk. As an example, the finance department will have lots of information surrounding your suppliers. Could that historical data tell you anything about annual financial pressures within the supply chain?
Every function will be struck by a risk event at some point. Preparing today for the challenges you will face tomorrow is the only way to begin the process of effectively mitigating such a threat.
Procurement Leaders will be hosting a webinar partnered by riskmethods: Procurement’s Evolving Role: Building resilience to supply chain risk
We will be looking at:
To register, click here
This article is a piece of independent writing by a member of Procurement Leaders’ content team.