Even if you have a resilient risk management strategy in place, situations can arise that are out of your control. On the bright side, supply chain risk management provides the opportunity to differentiate and gain a competitive advantage. Advantages may include quicker crisis response time, adherence to regulatory requirements and ethical compliance, ensured internal quality standards and avoidance of sales shortfalls and image damage. If Supply Chain Risk Management (SCRM) is an interesting topic for you, I invite you to read the following recipe that not only outlines the single ingredients needed for a comprehensive supply chain risk management process, but also highlights how you can integrate SCRM within your organization.
Ingredient 1: Selection of Relevant Supply Chains
First, define which supply chains to focus on and to include in SCRM. In principle, one of two approaches can be used: 1) monitor all supply chains or 2) monitor a very specific section of the supply chain. The following parameters can be used and taken into consideration for specifying which to select: impact on sales/image, region, customer specification, purchasing volume, regulatory requirements, etc.
Ingredient 2: Definition of Risk Inventory
Typically, the risk inventory is recorded in a risk scorecard. This scorecard includes all individual risks and indicators, which act as sensors for detecting risk changes: supplier risk (e.g., insolvency, CSR compliance), location risk (e.g., natural hazards, strikes) and country risk (e.g., political or macro-economic).
Ingredient 3: Supply Chain Visibility
Approximately 51% of all supply disruptions originate below the tier 1 supplier. It is therefore important to capture the 1st tier of the supply chain structure and the supply chain substructures including 1-n tier suppliers and supply paths.
Dawn Tiura, SIG CEO and President recently spoke on an expert panel at Coupa Inspire, and shared her thoughts with candor and authority. Coupa interviewed Dawn shortly after the event and published a blog sharing her responses which we are publishing with Coupa's permission. The original can also be found on the Coupa website.
Thanks to Coupa for the blog interview below: One of our favorite parts of Coupa Inspire are the expert panels. There's nothing we love more than getting smart people together to talk shop. If you missed Inspire, you can read excerpts of the analyst panel and the CIO panel on our blog. Today we're talking with Dawn Tiura as a follow up to the analyst panel. Dawn is CEO of Sourcing Industry Group (SIG) and has been observing the industry for 25 years from her vantage point as a CPA turned sourcing consultant. There's no one smarter on the topic of where sourcing is heading, so when she remarked during the panel that in her opinion, the term buyer should be eradicated, that piqued our curiosity. So, we got her on the phone to learn more.
Coupa: You had some provocative things to say during our panel discussion. One was that you wished the 'buyer' title would go away. We were hoping you could expand on that.
Dawn: I sure could! To me, buyer is such a demeaning title. The only time somebody is excited to say, "I'm a buyer" is if they're in the fashion industry, because that's cool and exciting and sexy.
Over the last 20 years, the role of chief procurement officer has evolved significantly, shifting from tactical to strategic and finally gaining the attention of the Board. I was just reading an article in the Wall Street Journal by Bruce Nolop about the "Five Ways the CFO Role Will Change" and thought the categories and language were great to address from the CPO perspective as well. So what will the CPO position look like in 2025? Here are five predictions from a different C-suite role:
Strategic Partner: CPOs will become explicitly involved in developing bottom line AND top line strategies. CFOs are generally dealing with financial data after results are posted. In contrast the CPO can impact a company's cost-making decisions mid-stride versus after the fact. As more of the business recognizes the perspective of the CPO, they will come to depend on that office for strategic realignment recommendations and will be more apt to partner with the CPO throughout the year. The importance of the office of the CPO will become more widely recognized by both the CEO and the CFO as the CFO comes to depend on the CPO for guidance.
Globalization: As companies expand globally, CPOs will also adopt a more global mindset and quite often will set up Centers of Excellence in order to source from the perspective of those countries. While the CFO works to establish a favorable tax framework, it will be critical for the CPO to be aware of the limitations such frameworks can put on receiving and distributing goods as well as the taxation laws on services. In addition cyber security will still be top of mind with the CPO as well as all types of risk that the company is exposed to with the maturation of big data and the "Internet of things."
Leading procurement organizations will increasingly be able to anticipate future spending patterns rather than just analyze historical spending, and will be able to prevent supply risk failures, such as supply chain disruptions, before they occur.
When it comes to analyzing historical spend data, there already exists a major divide between world class and non-world class. Looking at a "significant amount" of spend visibility company-wide, the gap is getting bigger: 23% more world class had this level of spend visibility overall in 2012, and the gap more than doubled in 2013 to 47%, when 89% of world-class organizations achieved this mark overall. Top performing organizations also have better visibility as to how their suppliers are currently performing. In 2013, 80% of world class performers were utilizing a formal, supplier scoring methodology as compared to just 50% of the total peer group, according to Hackett Group benchmarks. Going forward, these leading organizations will seek to further extend their advantage by leveraging spend and supplier analytics in more proactive and predictive ways, for example:
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
A strategic sourcing approach can accelerate enterprise growth. Deeply knowledgeable on IT issues, procurement leaders offer a sophisticated understanding of how to make IT purchases impactful to the corporate bottom and top lines. The next hill to climb in delivering increasing value to the C-suite may lie in another significant expense category: corporate real estate. Companies outsource facilities management and related services to reduce expenses, and those expectations are met, but they soon learn that real estate strategies can provide even greater value in areas such as employee engagement, worker productivity and risk management. The right real estate partner with the right strategy in place can also help companies optimize balance-sheet and P&L impact, enhance employee attraction and retention, and meet strategic goals in areas ranging from M&A to sustainability. These goals are often the responsibility of internal departments other than real estate, so gaining the benefit requires strong collaboration among internal teams. If this collaborative spirit doesn't already exist at your company, bringing in a third-party real estate partner can help bridge communication gaps and align the goals of different departments to gain mutually beneficial results. Some areas where collaborative initiatives pay the biggest dividends include:
I am a self-proclaimed Olympic junkie. It's true...summer or winter and ALMOST (but not quite) sport-agnostic. I LOVE the Olympics. For two weeks, I tape (an old-fashioned term similar to "DVR" for those who are too young to remember VHS) the Olympic coverage, and then watch it every night. I love the sappy side stories that tug at your heartstrings. I swell with pride when I hear the National Anthem being played, and I tear up when someone perseveres to win a medal or just has a personal best. And as much as I love the Opening Ceremony, it's really not that event which I'm most enamored by. It's all the little moments during the different sports that are so meaningful to me. I feel the same way about our Summits. Ok...maybe it's not QUITE the same. I don't have to wait two years between Summits (or four as the case may be). And it's not as if people are setting world records...but it's the anticipation of the event and the little moments that make it all worthwhile. When we start planning each event, it FEELS like we're planning the Olympics. We have a spreadsheet we start working through that has 231 line items on it. And EACH of those line items can represent 10-20+ individual projects, tasks, etc. (or even hundreds of phone calls as the case may be). For months we work to put together a world-class event—from finding the right speakers, to vetting presentations, to writing press releases, to picking meals—there are thousands upon thousands of "little" things that go into putting on a big event. In fairness, if one of our LCD projectors doesn't work quite right, we haven't disappointed millions of people...but regardless, much like the Olympics, we aim to execute a "flawless" event. We can't guarantee the performance of the athletes (read: speakers) or the spectators (read: delegates), but we can put together a compelling event with fantastic keynotes, thought-provoking content and incredible opportunities for networking.