Supply Excellence — Supply Risk Assessments for the Average Joe

Supply Risk Assessments for the Average Joe

March 14th, 2007 · by Tim Minahan · No Comments · supply management, supply market dynamics, supply risk

Thanks to increased globalization, outsourcing, and lean supply chain practices, many companies are more vulnerable to supply disruptions than ever before.

However, lessons from recent labor strikes and natural disasters, have made supply management executives (and their bosses) cognizant of the tenuous nature of today’s global supply chains. In fact, research from AMR Research and an ongoing survey from Aberdeen Group clearly indicate that pressures for business continuity and regulatory compliance will force companies to adopt procedures, metrics, and systems to make supply risk management a core discipline.

The Aberdeen study, due out later this month, will provide more details on both how to assess supply risks and how to assess your company’s ability to detect and address them. (You can still take the survey here. Participants will receive a complimentary copy of the the resulting study.)

In the interim, direct your attention to the latest issue of European Leaders in Procurement, where Booz Allen Hamilton Principal Simon Harper offers a (overly?) simple approach for detecting supply risks. Hamilton advises companies to ask four questions:

Which categories within our spend are strategic enough to warrant close attention?
What are the economic drivers behind these key categories?
How would those drivers’ movements affect the overall cost of our current sourcing arrangement?
How can my team best monitor changes in those drivers?

Harper says answers to these questions require the correlation of multiple sources: “Within one’s organization, the legal, finance, and tax experts can flag up relevant changes in economic and geo-political conditions within their domains.”

He adds that answers to these questions can also be found in business and trade publications. (I recommend The Economist and Purchasing magazine) Or on a commodity’s industry website. (Who knew the Aluminum Assocation or the American Hydrogen Association existed?)

Harper does overlook an extremely valuable resource: the government. Uncle Sam provides valuable data on the oil outlook, labor trends, or overall economic indicators. The Bureau of Labor Statistics or the Department of Energy are two of my favorites. And, for a reasonable fee, there are a number of small boutique research and information houses — like the Industry Cost Escalation (ICE) Alert — that will aggregate this information and do the heavy number crunching to provide you with predictive models on supply and pricing trends.

But my favorite, if somewhat self-serving, tip from Harper: “blogs are becoming increasingly valuable sources of industry information.” Savvy supply managers know to take blog posts with a grain of salt. Yet, even though content on blogs is opinionated, the blogsphere can indeed serve as a good news aggregator for commodity and supply trends.

Email Forward & Bookmarks