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Intelligent Supply Management

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Your Monday Morning Wake-up Call

Risk: Sorting out the Real Issues

When your organization is managing several hundred thousand suppliers, risk can become a significantly complex factor in your business, which poses the question, do we have our sights set on the real issue? Supplier solvency appears to be a common topic of concern today, so let’s examine some statistics:

For example, from 1990 to 1993 the bankruptcy rate for U.S. firms was about 1.32% of the total number of firms; it is estimated that from 2005-2008 the rate was significantly lower at 0.54% (based on data from the American Bankruptcy Institute and the U.S. Census Bureau). It’s been estimated that the rate for 2009 will rise to 1.01%, a very large increase but still well below the average for 1990-1993. Additionally, in 2008 there were 43,546 firms filing for bankruptcy; that figure is expected to rise in 2009 to just over 60,000. However, over the past 20 years, the peak in the number of bankruptcies occurred in 1991 with 71,549 firms filing and the lowest point came in 2006 with only 19,695. Yet we are in the most severe downturn since the Great Depression. While supplier insolvency needs to be a concern for us at all times, it appears the effort to focus on it in managing risk today may be somewhat misplaced.

It seems to us that the most significant risk in the procurement process is not supplier insolvency but poor scheduling and late deliveries; not always an entirely supplier generated problem. Late deliveries generally impact a schedule, manufacturing or project, causing delays and most likely additional cost. Other factors, such as poor quality, can be another component in this dilemma. However, we seem to have that under control with TQM, SPC and Six Sigma. There are always inaccurate price estimates for new products as well, and maybe difficult to control without dedicated resources to conduct thorough cost and price analysis. There are also a variety of financial, legal and human behavior risks that are impossible to predict. So the question is can we do more than just watch?

Let’s stop to think for a moment. Did anyone in procurement address the issue of risk twenty years ago? Were there any consultants or third party service providers out there offering to identify risk in a company’s supply base? In today’s society, especially with the down turn in the economy, organizations are becoming more aware of this issue at hand and are implementing a learning management system or e-learning courses into their repertoire to educate their employees on Risk management and how to identify and address the problem using methods best fit for their infrastructure in resolution.

Tell us the areas of risk you believe are the most important. Again, we have our preferences but let’s hear back from you. What is your experience and what do you typically monitor?

Fred Sollish for Supply Knowledge Monday, October 26, 2009

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Global Chief Procurement Officer Survey 2009

The third Global Chief Procurement Officer (CPO) Survey marks Capgemini’s continued commitment to understanding the trends and issues affecting the procurement executive. Given the seismic upheavals in the financial markets and their inevitable impact on commerce, it has never been so important to assess and understand what this means for procurement within organizations.

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Best practices can be applied to most industries to ensure successful supplier relationship strategy and execution.

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10 Strategies for Managing Suppliers

Start by treating your suppliers as true partners, not just vendors.

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A Guide to Meaningful Metrics and Successful Results By Sherry R. Gordon Understanding supplier performance is vital to ensuring a well-functioning supply network. This how-to book will help you develop and implement an evaluation process to help you reduce costs, lower risk, and improve both the performance of your company and your suppliers. This practical text includes examples of best practices that companies are using to evaluate suppliers and illustrates how to get beyond collecting data for the sake of data to achieving real results. It shows how to get at the meaning behind supplier metrics, and choose measurements that are meaningful both in the context of your company’s goals and also for the supplier. Supplier Evaluation and Performance Excellence helps you get at the root causes of supplier problems that even suppliers may be unaware of and enable them to make high-impact improvements. Many firms do not know where to begin in the supplier evaluation process, what ways would work best, or even what kind of results they want to get. They know that they should be measuring supplier performance, but may not understand why or what they would gain from it. This book is geared toward managers at two types of companies: those who know that they should be measuring supplier performance but don’t know where to start, and companies who want ideas about how to improve or revitalize a current program. Order Desk Preview & Table of Contents - PDF

Aravo Risk can keep your suppliers from driving you off a cliff

As the economic crisis has shown, running a company is risky business and executives don’t have enough tools that can help them steer clear of catastrophes. But supply chain software maker Aravo is launching a software service that can help companies reduce their risks.

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Recession: How Will You Play to Win? | Chief Financial Officer | CFO | Economic Downturn - Deloitte LLP

Chief financial officers (CFOs) are confronted with unimaginable circumstances resulting from a worldwide credit crunch and an inevitably challenging recession. It’s increasingly important for CFOs to be efficient operators of their finance business, stewards who manage to preserve value, catalysts for changes that drive new efficiencies and strategists in a new, post-recession environment.

Recession: How Will You Play to Win? | Chief Financial Officer | CFO | Economic Downturn - Deloitte LLP

Signs of a Supplier in Peril

During this unique economic climate, relationships should be a truly collaborative process, with the supplier communicating well in advance of any anticipated failure or disruption.

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United They'll Stand

Too many buyers do nothing as their suppliers fail in a recession. There's a smarter way to act.

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ISM Electronic Supply Management Group

Click on one of the landscape hot zones to jump directly to the discussion group. Electronic Supply Management Group Mission... to provide a resource and source of information to the ISM members concerning ...

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Supply Management

Supply Management: David Burt, Sheila Petcavage, Richard Pinkerton: Books ISBN: 0073381454 ISBN-13: 9780073381459

Global Supply Chain Risks and Rewards

When considering the global trade environment in 2009 there are a number of potential issues looming that can disrupt global supply chains, sourcing strategies and the flow of working capital. Several issues are hangovers from 2008's economic turbulence and some are just starting to develop. If not properly addressed, importers and exporters may face significant unexpected costs and increased disruptions to their supply chain. But the news for 2009 isn't all bad. A number of promising opportunities exist as well. Nine trends will continue to challenge multinational businesses for at least the next 12 months.

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