Managing Supply Chain Risk is Now Number One Priority for CPOs
Combine the current economic downturn with the increasingly complex global business and regulatory environment, and it’s no surprise that businesses today are feeling more vulnerable than ever to supply chain risk. In fact, I’m hearing from a growing chorus of corporate executives who now consider supply chain risk management the number one priority for their CPOs.
Fred Heegan, the vice president of purchasing for Takata Corporation in Auburn Hills, Michigan, does a fine job exploring this topic in the latest edition of Inside Supply Management. In his column, titled “CPOs’ Priority: Manage Risk,” Heegan says it will take strong leadership to survive these harsh economic times. CPOs have to be prepared to work aggressively to manage and mitigate supply chain risk, he explains, pointing out that many are now facing very tough questions, such as "What will happen if 30 percent of our supply base goes into liquidation or bankruptcy in the next 90 days?"
Heegan goes on to outline four tips for managing supply chain risk:
1. Use external financial or accounting firms to help you gather detailed financial supplier data. Then, use this information to develop strategic sourcing commodity strategies.
2. Visit your suppliers in-person, so you can determine their viability firsthand. Heegan calls this the practice of sangen-shugi (actual place, actual product, actual situation).
3. Check-in with the employees who interact directly with your suppliers. Their perspective can provide valuable soft data to add to your analysis.
4. Be on the lookout for supplier delivery and quality data that may signal broader instability and mismanagement issues.
I agree with Heegan’s assessment, and I’ll even take it a step further. I don’t see this as a short-term trend. The struggling economy, coupled with an increasingly complicated global business and regulatory environment, means that supply chain risk management is going to be a CPO's "priority number one" for quite some time. Successful companies are realizing that it’s critical to anticipate disruptions and mitigate a wide range of risks in their supply chains.
