Purchasing Transformation

With all the supplier quality scandals rising these days it might be time to refresh everyone’s memory of supplier risk management 101.

Most of the stories that are hitting the headlines (and the bottom line results of those involved) can easily be traced back to the failure of understanding the extended supply chain risks involved or addressing these risks early enough in a constructive manner.

One problem that arises when you look at risk management is that many companies only look at the physical flow, and forget (deliberately or not) potential risks in the extended supply chain as well as financial risks. All levels need to be covered and a strategy has to be available if anything occurs and you need to execute accordingly.

Supplier Risk Management Framework

This basic model can be used as a framework when assessing your risk management strategies, since it takes a holistic perspective on the risk management issue. At the same time it’s important to remember that no risk management strategy is final; practice makes perfect, and sometimes you might need to get a bloody nose in order to find the best-fit strategy for your operations. But with the appropriate strategies and processes in place, the impact will be minimized.

Risk management is very much on the agenda at the moment, so expect the blogosphere as well as big firm analysts to exploit and dive into this subject with vigour in the upcoming months.