Why supply relationship management must include supply risk management

With Brexit uncertainties increasing, and global markets becoming more volatile, proactive supply relationship and open…...

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With Brexit uncertainties increasing, and global markets becoming more volatile, proactive supply relationship and open conversations about the financial health of suppliers will be crucial in 2019, two industry veterans have emphasised.

In a recent webinar organised by the Chartered Institute of Procurement and Supply (CIPS), James Gellert, CEO and chair of RapidRatings, and Alan Hartley, Head of Procurement and Supply Chain Delivery at Sellafield, discussed the need for more integrated risk management strategies amongst procurement professionals, in what is set to be a volatile year. While many firms were surprised by the collapse of Carillion, Gellert believes that further collapses should be anticipated as the volatility of global markets rises in 2019 and beyond. Both he and Hartley believe that using and sharing continuously updated data to inform decisions will be key to managing these choppy waters, as will a more proactive approach to supply relationship management.

Many risk areas for firms tend to be siloed in different business units, making information-sharing across them difficult. The use of current data is also not a focus for many firms. Gellert said: “As companies evolve, we’re seeing centralised systems, analytics and processes that allow for the sharing of results along those different risk areas and business areas. We’re seeing consistent and fresh data coming into those organisations. That is really the foundation of optimal risk management.” These vital processes are unlikely to be operationalised in any realistic sense, though, without a mandate from senior management and an accompanying realistic budget for them. In the absence of both, the risks will remain siloed and invisible.

Developing a common risk language across business units will be indispensable, according to Gellert – a language that must include new transparency within the supply chain to identify suppliers who are not in the best financial shape. But the use of intelligent, continually updated data can enable firms to deal with supply chain failures proactively, engaging rapidly with at-risk suppliers, Hartley emphasised.

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