A risk analyst has warned procurement practitioners to pay attention to the smallest details in their supply relationship management efforts if they wish to avoid supply chain disasters. Speaking in London last week at the E-Procurement & Supply Seminar, Andrew Leach, supply chain risk management consultant at risk analysis firm Company Watch, told attendees how Boeing narrowly avoided a major disruption caused by a key supplier in financial difficulties.
Boeing had been relying on a single small company to supply specialist sand used in the manufacture of turbine blades. But, unbeknown to the aircraft colossus, the firm was struggling financially. Fortunately, Boeing identified the problem and put a recovery plan in place to prevent a major interruption of supply. Building an alternative supply chain took six to nine months. Even with an early warning system in place, Boeing failed to spot the problem sooner. Risk analysis, Leach insists, should be an integral part of strategic sourcing, occurring as early as possible in the building of supply chains. Every company, he warned, has a ‘sand supplier.’ He added: “If you pick it up early enough and if you work closely enough with your supplier you can ensure it doesn’t cause further risk to your customers down the line.”
He went on to clarify that the supplier procurement professionals choose to support, and how, will depend on the nature of the supplier and the return on investment their company expects by partnering with that firm. But, he urged supply chain practitioners to use new supply risk tools, which can help mitigate against financial instability and natural disasters.
Citing the collapse of Carillion as a prime example of poor financial risk management, which could have been prevented by the proper use of available financial data. Leach then concluded: “If you have the right tools then understanding the financial performance of the business can give you an indication as to its future reliability and its future risk to you as a customer.”