2007 Global Supply Chain Resolutions
This morning, I'd like to again welcome Jim Lawton to Spend Matters. Jim is vice president and general manager at Open Ratings, a D&B company with a range of supply risk management solutions for automotive, aerospace and industrial manufacturers.
In my view, New Year's resolutions often seem destined to fail from the start. Consider how "Losing weight" is the perennial #1 resolution -- but how often do the scales in May register success?
As manufacturers look to trim the last traces of fat -- in the form of excess inventory or cost in their supply chains -- by tapping low-cost country sourcing, supplier rationalization or lean initiatives, their efforts (if successful) may ultimately land them in a precarious position. This may be the year to deviate from the standard New Year's resolutions that leave supply chains more vulnerable than ever, and instead, focus on initiatives to reduce exposure to risk.
For 2007, here are five supply risk management resolutions that companies can live with:
1) Identify the right suppliers from the outset -- based on stability and performance, not just price
2) Know which commodities or categories are suppliers are critical to your business, and watch them closer than ever
3) Strive to predict changes in the supply market environment, rather than reacting to them after the fact
4) Monitor suppliers' quality and delivery issues -- as these are early red-flags that bigger crises may be looming
5) Have contingency plans ready-to-go, but be willing to work with your supplier through issues if the situation merits
Fundamentally, the best laid global supply strategies and resolutions enable the organization to run efficiently while managing risk proactively. The ability to take corrective action before a supplier issue has a material impact on business is a far bigger achievement than shedding a few extra pounds of inventory or cost.
Spend Matters would like to thank Jim for sharing his views on supply risk. Without question, Jim is one of the seminal thinkers on global supply risk management today.
In my view, New Year's resolutions often seem destined to fail from the start. Consider how "Losing weight" is the perennial #1 resolution -- but how often do the scales in May register success?
As manufacturers look to trim the last traces of fat -- in the form of excess inventory or cost in their supply chains -- by tapping low-cost country sourcing, supplier rationalization or lean initiatives, their efforts (if successful) may ultimately land them in a precarious position. This may be the year to deviate from the standard New Year's resolutions that leave supply chains more vulnerable than ever, and instead, focus on initiatives to reduce exposure to risk.
For 2007, here are five supply risk management resolutions that companies can live with:
1) Identify the right suppliers from the outset -- based on stability and performance, not just price
2) Know which commodities or categories are suppliers are critical to your business, and watch them closer than ever
3) Strive to predict changes in the supply market environment, rather than reacting to them after the fact
4) Monitor suppliers' quality and delivery issues -- as these are early red-flags that bigger crises may be looming
5) Have contingency plans ready-to-go, but be willing to work with your supplier through issues if the situation merits
Fundamentally, the best laid global supply strategies and resolutions enable the organization to run efficiently while managing risk proactively. The ability to take corrective action before a supplier issue has a material impact on business is a far bigger achievement than shedding a few extra pounds of inventory or cost.
Spend Matters would like to thank Jim for sharing his views on supply risk. Without question, Jim is one of the seminal thinkers on global supply risk management today.
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Resolutions worth following indeed. I would add that CPOs should make risk/reward trade-offs visible at the board level (let's call it "supply risk visibility"). In other words, if the CEO or CFO is asking you for 15% reduction in procurement costs (almost certainly requiring some LCCS, supplier reduction and inventory reduction) then as a CPO you can present the risks involved in delivering that number. Even with risk mitigation strategies employed it may become apparent that 10% may be a better target if 15% results in risk levels beyond the comfort zone of these particular C-level executives.
# Posted By Mark Usher
| 12/28/06 10:01 AM
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