Tag Archives: supply chain disruption

4 Ways Procurement Could Better Manage Risk

Procurement pros need to get better at managing risk. Because supply chain disruption can come from any angle, whether it’s caused by a supplier site failure, environmental or geopolitical factors, or even adverse weather… 

If it’s not already, risk management should be a top priority for businesses. The consequences from not actively identifying, managing and mitigating supply chain risk can significantly impact an organisation’s profitability, not to mention brand reputation and potentially, its sheer existence.

riskmethods set out to determine the current “state of risk management and mitigation” in today’s global business ecosystem by surveying more than 250 senior procurement executives from across the globe. The study unveiled important findings around how prepared procurement leaders are to tackle rapidly evolving business environments brought on by new, more complex threats, and the current methodologies employed to manage risk in the supply chain. Here are four areas the survey explored, which indicate where procurement teams are failing in terms of risk management.

  1. Preventing disruption

All senior procurement professionals identify ‘avoiding significant disruption to the supply chain’ as a top priority, but when survey respondents were asked whether their organisation had a significant disruption in the past 12 months, more than 47 per cent indicated that they had experienced between one and five.

Additionally, a surprisingly high 13 percent indicated that they had 20 or more significant disruptions in the past year. Arguably the most alarming statistic – 12 per cent of respondents did not even know whether there were any serious disruptions to their supply chain during this time.

This is a testament to the 12 per cent’s minimal visibility into their operations. According to this data, nearly all organisations faced a disruption in the past year, speaking to the prevalence and nature of supply chain threats at they continue to increase. 

  1. Improve ability to uncover risks

The current landscape has made it critical for procurement professionals to have real-time, thorough views into potential risk and their impacts to make well-informed purchasing decisions. Many organisations have implemented some form of tracking mechanism for risks, but how often the data is updated is another issue.

When we asked respondents about the frequency in which data is refreshed, less than one third of respondents answered continuously. This is an alarming percentage.

Risk monitoring in today’s digital business environment needs to be a 24/7/365 task. Organisations that aren’t receiving continuous updates are falling behind and can’t possibly be making the best decisions for their business.

The underlying cause of this lack of complete information is usually associated with traditionally highly manual processes. Not only is the manual approach an extremely tedious and time-consuming task, it also takes away resources from other critical objectives. Most importantly, it severely limits big-picture insights and increases the chances of a serious supply chain disruption. When survey respondents were asked what level of automation their organisation employed to refresh critical information, less than one per cent of respondents indicated that it is completely automated.

An additional 39 per cent indicated that they were in the low to moderate rage of automation, relying heavily on manual tools such as Excel in conjunction with some outside sources. A full quarter of respondents indicated that they have no automation capabilities at all and are completely reliant upon manual search.

  1. Supplier risk impact assessments are key

Understanding a supplier’s potential impact on the business is key for procurement teams when it comes making purchasing decisions. For example, if a major supplier gets hit by a severe weather event which causes a delay in shipping, that could cause a ripple effect that halts production and eventually leads to a loss in revenue.

When survey participants were asked if their organisation had a mechanism in place for measuring the impact a supplier has on the business, almost half said that their organisation had no structured assessment of supplier criticality or impact.

Having no such assessment means organisations are at times putting their fate in the control of someone’s best guess. Organisations must have clear visibility into their supply chain, including which suppliers have the greatest potential impact, so they can refocus resources on reducing risk and preparing for a crisis.

  1. Organisations must be better equipped to mitigate emerging threats

While being able to identify potential risk is a crucial procurement workflow, having the ability to act on that information and mitigate evolving threats is equally, if not more, important.

Only slightly more than 20 per cent of study respondents indicated they have plans in place. An additional 27 per cent indicated that no such plans exist and 53 per cent indicated that there were only partial plans in place. These numbers demonstrate how difficult it is to evolve into a mature organisation when it comes to prioritising risk because businesses lack the necessary level of stakeholder collaboration.

Supply chains will never be free of risks, but an organisation’s ability to prepare for, identify and mitigate emerging threats will set them apart from the competition. Procurement teams can’t possibly make well-informed business decisions without a risk management strategy in place. As the number of risks continues to increase in this environment, the need for accurate, actionable insights will only become more critical.

When it comes to risk management, companies need to consistently be moving forward as the current threats will only continue to evolve.

Download the report: Procuring Risk: The State of Risk Management and Mitigation in Today’s Global Supply Chain to read riskmethods’ full findings.

Procurement Pudding (It’s A Trifle Complicated)

Nothing says Procurement quite like a classic trifle; it’s intricate, it’s complicated, but if you get it right… everyone wants a piece of it!

As the holidays descend upon us, it’s time to start winding down the gears to relax and – inevitably – reflect on the year that was!

Time with family and friends for me is synonymous with food! Because I almost always spend this time of year in the southern hemisphere, it’s a summer menu. It’s more about prawns and pavlova than pork and pancetta (although the latter does make it onto table anyway!) But, of course, that other p … the “p” we all love – procurement – is never far from mind and always on the menu for discussion!

During the year I have been fortunate to speak to procurement and supply chain audiences around the world about the trends we are seeing on Procurious and the impending impact of Industry 4.0 on our profession. In order to provide a framework for thinking through all the challenges and opportunities, I have been sharing a rather quirky analogy by comparing the well-loved English pudding – the trifle – to procurement and supply chain today. Putting up a giant image of a pudding on the big screen at a conference is also a great way to get your audience’s attention!

For the uninitiated, constructing an English trifle involves carefully layering sponge, jelly, custard, fruit, cream, and often garnishing with a heavy sprinkling of nuts.

Yet each layer remains distinct, and that’s how I think of procurement today – a series of self-supporting layers that feed into and out of each other. To manage our roles, we need to understand the strengths and weaknesses or the “setting points”, of those layers if we’re to stay ahead.

Let’s think through some of those layers.

Navigating the Nuts

Let’s start with the top layer of nuts. A generous sprinkling of the unexpected! This is how I think about the Black Swan events that seem to occur with alarming regularity these days. We need to be thinking about these unthinkables – hurricanes like Harvey that de-commission whole cities, man-made catastrophes like the Tianjin port disaster, not to mention recent terrorist attacks. If we can’t predict them, we can at least prepare for the unexpected, take pre-emptive action against disasters that could destroy our supply chains and analyse areas of high-risk.

Geopolitical jelly

Brexit is just one example of how our supply chain forward planning can become somewhat suspended by macroeconomic and geopolitical changes. In Europe, the UK’s decision to activate Brexit is having clear ramifications including a rise in nationalism that’s reflected across Europe. Currency fluctuation and workforce migration also impact procurement and supply chain. The costs to import goods within supply chains will increase; there could be a loss in freedom of movement both in goods and services for UK and EU businesses, and procurement talent could also be considerably affected if the talent pool is reduced.

The Fruits of Progress

We all have front row seats at the parade of new and exciting technologies that are driving the 4th industrial revolution. The rise of the Internet of Things, robotics, blockchain and artificial intelligence will create what we are calling Procurement 4.0.

Cognitive procurement & supply chains are the most exciting developments to happen during my 20-year career. These innovations will enthuse a whole new generation of procurement professionals to join our ranks, but we need to be flexible, agile and able to foster a culture of continuous invention to stay on the leading edge and avoid extinction.

The Foundation Layer

Finally there’s the layer in which we hold the power: Procurement.

Procurement is the sponge at the bottom of the trifle. No matter how many unstable layers of fruit and jelly and custard are piled on top of us, we remain intact. We successfully juggle with the events and changes over which our stakeholders and suppliers have only limited control.

Fortunately, social media helps. I don’t know about you, but when my phone is pinging through the night with texts and emails from the other side of the globe, I’m often tempted to turn it off. But I don’t, because for all the downsides of being constantly online, the benefits of being connected are immense.

Three out of four of our respondents to our Gen Next Survey believed that being well-connected online actually improved on-the-job performance. By using resources like Procurious, not only can we maintain the layers of our trifle by staying aware of these constant changes, but we can also gain access to an enormous diversity of ideas and enthuse the next generation of procurement talent.

The Cream of Procurement Talent

To meet the challenge posed by the top layers of the trifle – unthinkable events, geopolitical earthquakes and disruptive technology – attracting the best and brightest to the profession is vital to our success.

To do that, we need to think hard about how we are bringing on Generation Next, and giving them every opportunity so their impact is not just local, but global.

While we’re talking about talent, here’s another “unthinkable” to ponder – our Gen Next survey also discovered that over 70% of our 500+ survey takers intend to leave their organisation within the next five years. How can we respond to this? The worst thing to do is to keep up the pretense that every member of your team will be sitting at the same desk in ten years’ time. Instead, it’s time to throw away the retention plan and accept the reality that today’s workforce is increasingly mobile.

But this doesn’t mean giving up on developing your team. If you’re known as a supportive manager who gives others the opportunity to go on to a stellar career, you’ll become a talent magnet in the profession. Just image the level of superstar talent that you’ll attract if you develop a reputation as someone who produces future CPOs!

Cutting Through The Complexity

Change management is such an integral part of every senior procurement professionals’ role, and often involves driving change within your organisation and amongst suppliers on a global scale.

The good news is that we’re exactly the right people for the job. Procurement’s position as the conduit of supplier intelligence, our ever-growing level of influence in our organisations, and our keenly-honed negotiation and communication skills make us natural change-management gurus.

Remember that trifle?

The challenge for today’s procurement leaders to deftly cut through all those quivering layers of economic, social, political and technological complexity to serve up a slice of procurement solutions in such a way that your audience will devour your change agenda with gusto! 

Bon Appétit!

12,000 Jobs Gone: Coal Supply Chain Hit Hard

Businesses that supply equipment to coal and gas power plants are cutting costs dramatically in response to the rise of renewable energy. 

General Electric’s new CEO, John Flannery, is cutting 12,000 jobs in its electrical power division. The blood-letting comes in response to GE’s 44% plunge in the Dow this year, and an ongoing battle against overcapacity in an increasingly disrupted industry.

GE’s electrical power division makes turbines and generators used in coal and gas-fired plants, which are estimated to provide around one third of electricity produced worldwide. The company has reported that disruption  in the industry has reduced the need for its products by 40%.

The power division’s European headcount will be reduced by approximately 18%, including 1,100 jobs in the UK and 1,400 in Switzerland.

GE’s problems have been exacerbated by the previous CEO’s gamble last year with an ill-fated $10bn acquisition of Alstom’s power and grid businesses.

German industrial conglomerate Siemens has also announced plans to cut 6,900 jobs, predominantly in its power division. The company expects to sell only 110 large gas turbines for power generation, down from its global production capacity of about 400 a year.

The International Energy Agency reports that renewables currently generate 24% of power worldwide, and expects this figure to grow to 40%  by 2040. GE’s response is not only to shrink its power business, but to invest in renewables, selling about $9 billion in wind turbines last year.

In other news this week:

Infrastructure boom leads to skills shortage

  • The Australian state of Victoria is currently investing in an unprecedented number of infrastructure projects, leading to a shortage of specialist and entry-level skills across the state and related cost increases.
  • Shortages include specialist rail skills, project management, finishing trades, commercial advisory skills, industry analysis, systems engineering and tunnelling.
  • Increased demand for raw materials, quarry materials, cement and sand has also resulted in price pressures in the extractive industries. A similar skills shortage occurred in Western Australia’s mining boom.

Best places to work in 2018

  • Glassdoor has announced its 100 best places to work for 2018, with Facebook taking the #1 spot for the third time.
  • Bain & Company and Boston Consulting Group took out the 2nd and 3rd places.
  • Only three companies have remained winners for 10 consecutive years: Bain & Company, Google, and Apple.

Access the full list here.

The Early Bird Catches the Procurement News Worm

In a fast-paced world, being first with the procurement news can mean the difference between being in the know and being left behind.

Read Tania’s first article on the importance of networking and your personal brand here.

Too many procurement professionals spend their careers in closed networks. They stay in the same profession, peer group, company, or industry, associating with people they already know. In these safe, closed networks, it’s easier to get things done because we’ve built up trust, and know all the shorthand terms and unspoken rules. It’s comfortable because the group converges on the same ways of seeing the world that confirm our own.

Life in a closed network is easy.  It’s safe.  It’s comfortable.

But unfortunately these gentle words are not synonymous with career advancement. If you want to keep growing and get ahead in your career, you need to be challenged, and be a challenger, within your ‘tribe’. You need to be first with the procurement news, be able to quickly digest the information, and interpret what it means for your organisation.

Open or Closed Case

When we were designing Procurious, the team had a lot of heated debates over whether we should have an open or closed network. That is, should it be closed exclusively to highly pre-qualified procurement professionals, or open for the whole world (aka. recruiters, consultants, sales professionals) to join.

Luckily my team convinced me to keep our network open, and it’s been an important part of our success story.

When you become part of an open network, you are exposed to multiple groups. Unlike your peers in closed networks, you gain access to unique relationships, experiences, and knowledge. You get to hear from thought leaders and industry experts, and learn about their diverse opinions on the hot topics in procurement.

As a result of being exposed to thinking outside your ‘tribe’, you gain a more accurate view of the world. In fact, some research shows that people with open networks are better forecasters than people with closed networks.

Leverage Your Networks

While Procurious members may not be the first to hear new information, they can be the first to introduce information to their network. As a result, they can leverage the first mover advantage.

For example, as a member of Procurious you may be the first in your company to become aware of a major supply chain disruption. Although the whole Procurious community is aware of this event, you could be the first person in your company to share the procurement news and start planning your response.

What’s more, you could use your network to gain further information on the disruption, and leverage their expertise to help solve the problem. You will be amazed how the community responds with alternate suppliers, solutions, on the ground contacts! In our Discussions section you will see there has already been hundreds of questions asked, and thousands of answers provided by procurement professionals all around the globe.

Let’s face it – procurement issues are now global business issues. The nature and complexity of procurement and supply chain challenges mean that they are too big for one person alone to solve.

To come up with the best ideas we need many, diverse perspectives.  By involving more views, life and career experiences, demographics, and cultures, we can access these perspectives. Through our Procurious network, we increase the pool of talent and therefore ideas that are working to solve problems.  Let’s call it collective problem-solving.

Collective Muscle

If our procurement network on Procurious gets into the habit of collective problem solving by supporting each other by sharing the procurement news, and with information and advice, it will soon become an instant reaction – a community reflex. And if we keep repeating that action, then we will build community muscle.

So when bad things happen, or when we’re looking for solutions to big problems, we turn first towards thinking that we’re going to solve it in a community way, through our network!

Apparently there are more than 3,500,000 procurement professionals in the world. But there are probably less than 500,000 who we can readily identify.

Many procurement professionals are working in isolation, unaware that there is a whole universe of knowledge and professionals available, to help them do their jobs better and learn more effectively.

There are so many problems we can solve together, so much we can do to promote our own careers and the profession – if only we use the power of connection and leverage our network – there is very little that we can’t achieve!

This blog is part of a speech Tania made at the eWorld Procurement and Supply Conference in London on 2 March 2016. Stay tuned for further insights from Tania and the Procurious team from eWorld.