Seven factors of supply chain failure from Airmic: Procurement Risk?
The Airmic – who are the leading association for risk management and insurance specialists – exposition on supply chain failures (see the Supply Management article from Airmic’s Paul Hopkin here) is the tip of a very large iceberg.
There cannot be any argument with the seven underlying factors that tend to be present whenever supply chains go wrong (for more details see the full report from Dr Alan Punter here).
BUT!
Who is accountable for the choice of the supply chain in the first place? Is it Procurement? Is it Manufacturing? Is it a Board Member? Whoever it is how versed are they in writing/negotiating robust contracts? Did they for example, use a robust risk modelling process prior to entering into the contract? Probably not, for a number of reasons. Firstly, they probably haven’t got a model; secondly, the procurement process doesnt demand one; thirdly, if a robust risk model was used it would expose deficiencies in the supply chain and we do not want that – do we?
What about the post-contract award actions? Who is accountable for contract managing the supply chain. As example of ineptness we heard a buyer contact a supplier and ask a million dollar question:
“Can you confirm that everything is going well?”
What is the chance of the supplier saying, in response:
“No. We are in a mess because our suppliers have put us on the stop because we haven’t paid them and we may have a component obsolescence problem in the next batch.”
Supply chains are not new, that is the astonishing point. The problem with supply chains are definitely increasing. Some Boards of Directors are complacent and need to waken up! One very pertinent action they could take immediately is to ask the Head of Procurement to bring to the next Board meeting the risk registers for all strategic purchases.
A confident prediction: not much space will be required to accommodate the risk registers. The second action is to ask the Head of Procurement,
“Are you fully accountable for supply chain performance?’ This can only be answered YES or NO?
It will be enlightening!
If you would like to learn more about how we might be able to help you achieve your procurement risk management goals, including Procurisk, please contact me and we can have an informal chat to discuss your areas of interest. Alternatively you can call me on 01744 20698.
Thanks Steve Ashcroft
Seven factors of supply chain failure from Airmic: Procurement Risk?
