Formulation of a supply risk strategy is essential for a company to perform at its optimal potential. Failure to construct an appropriate strategy can turn your risk into reality. Some may argue risk in the indirect and MRO world is less risky. But in fact, shutting down a factory line due to lack of critical tooling is just as bad a shutting it down due to lack of direct materials.

“Formulation of a supply risk strategy is essential”

When formulating supply strategy, here are some things we keep in mind when working with our clients:

1. Having visibility of spend across all service and material categories, e.g., shutting down an email network due to a server failure without replacement parts is just as bad as the MRO example above.
2. Communicating the business strategy to procurement. The worst business strategy is the one kept close to the vest. The CPO needs a seat at the table, or at the very least needs to ensure that the company, product, and go-to-market strategies are known to the procurement and sourcing teams.
3. Knowing the capabilities of your supply base to create an appropriate strategy. Many suppliers can bring value-add, and in many cases even help with mitigation plans.
4. Obtaining adequate market information regarding supply and demand along with ensuring you have the right set of skills and experience in the team to develop the strategy.

Related: Supplier Rationalization