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The new normal for supplier risk management

· supply chain,Suppliers,pandemic,procurement,sustainability

We know that supplier risk management is resource intensive - information is hard and time consuming to source, it comes in many different forms and needs to be updated regularly. And with sustainable and social suppliers, there is an added dimension – how to assess impact. We leverage technology to solve both these problems.

“It was considered a compliance headache; it’s not something a lot of people like,” she said. “Now, it’s key to their operational and strategic future.”

Lori Frank, Argos Risk

Until now, many corporates had focused on their top 10% or top 100 suppliers. The tail spend didn’t get much attention, risk assessments occurred infrequently and there was generally little visibility on those suppliers.

 

Some have characterised this pandemic as the ‘black swan event’ for supplier relationship management and supply chain risk analysis. In fact, in the early intense period of the pandemic - for a third of CFOs it was a top 3 concern in rolling surveys conducted by PwC.

It is clear supply chain risk has been a pressing C-suite issue during this crisis. Procurement teams focused on securing supplies and finding other channels as supply chains came to a halt. With many businesses closing or significantly reducing operations, financial health was considered in the context of delivering the immediate supply.

What can be expected going forward? Well, even as pressures start to ease many companies have said that diversification is still on the agenda, but over a longer timeframe – a three year exercise. Over half of CFOs surveyed by PwC say that additional sourcing options will be developed. And more will be invested in better understanding suppliers “moving away from low-cost supply chains toward fully pricing supply chain risk to the cost of goods”.

Technology will play a critical role. If supply chains are broadened and greater attention is required, for large organisations managing thousands and thousands of suppliers, it will be impossible to manage an even larger pool in the absence of technology.

In addition, we are of the view that sustainability and social factors will once again rise to the top of agenda. Regulatory requirements are not going away, and the positive affects of the lockdown on the environment have been witnessed by people everywhere. Images comparing some of the world’s greatest cities pre and post covid-19 will not be forgotten easily. With governments all around the world investing in businesses to support employment, the private sector will bear some responsibility for repairing social fractures caused by the pandemic.

A company’s supply chain is now seen as an imperative, strategic function. New ways are needed to tackle new problems.

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givvable is a sustainable and social procurement platform used by procurement and sustainability managers to find and assess suppliers, and track impact of their spending. Contact hello@givvable.com to find out more.

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