Risk Management in Procurement – A Strategic Management Task (Part 1)
riskmethods welcomes a guest post from Dr. Hugo Eckseler, procurement and supply chain management consultant and former Executive Vice President at Deutsche Post DHL. Dr. Eckseler’s first article is about risk management in procurement.
Very few other topics related to procurement have gained as rapidly in importance in the past few years as supply chain risk management. In a research study conducted by Roland Berger in 2011, 82 % of the procurement managers interviewed indicated that risk management was right at the top of their agenda – compared to only 43 % in 2003. A survey by the Procurement Leaders Magazine in 2013 confirms this trend: The majority of procurement managers intend to address the topic of risk management even more than before in future.
For good reason: globalization of the economy and the associated complexity and vulnerability of modern supply networks can have disastrous results for a company in the event of a crisis. And risks lurk everywhere: from insolvency of key suppliers, quality and capacity problems, shortage of raw materials, downtimes in production plants due to tropical storms and other natural catastrophes right up to political unrest and non-compliance with social and environmental standards along the supply chain.
Risk Management in Procurement as a tailor-made strategy
Given this wide range of threats, it is essential to systematically include all relevant internal/external partners and modern IT tools so as to detect supply chain risks sufficiently early and to manage these effectively and efficiently. Gone are the days where simple credit reference checks of individual suppliers are enough when it comes to procurement; today it is a question of taking into account entire supply chains and of developing a tailor-made risk strategy for your own company that includes both preventive elements and emergency plans for all eventualities.
The role of procurement in supply chain risk management
Supply chain risks can threaten the existence of a company, as can be seen in examples over the past years. It is therefore not surprising that executive boards and business managers expect professional risk management from their procurement managers to prevent damage to the company. This may be a challenge for buyers and supply chain managers, but it is also an opportunity to position themselves as key strategic players in management.
What is your strategy for risk management in procurement? Is your organization aware of all potential risks?
I’m looking forward to your comments.