The Future of Procurement – Take 2

When Kelly Barner from BuyersMeetingPoint asked us to join in by making a prediction on “What does the Future of Procurement Hold?” we immediately had varying thoughts. Our first take was “THE END OF SUPPLIER RELATIONSHIP MANAGEMENT“. We now would like to share with you our 2nd prediction:

SUPPLY CHAIN RISK MANAGEMENT AS ESSENTIAL PERFORMANCE METRICS FOR PROCUREMENT

The goals for procurement are currently: 1. Savings, 2. Savings, 3. Savings – as well as KPIs such as performance, quality and logistics. Supply Chain Risk Management (SCRM) has so far not made its mark in these performance metrics in most organizations.

We recently gave a talk at a SCRM event, together with our customer Belimo, who impressed upon purchasing agents the value of SCRM as a personal objective in terms of their suppliers. The question to the audience as to which companies this applies to yielded only one response.

 

SUPPLY CHAIN RISK MANAGEMENT AS ESSENTIAL PERFORMANCE METRICS FOR PROCUREMENT

 

And yet we hear almost daily from our customers that further globalization and worldwide goods procurement are crucial in order to remain competitive. To generally benefit from this, however, you should be prepared for potential risks. Risks along the entire supply chain, which go far beyond financial key figures and which can cause disruptions that result in damage amounting to millions.

We understand very well that there is a conflict of goals when it comes to procuring the most cost-effective goods – which are highly likely not being produced in the most low-risk areas of the world, though.  Should these savings not, however, be seen in the light of damage worth millions, which is caused by a disruption in the supply chain?

We are of the opinion that there is a huge opportunity for procurement here: Combining the “old KPIs” price, quality, performance and delivery reliability with the goal of ensuring protection against risks along the supply chain by way of SCRM will provide procurement with a high leverage effect as regards participation in the company’s success.

And as has been proven by Accenture’s current study “Accenture Global Operations Megatrends Study – Focus on Risk Management”, SCRM also contributes to ROI: nearly all of the 1000 companies represented in the study receive a return on their investment (ROI) in risk management. Only 7% are, however, generating returns of over 100% on their SCRM investments. Why? Because precisely only these 7% have a continuous approach to SCRM: they make SCRM a priority, centralize their responsibility for risk management and invest aggressively in risk management with a specific focus on end-to-end supply chain visibility and analytics.

If you want to learn more how our customers measure the ROI of SCRM and what further studies and experts say see our blog post ROI via visibility into your supply chain and suppliers.

See also our first prediction: THE END OF SUPPLIER RELATIONSHIP MANAGEMENT

Rolf Zimmer is a founder and managing director of riskmethods, and is responsible for Finance, Product Strategy and Customer Success Management.

Rolf has been working in software business and procurement for 18 years. He has excellent knowledge in the areas of procurement, supply management and risk management – which he gained from working inside procurement departments as well as from consulting activities at SAP, Ariba and Emptoris, among others. His previous position as Sales Director at IBM included responsibility for distribution of the “Emptoris” Supplier Relationship Management suite and associated consulting services.


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