Sourcing Professionals Must Also Become Risk Managers to Avoid a Career Burn

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Sourcing Professionals Must Also Become Risk Managers to Avoid a Career Burn

Long gone are the days when most sourcing professionals focused solely on cost and quality. People are now being held responsible for the sourcing decisions they make. Discover that your supplier can’t keep up with your growth projections — burn. Work with a supplier who falls out of compliance — burn. Lock in with a supplier who de-prioritizes the industry you are in — burn.  Discover you have no reasonable contingency supplier when that natural disaster hits — burn.

Today, sourcing and supplier management professionals must also serve as risk managers providing ongoing assessment of supplier risk from the selection process through the end of the supplier relationship. The mindset is shifting from reactive to proactive backed by data-driven analysis. So how can sourcing and supplier management teams build a risk assessment process that enables them to make the best sourcing decisions? Here are some steps to consider.

  • Identify and fill information gaps.  The more global your supply chain becomes, the more likely you are going to experience information gaps, especially as it pertains to Tier 2 and 3 suppliers. Determine the areas where lack of information puts you at the most risk? Is it financial strength, performance, ownership structure, compliance certification, capacity data, etc.? Identify the priorities and close the gap.
  • Leverage your Tier 1 suppliers.  Today’s supply chains are longer and more complex than ever before. Look for opportunities where you can engage Tier 1 suppliers to develop a risk assessment methodology that they can help implement for the upstream supply chain.
  • Collect as much information as before or during a sourcing event. This is when your suppliers will be most forthcoming as the idea of winning or retaining business can be a powerful carrot. But don’t take their responses at face value. You should be treating these responses as inputs that feed more sophisticated analysis and validation.
  • Store your data consistently so anyone around the globe can access it. Data should not be collected for one time use. Your data should be standardized and stored centrally for all business units to access, to build upon, and to synthesize. Consider adding skilled data managers to the team.
  • Risk scoring must assess true business impact. As tracking and scoring models are developed it is important that the end result is tied to true business impact. Management needs to understand when revenues, profits, or market share is at risk and focus their attention there.

Incorporating risk assessment and management into your day-to-day sourcing and supplier management activities will make you a more valued sourcing professional. And that will enhance your career not shorten it.

Michael Cross
Michael Cross
Michael is the Senior Marketing Manager at Directworks. He is responsible for helping manufacturers generate critical thinking around direct materials sourcing through the creation of webinars, seminars, conference presentations, whitepapers, articles, videos, blog posts and social media discussion.
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