Minimizing supply chain risk via procurement

Minimizing procurement risks

The procurement department in any electronics company is a crucial cog in overall operations, but one of the greatest threats to an organization’s procurement department—by extension, its supply chain—is supplier risk.

In a new Global Chief Procurement Officer Survey published by Deloitte, the firm reported that 65 percent of procurement officers don’t have visibility down their supply chain after their Tier 1 suppliers, a trend that Deloitte describes as “surprising.” What’s more, only a sliver of procurement heads (6 percent) has full visibility into their supply chains. The report marks out that risk mitigation is the next challenge facing procurement departments.

“In addition, greater visibility lends itself to greater innovation and improved total cost of ownership. High performers are two-and-a-half times more likely than their peers to have full supply chain transparency,” said the report. “We anticipate that the challenges for organizations will be increased in future by the rise of Digital Supply Networks, changing industry dynamics, and the race for talent.”

Bringing Crucial Processes Up-to-Date

While those numbers in Deloitte’s survey could signal a cause for concern, there are numerous solutions at the disposal of procurement officers one of which is a simple increase of visibility. As Industry Week points out, visibility up and down the supply chain can go a long way in mitigating and even outright avoiding disasters and supply disruptions. However, 100 percent visibility for a procurement professional is an alignment of various players and factors, where all parties conduct and report in real-time updates which then allows corrections along the chain to prevent issues.

Along with visibility, updating supply chain technology should be a priority for procurement specialists and suppliers because of a variety of contingencies that could occur. According to EBN Online, procurement managers should consider connectivity, tariffs, geopolitical unrest, technology infusion, sabotage, and Internet of Things connectivity as reasons for making sure supply chain risk is minimal.

Additionally, supply chain risk management is an on-going process: it is an ongoing conversation that occurs at different, strategic times during a vendor-customer relationship. GRBJ suggests managers avoid passivity when managing supply chain parties. Instead, managers should work to enact “periodic 360 evaluations.” The evaluations are holistic in nature, examining every aspect of the relationship hoping to suss out any present deficiencies.

Looking to Blockchain

Another tool in the arsenal of procurement managers is potentially blockchain. As Procurement Tidbits outlines, blockchain is a “form of digital trust that speeds up transactions and removes intermediaries. It is why it can have massive implications in the business world as supply/value chains are interconnected and complex.”

Blockchain ensures that data within the blockchain is concrete, accurate, transparent, leading to a greater degree of trust down the supply line past Tier 1 suppliers. With blockchain fortifying data within a supply chain, this allows for procurement departments and managers to implement processes that streamline operations for greater efficiency down the road.