DISCIPLINE AS KEY POINT

Proper and professional risk management is essential for any organization; minimizing the risk of shortage and bottlenecks in the supply chain, and consequently allowing the company to achieve its expected performance.

For proper risk management, a systematic approach must be implemented within the organization to regularly check in with suppliers regarding topics like environmental and social aspects, operation performance, compliance, contract management, etc. In addition, it is essential to assess financial stability and market analysis factors such as single source classification, dependency and number of locations, among others.

But even with a systematic process implemented, the risk will not be properly managed if the right mind-set is not instilled in the organization: to have the discipline to analyse the suppliers properly, neutrally, based on facts and values, and if needed to modify the strategy consequently according to the results.

How many times has a purchasing organization follow the ostrich strategy: not interested in actually assessing the risk and underestimating the potential impact on the company because “doing nothing” is easier than moving forward with a proper action plan to minimize or avoid risk?

Insolvencies, bottlenecks and shortages appear later on (surprise, surprise) and task forces are needed to solve the situation, but at that point with a huge investment in personal resources and additional cost for the company.