Archive

Procurement

DisasterA.T. Kearney quotes an interesting figure in their Assessment of Excellence in Procurement Study that about 80% of “follower” companies are one natural disaster away from a major business disruption.  By contrast, according to their analysis, leaders use risk-impact analysis, financial risk management (such as hedging) and disaster planning as ways to protect against unforeseen threats.

With some very public disasters caused by major disruptions in the supply chain it’s hard to believe that many Supply Chain organizations do not include risk assessment and planning as part of their strategy deployment.

Risk Planning doesn’t have to be complicated.

A brain storming session with your team identifying possible risk events is easy and gets the involvement of your team. Then a simple risk impact analysis (a XY table) assessing the probability and impact of the potential events can be carried out. High, medium and low are the only scores you need to worry about.

Potential events include strikes at the supply base or its transportation network, poor service, crop disasters, key inputs cost escalation, cost saving project delays, quality, poor supplier relations to name a few.

Risk management planning should receive the same attention as planning cost saving projects. SMART objectives are developed and subsequent plans are included in personal and team objectives.

Continuous Risk Monitoring

A monthly review of potential risk events and risk management activities should be part of your agenda.  One event could wipe out all your hard work and destroy a career.  Isn’t it worth a half hour of your time each month?

Gary Lajoie is an end to end supply chain professional with expertise in procurement, manufacturing & distribution. Renowned for improving margins by relying on Lean techniques and innovative thinking to progress the organization’s cost saving activities beyond the idea of “picking the low hanging fruit” and uncovering great opportunities “buried in the roots”. Described for his ability to balance the culture and vision of the organization with a hard driving passion for eliminating excess found, but seldom noticed, throughout the supply chain

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We often get caught up in the volume/price negotiation for products or the development of specifications/ price for that one big piece of equipment we often forget that there are still opportunities to be had. The Service Level Agreement (SLA) is a great vehicle to provide you, the purchaser, additional benefits.

Spending less than 5% of your time on the SLA? – Shame!

Thinking beyond the traditional customer service agreement, SLA’s can be a great method to close some gaps in your operations including;

  • Agreement to targeted cost saving objectives
  • Supplier funding for market development opportunities
  • Equipment performance guarantees with specified penalties
  • Supplier sponsored training and seminars
  • Shared roles and responsibilities for new product launches
  • Spare parts availability and pricing

These are just a few areas to explore. An internal SWOT analysis can provide other ideas.

Dealing with monopoly markets.

SLA’s are great when we are faced in negotiating deals when there is only one de facto supplier. When you feel like you are in a price taking situation – deflect the conversation. There is often less resistance from a supplier when looking beyond price, so focus the discussion to other areas. Negotiate hard -there is always something to gain.

What opportunities have you explored?

Gary Lajoie is an end to end supply chain professional with expertise in procurement, manufacturing & distribution. Renowned for improving margins by relying on Lean techniques and innovative thinking to progress the organization’s cost saving activities beyond the idea of “picking the low hanging fruit” and uncovering great opportunities “buried in the roots”. Described for his ability to balance the culture and vision of the organization with a hard driving passion for eliminating excess found, but seldom noticed, throughout the supply chain