The amount of risk in a supply chain should be considered alongside other factors to achieve the best results, say specialist consultants Positive Purchasing.
In the latest Thought Leadership article from Positive Purchasing, Risk: it’s a balancing act, director Mark Hubbard says recent events in north Africa have underlined the vulnerability of supply chains in a globalised economy.
But he says threats to supply chains always exist and the challenge is to balance them against other factors.
The risk of a supplier’s price changing, for example, should be balanced against the risk of trying to stablise it by entering a longer-term contract.
Other risks include disruption to supply chains and changes in market conditions.
Hubbard says developing a strong, stable supply base is generally a positive strategy and may maximise opportunities for benefiting from the creative thinking offered by suppliers. But it may mean the rest of the supplier base is “locked out”.
A balanced approach in which newer, smaller and less traditional suppliers are given some
space may be an effective counterbalance against the risk of long-established suppliers becoming complacent.
Hubbard says: “To be able to manage these and other forms of risk in an unstable world, we need a really clear understanding of the businesses appetite for risk. To what extent is our business prepared to accept risk in order to reap potentially higher rewards? Conversely, how much does it value stability, even though it comes at a higher price?”
He concludes: “The really effective strategy is to understand all the factors involved and then make sure you have balanced them against each other to produce the best results.”
Notes for editors:
Risk: it’s a balancing act can be downloaded at: www.positivepurchasing.com/getdoc/538a7d92-f6a8-41e0-895b-5e...
About Positive Purchasing
Positive Purchasing is a leading strategic purchasing consultancy providing education and training, procurement transformation, best practice purchasing tools and online learning and resources. Positive Purchasing enables today's global companies to develop their purchasing function to achieve greater effectiveness.
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