A recent post, Exploring Sustainability Risk Management, we discussed how current market forces are affecting business sustainability. The post, in particular, focused on business reputation as a component of sustainability risk. To further build on the discussion, today’s leaders are also focusing greater attention on supply chain risks as a key factor in business sustainability.
According to the Aberdeen Group’s CPO Agenda 2009, the current economic climate has increased business sustainability risk in the supply chain. As a result, the roll of the supply chain function has elevated in many organizations. Along with many other factors, the top supply chain drivers in 2009 include:
• Identify Cost Reductions: Best-in-class organizations are targeting on average an 8.5% cost improvement on total company spend.
• Mitigate Supply Risk: On average 37% of all companies are implementing sustainable supply risk mitigation strategies.
• Improve Processes: Best-in-class organizations reducing sourcing activity to focus on key suppliers, improving contract compliance, and eliminating maverick spend.
In contrast to traditional procurement functional rolls, the growing pressure of supply risks have many companies redirecting their department’s actions. The skill sets of a traditional procurement professional are becoming more strategic to include: market intelligence and risk screening. Functional leaders are implementing risk mitigation strategies to:
• Define metrics and leading indicators for supply chain performance and risk.
• Develop contingency plans for supply disruptions.
• Integrate external market information to monitor and assess risk.
Many business leaders take a passive approach in response to changes in the market. However, progressive companies are leveraging this time to make their business more competitive. At Taiga Company, our sustainability consulting is working with clients to manage risk and optimize their strategic relationships.
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