Identifying and Managing Procurement Risks PDF

CHAPTER 6: IDENTIFYING AND MANAGING PROCUREMENT RISKS ===================================================== Supply chains are complex and multi-faceted, requiring a strategic approach to identify and mitigate risks. But when they try to map out the entire supply chain, companies can pinpoint areas...

CHAPTER 6: IDENTIFYING AND MANAGING PROCUREMENT RISKS ===================================================== Supply chains are complex and multi-faceted, requiring a strategic approach to identify and mitigate risks. But when they try to map out the entire supply chain, companies can pinpoint areas that need the most attention, resulting in a more resilient and sustainable operation. Ein Bild, das Text, Diagramm, Reihe, Screenshot enthält. Automatisch generierte Beschreibung **RISK = PROBABILITY \* IMPACT** Supply chain risks can be categorized based on their predictability and impact: - **Manageable Surprises**: Difficult to anticipate but manageable impacts (e.g., supplier bankruptcy). - **Black Swans**: Hard-to-predict risks with severe impacts (e.g., natural disasters, cyberattacks). - **Brewing Storms**: Anticipatable risks with high impacts (e.g., tariff escalations). - **Business Challenges**: Low-impact, easily manageable risks (e.g., changing customer requirements).  [Source: McKinsey, 2023](https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Operations/Our%20Insights/Supply%20chain%20risk%20management%20is%20back/supply-risk-management-is-back.ashx) 1. **BLACK SWANS** - - - - - 2. **BREWING STORMS** - - - - - - **\ ** 3. **MANAGEABLE SURPRISES** - - - - - **\ ** 4. **BUSINESS CHALLENGES** - - - - - - **RESOURCE SCARCITY** Resource scarcity is a MAJOR issue that impacts global economies and business operations. It involves the limited availability of natural resources that are both scarce and economically useful in production or consumption, such as water, minerals, metals, oil, and forests. These resources are categorized into **renewable resources**, like water and forests, which regenerate naturally, and **non-renewable resources**, like fossil fuels and metals, which are finite and formed over geological timescales. The scarcity of a resource is determined by its geological availability, the static life index (ratio of known reserves to annual consumption), and price, which is influenced by supply and demand dynamics. Quite simply, the scarcity of a resource is not just about its rarity but its economic demand and availability. - - - "*Recent crises have constrained resources and increased costs but the slow return to normality indicates an incoming era of scarcity.* *In the new reality of scarce resources, businesses will need to adapt their business model to ensure sustainable growth.* *Businesses should focus on medium-term activities that will ensure an abundance of talent, a sustainable business model and the leveraging of technology for advantage, while changing their mindset around growth and success metrics in the long term."* [**The World Economic Forum, 2023**](https://www.weforum.org/agenda/2023/03/scarcity-doesnt-mean-the-end-of-business-heres-what-they-should-do/) *Did You Know? The [ABB Motion "Circularity: No Time to Waste"](https://new.abb.com/news/detail/111923/circularity-no-time-to-waste) analysis found that 37% of industrial enterprises cite raw material shortages. Energy (34%), labour (32%), and technology (26%), follow raw materials. 40% said energy was their largest waste source.* A diagram of a water cycle Description automatically generated Source: [The Curious Economist, 2024](https://thecuriouseconomist.com/microeconomics-what-is/what-is-scarcity/) **STRATEGIES TO COMBAT RESOURCE SCARCITY** 1. Secure the Supply 2. Own the Origins 3. Force Innovation 4. Extract Value 5. Broaden the Market 6. Arbitrage the Options 7. Act Collectively 1. **SECURE THE SUPPLY** 2. **OWN THE ORIGINS** 3. **FORCE INNOVATION** 4. **EXTRACT VALUE** 5. **BROADEN THE MARKET** 6. **ARBITRAGE THE OPTIONS** 7. **ACT COLLECTIVELY** **ASSESSING THE PERFORMANCE OF SUPPLY CHAINS** Performance = the output of product and service operations that may be compared to objectives, standards, prior outcomes, and other organisations. Supply chain performance assessment determines if firm goals and objectives are met, which should enhance profitability. In any circumstance, supply chain performance assessment is critical to assess current performance and supply chain management success.  - **WRONG APPROACH TO THE MARKET** - **MISINTERPRETATION OF FACTS BY POTENTIAL SUPPLIERS** - **OUTDATED INFORMATION ON POTENTIAL SUPPLIERS** **\ ** **KEY TAKEAWAYS** - - - - - -