The primary task of procurement is to ensure security of supply by providing the necessary goods at the right time and in the right place. Exactly four factors influence supply security, such an important aspect for company growth and success: supplier, country, material and politics.

Supplier: The suppliers are the direct interface of the procurement department and here the economic situation, the logistics chains but also the commissioned subcontractors influence the security of supply.

Country: There are very few companies left that do not contract at least part of their procurement volume outside Germany. The economic but also political situation in a country, as well as the working conditions or natural disasters there, can jeopardize a seamless supply.

Materials: In the area of materials, we cannot avoid the issue of resource scarcity. If our natural resources are finite and we consume significantly more than can be grown back or mined, then economic efficiency is faced with a huge supply problem.

Politics: Finally, unrest at home or abroad, duties or import restrictions can endanger the security of supply for German companies.

Security of supply through risk management

In order to keep an eye on the various influences on the security of supply of a company, procurement departments need a well effective risk management. Procurement is thus put in a position to react to risks at an early stage, avoid damage to the company and ensure security of supply through risk management. This requires a general understanding of risk, clearly defined reporting processes and comprehensive transparency regarding suppliers, processes, material groups and products. Any risks that arise must always lead to measures and subsequently to an examination of risk management. Known risks must be „insured“ by procurement, for example through alternative supply sources. However, the effort for risk management must never exceed the weighted potential damage.

Security of supply through risk management therefore requires constant monitoring of millions of sources in order to identify current and potential risks. However, manual monitoring of all these risk sources blocks resources in procurement that could be used for strategic and value-added activities.

Artificial intelligence as the next stage of expansion

For this reason, modern supply chain risk tools use artificial intelligence that collects real-time information about logistics chains based on stored parameters and aggregates this information according to risk requirements. Without any action on their part, buyers are automatically notified of relevant risks and can proactively counteract them.

However, this form of automated risk reporting can never stand alone. Rather, it must be embedded in a structured, cross-company, holistic risk management driven by the management. Benefit from our experience in auditing your risk management and the practical implementation in your procurement department.

 

Gregor van Ackeren

Managing Director, ADCONIA GmbH

Vivien Koch

Consultant, ADCONIA GmbH