Successful Risk Management Begins with People and Process

How to more effectively manage risk by viewing the supply chain as an integrated corporate function


Process improvements often include new tools or changes to existing tools. These tools can help improve supply chain effectiveness but generally require a longer lead time to implement, and they should be incorporated into the organization’s broader IT strategy. It is important that the category council define and prioritize these tools, build business cases based on companywide benefits, and explain these benefits and impacts to key decision makers.

Metrics also will likely need to be adjusted to help promote desired behavior. While cost reduction has been the traditional metric used to evaluate supply chain performance, it does not adequately measure or represent the contribution of the supply chain to the larger organization. General metrics that should be considered include total value contributed, spend under contract, internal price change compared to market, supplier performance, supply diversification/risk, and working capital improvement. Specific metrics should be based on the company’s industry, operations and strategy.

Conclusion

Successful supply chain management starts by accepting that this is an integrated companywide process managed by the Supply Chain organization – not an isolated function. By creating a new model that involves participation from the entire organization, companies can more effectively manage risk while realizing improvements in areas such as working capital, profitability and innovation.

Disclaimer: The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.

About the Author: Jeffrey Farmer is a senior manager in KPMG LLP’s Business Effectiveness Advisory group. He can be reached at jfarmer@kpmg.com. More at www.kpmg.com.

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