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in Supply Chain

Six Best Practices to Mitigate Sourcing & Supply Chain Risk

by Vanguard Software

It’s clear that sustainable supply chains deliver value through the efficient use of resources and enhanced product and sourcing visibility. This helps organizations avoid supply disruptions, product outages, and unsavory sourcing surprises. More importantly, it helps organizations gain a competitive advantage by adapting more quickly to market changes, securing the best-available resources, and maintaining sufficient sourcing options.

Upstream supply chain visibility and sustainability initiatives remain demanding, though, especially for organizations that:

  • Conduct business across multiple boundaries
  • Contend with diverse, complex parts requirements, globally distributed suppliers, or other high-pressure or technical demands
  • Operate in strict regulatory environments, or in markets with high customer/consumer expectations
  • Seek environmental goodwill for water stewardship, materials repurposing, and other value that require additional attention or investment

These lofty supply chain risk management goals are achievable only if all members of the organization, and sometimes their suppliers, are on the same page.

In fact, supply chain and procurement professionals, including chief procurement officers (CPOs), are now collaborating to develop supply chain risk management and optimization strategies within the organization, and in partnership with outside parties. Firms that manage sustainability initiatives proactively tend to:

  1. Continue to use supplier audits as a diagnostic tool to maintain greener and more ethical supply chains, but also look to procurement professionals to address the root causes of intractable sustainability issues. They rely on data-driven risk assessments, collecting information directly from workers using mobile phones, or doing intensive, multi-stakeholder work that focuses on particularly difficult issues.
  2. Adopt specific reporting methods, like fact-based reporting, tracking greenhouse gas emissions data, and triple bottom line (TBL) accounting of economic, environmental and social impact provide benchmarks. These methods ensure internal sustainability goals are realistic and can be reported out to critical audiences, such as consumers and regulators.
  3. Conduct life cycle assessments (LCA) to determine the environmental impact of their products or services from cradle to grave. These include the impact of raw materials extraction; processing, manufacturing, fabricating, transporting and distributing a product; and disposing of or recovering all of parts of a product after its “first” life is over.
  4. Adhere to ISO 14000 environmental management standards that improve environmental management efforts.
  5. Follow the 5 Level Framework, which is designed to enable planning within complex systems, organize thinking and information to be more clear and strategic in meeting sustainability goals, and help companies define success, set strategy, determine actions, and identify the best tools to use. The framework enables procurement professionals to think beyond the company and consider suppliers as well.
  6. Consider risk aware procurement (RAP)–an aspect of supply chain management (SCM) led by the procurement department that goes far beyond key performance indicators (KPIs) and stock “buffering.” In fact, RAP is designed to lead the organization into a continuous process improvement loop that not only creates competitive advantage through the supply chain, but secures its ability to profit from unexpected events.

Better reporting, knowledge transfer, collaboration, and optimal use of the best tools create a solid grounding for sustainable supply chains.

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