Does Your 2015 Plan (and Budget) Include Risk Management?

Posted by Ryan Gudovitz on Mon, Jan, 19 2015 @ 10:54 AM

crying-piggy-bank1Everybody is talking about “managing risk” and “gaining visibility” in order to prevent risk, but only the smartest of leaders are putting their budget where their concerns are – into technology solutions to manage the enormous amounts of data necessary to steer clear of jeopardy. Over the last few weeks, my email inbox has seen at least one news article a day that dealt with supply chain risk.

Last year, I talked about the need for technology investments to be made in this area in order to make sure your brand isn’t being hit below the belt with a recall, consumer attack or some other form of hack.

In a recent article in CIO Magazine, Doug Stephens, president of Retail Prophet, a management consulting firm, said, “At the risk of generalizing, retail companies tend to be very reticent to make investments in technology or software that doesn’t appear to have a bold, straight line back to sales or profitability. They tend to be rather shortsighted in terms of payoff…”

Investing in a tech solution is like buying an insurance policy to protect against risk. Of course, we all hate to pay the premiums until something tragic happens, then we don’t mind at all.

Product safety and factory compliance issues dominate the trends in supply chain management – especially in the apparel and footwear space where regulatory direction is becoming more difficult to follow and loss of life from a lack of oversight within outsourced production facilities is tragically prevalent.

Even though the CPSC’s total recalls for apparel and footwear in 2014 totaled a mere 34 products, in comparison to previous years where the numbers were in excess of 250, risk is still rearing its ugly headed in other ways.

Our friends at Deloitte Consulting have always published great statistical reports and their 2014 Chief Procurement Officer (CPO) Global Survey states that only 60 percent of the CPO respondents feel their teams have the necessary skills to deliver in line with the strategies, and outdated technology (kindly referred to as “legacy issues”) are a concern when it comes to transparency that can avoid and remediate risk factors if identified to the sourcing teams. Often, social media and other media outlets provide better visibility into geo-political and health/safety problems long before alerts are triggered in-house.

Unforeseen security, environmental, political and economic issues flourished in 2014; the Ebola crisis in Africa, heightened tension in Russia and Eastern Europe, religious fanaticism causing disruption and violence all around the world (including the calm streets of France), typhoons and hurricanes sweeping across the Pacific, Vietnam and China battling over territory, and political mood swings like that seen in North Korea, Cuba and other nations, to name some of the most notable.

In last week’s news, SJ editor Tara Donaldson captured responses from three leading retail organizations’ top executives. I was pleasantly amused when I read that the responses weren’t all standardized, showing me that there is at least some level of comfortable division out there; we aren’t all in the same boat so let’s not try to “can” our opinions and perspectives. Rather, let’s hope to be inspired by the diversity and create our own blended outlook. But all of these top leaders agree on something – as business relationships expand into new markets and diversify, every organization needs to make a mindful effort to reduce risk by employing technology to make process changes. Going more global means companies will increase their risk profile and broaden exposure to new perils or simply by making existing risks more difficult to quantify or manage.

When you begin planning for the upcoming year, be sure to consider the increased exposure to risk and look deep into your technology wallet. It might be penny wise rather than pound foolish to start investing before you get caught in the quagmire.

SJ Guest Editorial written by:
Gary M. Barraco                               
Vice President, Industry Development | ecVision

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