The Point by Buyers Meeting Point
Book Review: Single Point of Failure
Recent disasters, whether earthquakes, tsunamis, or tornadoes, have threatened business continuity for many industries. As has been pointed out in many recent procurement webinars, this presents an opportunity for us to step up and prove our strategic value to the organization. We cannot, however, rely solely upon the stories in the news. We need to educate ourselves and be prepared with suggestions.
- As you review the categories you are currently sourcing or are managing contracts for, ask yourself what would happen to your company’s operation if this product or service were unavailable in 90 days. 30 days? Tomorrow? What is your backup plan? You don’t have to be managing a direct spend category to significantly affect revenue. I used to work for a food retailer and was responsible for sourcing pest control services. Not direct spend, but need I say more?
- Is there a reason to strategically split your award between two or three suppliers rather than consolidating all spend with one? In many cases, the reason for a single supplier award strategy is based on volume and discounts. But if the additional margin of savings isn’t significant, there might come a day that you were glad you paid a little more. I certainly wouldn’t want to have to tell a CPO or CFO that we had no supply of X because we saved an additional 1.3% over the term of the contract.
- Be sure to conduct a news search on all strategic suppliers, or those suppliers currently going through the sourcing process over the last twelve months. While you may not have access to a fancy service like Lexis/Nexis, you can do a pretty thorough job with a google news search. It is certainly better than not doing any search at all.
- Remember to consider the location of your suppliers’ headquarters or business offices as well as the location their goods and services are being manufactured in or traveling through to reach your company. It is easy to feel that a supplier based in Chicago is low risk, but if their goods are coming from or passing through Asia, you could be facing supply disruptions. In that case, all you are likely to actually get from Chicago is a heartfelt apology.
This book is absolutely worth the cover price. It’s technical and a slower read than some of the other books we’ve read – it is certainly no ‘Girl with the Dragon Tattoo’ but on a topic like this, we would be disappointed if the author weren’t serious and more than a bit concerned for all of us, which he seems to be.