1. Strategy Risk = Choosing the right supply management strategy.

Know that whats right for one business might not be right for yours. For example, a small
family-run business may opt to source locally because they dont have the resources needed
to keep an eye on global suppliers.

Mitigation and Management Approach: Define the right up-front strategy, and identify and
qualify the right suppliers, using reliable market intelligence to drive decisions.

2. Market Risk = Brand, compliance, financial and market exposure.

When outsourcing part production or even entire product lines, youre putting your company
at the mercy of your suppliers. If they deliver a sub-par product, or fail to deliver completely,
your customer will be looking to you not them for an explanation.

Mitigation and Management Approach: Pinpoint the product lines quality standards
tolerance, and determine the possible impact of a compromise. Monitor those lines closely to
detect early-warnings before issues wreak havoc with your firms brand, ability to meet
compliance regulations and the bottom line.

3. Implementation Risk = Supplier implementation lead-times and production/performance

ramp.

Know who youre working with and what their capacity issues are before signing on with
them. Working with a supplier for whom your business only represents a fraction of their
revenue means you may not get the level of attention that you want.

Mitigation and Management Approach: Ramp new suppliers quickly to gain early visibility
into any risk factors that might hinder production, lead-times, initial performance, etc.

4. Performance Risk = Ongoing supplier quality and financial issues.

Now that youve selected a supplier, theres still a lot of work to be done. Businesses are
acquired, go out of business or shift strategy every day, so constant vigilance is needed.

Mitigation and Management Approach: Continuously monitor all of your suppliers to avoid
disruptions caused by bankruptcies, performance issues, ownership changes, labor strikes,
geopolitical changes, etc. You may need to tap technology to effectively achieve this level of
monitoring.

5. Demand Risk = Demand and inventory fluctuations and challenges.

 While some suppliers jump at the chance to take on new opportunities, enthusiasm doesnt
necessarily mean theyre in the best position to excel.

Mitigation and Management Approach: Watch your suppliers carefully for signs that they
are overwhelmed with new business. Dont let their desire to grow their business affect your
commitments.

1. Strategy Risk Doesnt choose the right supply chain management strategy
- In 2005, they separated strategic from non-strategic raw materials.
Specifically, strategic ones were placed under the responsibility of a
Strategic Raw Material Worldwide Director reporting to the Worldwide
Purchasing Director. Whereas, non-strategic ones are under different Area
Purchasing Directors responsibility based on the Worldwide Purchasing
Director.
- Not until 2010 did the distinction between strategic and non-strategic raw
material purchases disappear. However, there is still the gap between
upstream and downstream as purchasing is only considered as a
transactional function in Chemspec.
Solution: At the corporate level, the purchasing department should be
promoted to Purchasing and Supply Chain Department to define the
policies, the process and the procedures. Furthermore, in order to
merge the strategic and non-strategic raw material purchases, the
Marketing Organisation should not be considered as internal series
providers.
2. Market Risk
- Due to the increase in raw material price, the top management recognised
that Chemspec lacked upstream market knowledge. Therefore, external
factors such as geopolitics, environment, economics and technology are
not anticipated. Moreover, in Chemspec, the marketing department never
makes any attempt to solicit purchasing directions knowledge.
The top management should come up with organisational devices in
order to widen the scope of the integration process. Also, there ought
to be a change in the supportive teams perspectives in the
importance of Marketing Organisation because the strategic analyses
help the company figure out ways to overcome different difficulties
(lack of visibility on upstream markets) and beware of changes in the
market.