supply chain with raw material sourcing
Whilst we look to source in a sustainable way, risk factors must always be considered. To be forewarned is to be forearmed, which is why the comprehensive Raw Material Risk Management system is an excellent tool for Givaudan.
At Givaudan, raw materials sourcing risk is a cross-functional consideration. Identifying and mitigating risk is integral to securing supply and satisfying customer needs.
Underpinning this risk assessment activity is the Raw Material Risk Management system, based on a concept partially developed by economist Peter Kraljic and by Jan Willem Ederveen, former CEO of Purspective B.V. The system was initially designed to optimise supply security.
A snapshot of global sourcing
Johannes, Global Head of Procurement Excellence explains: “The Raw Material Risk Management system is a procurement portfolio matrix that has four ‘arms’ or quadrants, like a windmill. By inputting criteria such as risk, spend, and supplier turnover, we gain a quick, high-level overview of our global sourcing situation.”
Johannes describes the various categories of risk that Givaudan takes into account, which are rated by procurement category managers and site buyers: “Risk can, for example, relate to crop, market, geopolitical or logistic factors. Our sourcing risk management tool is used globally; it enables us to visualise and rank our sourcing risk in a consolidated way. We take into account the business impact of the raw materials by including the spread of these in the manufacturing of finished products.”
Improved transparency means better business solutions
Johannes continues: “This means we’re able to quickly spot raw materials at global and local level that may need extra attention. By highlighting these raw materials at sales and operations planning meetings, we can improve transparency and determine the best business solutions in cases where we don’t already perform adequate risk reduction activities. The solutions could include strategic stocks, alternate vendor development or make/buy options.”
“The risk management system offers a structured way of indicating where our sourcing risks lie. This improves our ability to improve effectiveness by helping us achieve world-class excellence in our end-to-end supply chain.”
By identifying and managing sourcing risks, we continue to make our supply chain stronger, link by link.