Management of Procurement Risks on Manufacturing Processes

Results of a survey about the state of the practices and their requirements

Management of Procurement Risks on Manufacturing Processes

Results of a survey about the state of the practices and their requirements

The management of procurement risks induced by suppliers and their impact on industrial processes chains is still arduously evaluated and handled by the companies today, in particular by SMEs. In the context of the CORNET SimQRi project, CETIC and the Institut Fraunhofer led an survey with Walloon and German SMEs in order to establish the current state of risk management practices and identify the associated requirements.

This article presents a synthesis of the different types of risks, the current ways to manage them and the requirements that will allow to better understand them. A more complete version of our analysis is available on the project web-site.

Companies Panel

The survey was carried out from October 2014 to the end of January 2015, based on a trilingual form (French, German, English) that was distributed through different channels in Wallonia and Germany. Around 70 companies answered the enquiry which was anonymous by default, but allowed us also to record the contact data of companies interested to follow the project. The distribution of the companies was balanced between Belgium and Germany (given the sizes of activity sectors in both countries). A great variety of manufacturing industrial sectors was covered, with no predominance of any specific sector. The majority of the companies was medium-sized (between 50 and 250 employees), whereas Walloon companies were smaller, which corresponds well to their economic make-up. Nevertheless, we can notice that the Walloon manufacturing sector contains more medium-sized companies than other industrial sectors (UWE11).

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Figure 1. Participants overview

Main Characteristics of Procurement

The companies that answered the enquiry were mostly manufacturers of final products, but we also got a significant number of parts assembly companies, as well as parts suppliers to a lesser extent (see figure 2). With respect to the number of suppliers for each company, we rather noticed a high number of suppliers on average: indeed there were as many companies with less than 100 suppliers, as companies having more than 100 suppliers. That number points the need of having methods and tools able to manage an important suppliers base.

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Figure 2. Procurement overview

Type of Risks to Manage

To set up a priority hierarchy for the risks to handle in a global manufacturing process (top of figure 3), we asked the companies to rank their top 3. The quality risks (products that cannot fulfil quality requirements) came first, followed by supply risks (constraints on the volume and the delays required by the clients), before the risks related to demands (which are directly related to procurement). Considering more specifically the point of view of procurement processes (that is, before the manufacturing), the bottom of figure 3 shows a similar top 3 for the risks, where the procurement risks logically ranks first. Other risks that intervene to a lesser extent are the economical risks (e.g. bankruptcy of a supplier), political risks (related to the political situation of a country or a region), transport risks (possibility of losses or delays in conveyance) and storage risks (losses or stocking degradation).

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Figure 3. Risk management

Current and Wished Tools

The pie chart in figure 4 shows the current situation in the use of tools for risk managing. It reveals that a majority of SMEs does not have any kind of risk management tool, or more precisely, that they rely essentially on standard office tools, like spreadsheets. Barely 10% of companies have dedicated tools for risk management. The main obstacles are the costs as well as the required level of expertise to master such tools. Our enquiry clearly highlighted that one of the main desires of SMEs would be to have at their disposal a tool that is affordable, easy to learn and administrate (mainly by a web user interface), without requiring any programming skills.

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Figure 4. Tools overview

Next Steps

Based on this enquiry and its recommendations, the SimQRi project is currently developing the prototype of a tool allowing the assessment of the impact of different risks. The designed prototype will provide the following functionalities:

  • A simplified modelling of procurement and manufacturing processes, based on a web graphical editor.
  • An efficient discrete-event simulation based on Monte Carlo methods with the inference of probability distributions for different types of risks.
  • The possibility for the user to explore different variants of an existing process, in order to optimise the risk management.
  • Different kinds of reports that facilitate risk analysis and variants comparison.

The tool should be made available to the project user committee during September 2015, after some partial validations done on the summer. The project user committee is open to any interested company. If you are interested in SimQRi, please do not hesitate to contact us.