Risk assessment case study Sourcing IQ

COVID-19 and other market factors placed incredible strain on the global supply chain, and one of the first industries hard hit included the electronics and, specifically, microchip, industries. This shortage reverberated throughout other industries as consumers began to see higher prices and longer fulfillment times for everything from automobiles to cell phones, computers and even washing machines.

Our aerospace client, among others, was also affected by this chip shortage, seeing purchase price variances (PPVs) of nearly 10 times. They came to us for help mitigating and assessing the risks to their business during the shortage and crisis.

The Sourcing IQ approach to assessing risk is to always secure a clear picture of our clients’ business goals and needs. From there, we began whittling down the most integral components to the business. By taking their 33,000-item varying components list to a more manageable 170 items,  we were able to focus in on which components were most necessary for their daily operations and focus on sourcing for those items.

Once our client understood which components would have the greatest impact on their business, we were able to help them navigate the spot buys (or one-off/emergency buys) necessary to keep their business running smoothly.

Having a thorough understanding of our client’s business also allowed us to project minimum thresholds for inventory and recommend hedging strategies to avoid future PPV and ensure continuity of supply.

Our strategic risk assessment and management approach made the global chip shortage navigable for our clients. With a tailored methodology involving identifying key components, narrowing down to the most essential materials, spot buying when necessary and projecting required inventory, we could keep the business running for our clients.

The heightened pressure and scrutiny the global chip shortage placed on manufacturers indeed showed which companies were leaders in supply chain management and procurement. We’re proud our clients were among the leaders who gained the foresight to develop a risk mitigation strategy early on.