Risk has become an increasingly important focus for Stockholm-headquartered consumer goods giant Electrolux, which has thousands of Tier-1 suppliers. With such a large supply base, it’s not surprising to hear the business faces many different threats, including cyber risks, material availability challenges and logistics risks – to name but three.
For Mirela Boldu, senior programme manager – supplier risk management, managing these threats is crucial to the function. “We are not only focused on cost-reduction, but also added value when we talk about sustainability, innovation and risk avoidance. So risk will be one of the key metrics for purchasing in the future. As long as we nurture collaboration, have a strong team and have a clear process to follow, everything will fall into place.”
Boldu spoke to Tim Burt, community advisor at Procurement Leaders, to explain why she focuses on vulnerabilities ahead of strengths, the role of technology in risk management and why Electrolux places an emphasis on education and collaboration in managing risk. Listen to the conversation in full or read highlights, below:
Focus on weaknesses ahead of strengths
“The last three years have shown us both our potential vulnerabilities and our strengths in purchasing. We like to start with the vulnerabilities and build up from there,” Boldu explains.
Digitalisation has been important in enabling the business to identify risks and improve communication: “We have made a lot of improvements to our digital infrastructure over the last couple of years. As you know, Electrolux is a global company – not only in terms of sales but also our manufacturing footprint. Consequently, the digital infrastructure and communication with suppliers are quite different at a local level.”
The multitude of risks buyers face represents an issue
Boldu is not focused on one specific threat. In fact, the real challenge comes from the variety of simultaneous risks procurement teams face: “We talk about the geopolitical constraints, as well as material and availability shortages, supply chain and logistics risks we have faced in the last couple of years, but also operational risks such as financial risk, as well as natural hazards or cyber risks,” she says.
“The most discussed, currently, is the geopolitical risk, because of the need for a more localised supplier base. I would say if I were to pick one of the other risks, the newest in the sourcing environment is the cyber risk. We have started to engage [on this] internally with internal subject-matter experts, as well also externally with our suppliers.”
Education and collaboration are critical
“Education means that we educate ourselves about the newest risks and extend this by sharing best practices with our suppliers. We have a multitude of different suppliers with different preparedness levels – we engage the more mature ones to discuss benchmarking,” Boldu says. Meanwhile, Electrolux keeps even closer ties with less mature suppliers to help ensure their preparedness and minimise the impact of risks.
This collaboration extends beyond suppliers to include key internal stakeholders: “Over the last couple of months, we’ve built a very strong process around risk management and have defined methods to analyse and mitigate these risks. We also have a very strong subject-matter expert team in place. We cross-collaborate with cybersecurity for cyber risk, with loss prevention for fire and natural hazards risk. We built these processes and methodology and now we will integrate them into our sourcing process. This means having risk metrics in the business for new sourcing boards but also, for continuous improvement, we include risk metrics in quarterly business reviews with suppliers.”