Written by: Donna Kirk – The Pro Forum Community of Practice
Often thought of as an engineering process to test functions or usage, a stress test is used to diagnose just what it might take to break a process or product. In a procurement or project situation a stress test could be considered risk analysis!
The Covid-19 pandemic had shown the importance of supply chains with resilience built into them – as we see empty shelves in supermarkets, price increases and growing pressure on our health system, it’s easy to get caught up in fixing the ‘now-issues’.
Procurement and project management need to consider the vulnerability to internal and external stresses on not only supply chains, but on processes as well.
We all know that supply chains are vulnerable to stress. This can come from issues from an internal process or procedure consideration. It can be external market forces. Sometimes the flaws are visible, sometimes they are not. Regardless, they pose a risk to the outputs and outcomes we are working towards.
Both internal and external, bottlenecks at any point can impact the delivery of a product or service. When demand is accelerated, the risks can increase. Consider the challenges initially faced with PPE and vaccine supply across the world.
Bottlenecks can be identified, re-evaluated, and repaired. Identifying them requires an honest review of the current state of play. Asking the question– what if? Assuming nothing.
An example of a common internal bottleneck – forecasting accuracy.
In logistics, warehousing and distribution, forecasting is essential for planning, and with an inaccurate forecast severe bottlenecks may result if capacity has been underestimated or overestimated. For logistics to work correctly, forecast information must be accurate to determine things such as lead time and production time. [courtesy SCMR.com]
What are the risks?
Procurement and project professionals evaluate risk constantly and for some it is almost intuitive. However, there are always new opportunities to assess the risks and find the root of any issues that could arise from a bottleneck in the supply chain.
Effective risk management may prevent a bottleneck from occurring and is required once a bottleneck (or potential bottleneck) is identified.
Most companies and organisations have volumes of data. If not understood or used well, it can present a significant roadblock to success. Stress testing can be as simple as measuring how long it takes to source information internally (or externally) and then checking the accuracy of the information.
Did it take longer than expected? How many people were involved? What if those people weren’t available?
With proper data and access to data, procurement and projects become more transparent, and less vulnerable.
A stronger understanding of when and what customers buy along with evaluating supplier spend can reduce the potential for unexpected increased costs and potential supply/demand bottlenecks.
Maturity level of the Procurement and Project Functions:
Identifying the maturity level of the procurement function, and in understanding how well each step in the process is being executed, is a major part of stress testing.
The varying levels of maturity:
- Emerging – a slightly adhoc approach utilising individual knowledge and experience. Low level of compliance checks for processes. Transactional and siloed.
- Developing – core task skills being developed for individuals however still reactive to supply and demand issues. Some processes exist but not mandated.
- Structured – Mandatory processes in place. Senior management engaged. Moving to anticipative processes with focus on documentation and compliance. Some of the team have qualifications and experience.
- Mature – strategic with fully integrated with business /organisation functions. Metrics in place to monitor performance. All of the team at all levels provided with training. Senior leadership qualified and experienced in procurement/projects/programs and
- Established – optimising processes, alignment with suppliers and marketplace. Project /Procurement lead in executive team leading strategy. Ongoing training becomes best practise with continued PD at all levels.
This exercise can assist in identifying areas where implementation or executive might break down.
Testing the level of collaboration across all functions, from the initial requirement to project planning onto implementation and BAU including the suppliers and the entire extended supply chain can highlight potential flaws that aren’t obvious.
Stress testing and understanding the maturity level of an organisation has grown increasingly important especially with the acceleration of change being demanded of us.
With the proper approach to stress-testing, processes become more than just the intangible. Instead, it becomes meaningful and strategic and ultimately can provide VFM and deliver the outcomes we are all seeking.