Successive crises (COVID, supply chain tensions, inflation, etc.) and regulatory changes (CSR, etc.) have gradually led Purchasing Departments to redefine their missions within the company: moving from a cost-cutting rationale to a forward-looking, more global risk management rationale (particularly supplier risk), where data governance becomes central, for a 360° evaluation of suppliers.
What is supplier risk? Why is it amplified today by a particularly unstable global context? What impact does it have on the company? What role can the digitalization of the purchasing function and AI play? Here's how.

A particularly unstable global environment amplifies supplier risks

65%* of Purchasing Departments consider that the risk of supplier default will be major in 2025: supplier risk management is therefore a crucial issue.

Today's companies are operating in a globalized environment, where geopolitical, economic and technological contexts are redefining the situation, and increasing the criticality of supplier risk in the purchasing process:

Political context

Trade restrictions (embargoes and sanctions) and asset freezes

Economic context

Inflation, recession, exchange rates and customs policies

Technological context

Cyber risk, AI and fraud development

Regulatory context

Duty of care, Sapin 2, etc.

Environmental context

Climate and NGO pressure.

As a result, supplier risk management is more than ever a key issue for Purchasing Departments.

But what do we mean by supplier risks today?

* Trends and Priorities for Purchasing Departments in 2025" (AgileBuyer and Conseil National des Achats [CNA])

Supplier risk: a threat with many faces

With the globalization of the economy, cascading subcontracting, corporate mergers and industrial dependency, supplier risk is defined as the probability, for a client, of seeing its economic activity deteriorate, or even come to a halt, as a result of a malfunction in its relations with its suppliers and service providers, or of undesired behavior on the part of one of them.

More concretely? These malfunctions can be: a delay in production or delivery, a default, a cash-flow problem, a lack of investment, or misconduct involving an image risk (ethically negligent subcontractors, manufacturers using child labor, etc.).

As you can see, supplier risk is a "protean" threat:

Geopolitical risks - embargo, war, conflict
Economic risks : These relate to the general dynamics of the markets in which the company operates. They include risks associated with market volatility, supply chain disruptions, and changes in demand or prices.
Risks relating to suppliers and purchasing strategy : These may be risks associated with the supplier's financial health and stability, or may take the form of economic dependence.
Fraud risks
Operational risks: These risks are inherent to the internal processes and procedures used by the company to manage purchasing, such as errors or inefficiencies in purchasing flows, inadequate controls and a lack of transparency or visibility of your purchasing activities.
Reputation and image risks: These risks are linked to non-compliance with regulatory requirements and ethical, societal or environmental standards.

Supplier risks are therefore multiple and complex, forcing Purchasing Departments to redefine their missions:

On the one hand, to move from a purely cost-cutting objective to a purchasing function performance issue.
But also to move from a logic of adaptation to one of anticipation, where data governance and the KYS (Know Your Supplier) concept become an essential building block in the Purchasing process.

KYS: putting information at the heart of the purchasing process, for a continuous evaluation of your suppliers

23%* of Purchasing Departments train their teams in data analysis (datamining or data Analytics).

Data therefore becomes central to controlling expenditure and supplier risk, and improving compliance and purchasing management.

How can we do this? Gather information from suppliers both upstream and downstream of the relationship, for greater visibility and efficiency in the procurement process.

The benefits of such an approach are manifold:

Secure the third-party repository by verifying the identity and knowledge of suppliers
Monitor suppliers' financial situation on an ongoing basis
Avoid supply disruptions and bankruptcies - in particular of strategic suppliers -.
Prevent dependence on fragile suppliers

This shift towards data thus implies a technological shift, towards a digitization of the Purchasing function, where Artificial Intelligence (AI) definitely has a role to play.

*The priorities of Purchasing Departments in 2023" (AgileBuyer - Conseil National des Achats [CNA])

Towards the necessary digitization of Purchasing Departments

By putting performance back at the heart of the issues at stake, Purchasing Departments must today begin the necessary shift towards the digitalization of their function.

And we're still in the early stages of this process: in 2023, less than one in two Purchasing Departments will have embarked on their digital transformation*.

But what do we mean by "digitalization"? Quite simply, it means using technology to automate and optimize the purchasing process.

More precisely, this approach involves integrating the information collected on suppliers into the company's purchasing information system, via connectors. The benefits are clear: centralized "KYS" data, more productive teams, faster and better decision-making.

Beyond this interconnection between systems, there is also the question of the use of AI.

Thanks to its advanced analysis, automation and forecasting capabilities, this technology is a powerful lever for transformation and improved performance.

But this potential is still largely under-exploited: only ¼ ** of Purchasing Departments use AI in their business.

Training teams, accelerating the adoption of AI, facilitating the integration of data into systems, but also improving the quality and governance of data, are among the major challenges that Purchasing Departments will have to meet over the next few years, to boost their performance.

* Annual barometer of the digital transformation of Purchasing Departments - 2023

** Trends and Priorities for Purchasing Departments in 2024" (AgileBuyer and Conseil National des Achats [CNA])