How risky is supply chain risk?
Leading organizations assess it, manage it, and communicate it. But in an effort to be both cautious and proactive, it is important to remember that there is more than one audience for risk information. Information shared in a routine disclosure to one reader may signal a crisis to another, or so the Chipotle Restaurant Chain learned the hard way earlier this month.
The Chipotle Restaurant Chain is reassuring consumers after an industry blogger highlighted supply cost risks from Chipotle’s annual report. The blogger suggested the restaurant might stop selling popular items such as guacamole and some of their salsas if the cost of avocadoes and tomatoes continues to rise and fluctuate. As reported by ThinkProgress.org on March 4th, the chain’s focus on sustainable and responsible sourcing requires it to operate in markets that “are generally smaller and more concentrated than the markets for commodity food products”, where smaller suppliers are less able to hold their prices flat in response to adverse conditions.
When the story began to pick up momentum, Chipotle responded by assuring the public the assessment of avocado risk was nothing more than a routine disclosure for shareholders. In an official statement to FoxNews.com, a spokesperson for Chipotle said, “It’s nothing more than routine and required ‘risk factor’ disclosure. The sky isn’t falling”.
We can all rest assured that our trusted local source of guacamole is safe for the time being. But while we dig into a burrito bowl with a fresh bag of tortilla chips, it is worth recognizing the lesson in risk communication. Procurement fills a unique role in the organization because we communicate almost equally with internal and external parties. We are accustomed to being careful with factual information, especially when it could damage our negotiating leverage, but subjective assessments of risk require equal care. Once that information leaves our hands, mouths, keyboards, etc. we may find ourselves in a position of explaining negative publicity. And unlike in Chipotle’s case, where we are all reminded how important their guacamole is to our general well-being, our corporations may be left with doubting shareholders and customers.
Is procurement responsible for communicating assessments of risk in your organization? Or has information intended for internal eyes only ever gone beyond the corporate front door? Share your thoughts by commenting below or tweeting @BuyersMeetPoint.