A monetary approach of risk management in procurement

Currently, companies are not able to properly estimate costs induced by procurement risks. Hence, the optimal trade-off between effective and efficient processes (cost reduced processes) on the one side and risk induced costs on the other side are not quantified by companies until today. The approach will enable producing companies to systematically quantify risks in procurement monetarily. Based on an innovative approach, risk management is both efficiently and effectively sensitizing employees for risks in procurement by means of an integrated approach. A multiple-stage use of Monte Carlo method enables companies to monetarily quantify total costs of procurement risks providing a sound base for scenario analysis. Practicability of the approach was already validated in different co mpanies indicating several advantageous for the industry. The approach was developed as part of a nationally funded AiF research project.