ANNEXURE B CASE STUDY: GLOBAL SUPPLY CHAIN RISK MANAGEMENT - HOW AGCO IMPLEMENTED AN SCRM SOLUTION TO SAVE MILLIONS AGCO is a Georgia-based multi-business unit, global manufacturer of agricultural machinery. The company traces its roots back 100 years but was formed 25 years ago and has operations in primarily North America, Brazil, Western Europe, China and India. AGCO has addressable procurement spend around $7 billion, out of which $5 billion is in direct materials and $1 billion is pure indirect spend, with parts and third parties making up the remainder. AGCO's procurement organisation comprises about 250 people, touches 25 direct commodities, and works with around 6,000 suppliers, out of which around 250 make up 90% of spend (the suppliers in risk monitoring). The procurement function was fragmented and spread across the many business units, which lead to business challenges when external eventssuch as earthquakesdisrupted the supply base. These events sent buyers scrambling for available capacity without any sense of teamwork or collaboration. In some cases, they were outbidding each other for the same suppliers. When a competitor proved that a centre-led SCRM approach was more effective at securing supplier capacity, this drove AGCO to adopt its own strategy, as well as an organisational change to a matrix layout. Key business objectives were identified: 1. Eliminate internal risks 2. Focus on top 250 suppliers 3. Consider supplier, location and country risks 4. Automate data capture to minimize manual efforts In addition, outcomes or business benefits were defined as: Better sourcing decisions through risk adjusted Total Cost of Ownership (TCO). Sub-tier supply chain risk identification through multi-tier supply chain visibility. Alignment of category management strategy with supply chain risk exposure. The SCRM effort at AGCO was not a quick fix, or narrow point initiative but was rolled into a holistic approach that combined: Internal organization change to a matrix structure with category owners that also have regional or even cross-enterprise roles in addition to their responsibilities at the business unit level

Question 1 From the case study, the procurement function at AGCO was fragmented and spread across the many business units, which lead to several business challenges. Using the Risk Management process, explain how you as the Regional Procurement Director would go about addressing existing and potential risks within AGCOs procurement function. Use realistic examples based on the case study in your solution. (25) Question 2 By applying examples from the provided case study, explain the types of risk management classifications that you can employ to classify risks existing within AGCO?