In this crazy economy, add another line to your job description: risk manager.

Normally, buyers are expected—at the very least—to keep their companies cost competitive and make sure their plants don't shut down. The deflationary environment of the last several months and wild inventory swings have changed buyers' roles, however. The purchasing department at Ford Motor Co. found this out the hard way.

Buyers at Ford built up significant inventories of precious metals, particularly palladium, only to watch prices nosedive last year from more than $1,000 per troy ounce to $330.

Upshot: Ford announced in January it would post a $1 billion write-off, putting even more pressure on the company's troubled share price. Meanwhile, over at General Motors, which uses the same precious metals for catalyst technology, no similar problems were reported because buyers hedged contracts and took a more cautious approach.

As Anne Millen Porter chronicled in our Jan. 17 cover story, a deflationary environment poses special problems to the purchasing community. At the time, we never expected to see a $1 billion mistake by the number one company in our annual list of the 250 largest corporate spenders.

Lessons learned:

• If you don't practice risk management, don't wait any longer. A good place to start is the risk management story we published in our Feb. 21 issue written by Corey Billington, vice president of Supply Chain Services at Hewlett-Packard. A pioneer in online trading exchanges, Billington reviews the importance of distributing risk using a portfolio approach. If you missed the article, you can find it in the archives at www.purchasing.com.
• Stay on top of technology trends. New systems lessened dependence on precious metals for catalytic converters just as Ford buyers were ramping up their stockpiles.
• Participate in cross-functional teams. Adding insult to injury, it was a Ford researcher, Dr. Haren Gandhi, who was leading the work to develop new catalyst technology that reduced requirements for pallaidum.

Keep watch in these pages for more risk management coverage. We'll look at practices in the chemical process industries, where use of futures' contracts for chemicals and hydrocarbon feedstocks is becoming more widespread. Our metals maven, Tom Stundza, will also report on how to hedge in metals.