The importance of having the tools in place to control supplier risk
The most important thing for you to remember when looking at supplier risk is that the performance metrics your business needs are likely to already be in place. This will be hopefully be due to your excellent own record keeping or simply from repeated supplier interactions.
This is the first and one of the most telling indicators of supplier risk. Your own employees will know more about your suppliers than anybody else; after all they have to work with them on a regular basis. If you have a high turnover of employees then this should raise the alert, especially if you are looking to find and retain skilled employees.
Your supply chain can be disrupted by any number of supplier factors, including labour conditions, wage levels or anything else and these can damage your brand considerably. High turnover rates could be all you need to demonstrate that your supplier risk is too high and damaging your performance.
This is the most straightforward way to consider the risk management involved. Your supplier’s record with on-time deliveries and responsiveness is likely to be already tracked by your team so take advantage of it and use the information to start mitigating risk.
It’s all about process improvement rather than establishing new regulations or company checks. Make sure that you procurement team are addressing the possible warning signs of supplier problems. You need dependable suppliers not just those that going to offer the lowest quote.
Lean supply chain can result in restricted success
Trying to eliminate supply chain waste should be a key aim for you and your business, but be careful not to go too far. Starving yourself of potential resources could disrupt production. Opting for ‘just-in-time-delivery’ can be a great way to reduce warehouse turnover times but it may also leave you vulnerable to any weather or natural disaster delays.
The majority of the process of lowering supplier risk is common sense. Don’t over or under commit and plan for best and worst case scenarios.
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