𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝗿 𝗿𝗶𝘀𝗸 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗶𝘀 𝗮 𝗺𝗮𝗷𝗼𝗿 𝗶𝘀𝘀𝘂𝗲 𝗳𝗼𝗿 𝗽𝗿𝗼𝗰𝘂𝗿𝗲𝗺𝗲𝗻𝘁.
How many times in the event of a supplier failure (such as late delivery, poor product quality or insolvency), operations of the buying company are severely affected?
Hence It’s vital to do your due diligence.
Evaluating the risk of key suppliers failing to deliver is critical, especially the Tier 1 Suppliers.
𝙃𝙤𝙬 𝙚𝙖𝙨𝙞𝙡𝙮 𝙩𝙝𝙚𝙮 𝙘𝙤𝙪𝙡𝙙 𝙗𝙚 𝙧𝙚𝙥𝙡𝙖𝙘𝙚𝙙 𝙞𝙛 𝙣𝙚𝙚𝙙𝙚𝙙 𝙖𝙣𝙙 𝙝𝙤𝙬 𝙢𝙪𝙘𝙝 𝙞𝙩 𝙘𝙤𝙪𝙡𝙙 𝙖𝙛𝙛𝙚𝙘𝙩 𝙮𝙤𝙪 𝙞𝙛 𝙩𝙝𝙞𝙣𝙜𝙨 𝙜𝙤 𝙬𝙧𝙤𝙣𝙜?
The first step in this process is 𝙧𝙞𝙨𝙠 𝙞𝙙𝙚𝙣𝙩𝙞𝙛𝙞𝙘𝙖𝙩𝙞𝙤𝙣.
In order to manage it, you must know the level of risk that is present.
𝘼 𝙜𝙤𝙤𝙙 𝙥𝙡𝙖𝙘𝙚 𝙩𝙤 𝙨𝙩𝙖𝙧𝙩 𝙞𝙨 𝙩𝙤 𝙖𝙨𝙠 𝙩𝙝𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣: “𝙒𝙝𝙞𝙘𝙝 𝙨𝙪𝙥𝙥𝙡𝙞𝙚𝙧𝙨 𝙖𝙧𝙚 𝙢𝙤𝙨𝙩 𝙘𝙧𝙞𝙩𝙞𝙘𝙖𝙡 𝙩𝙤 𝙩𝙝𝙚 𝙤𝙥𝙚𝙧𝙖𝙩𝙞𝙤𝙣 𝙤𝙛 𝙢𝙮 𝙗𝙪𝙨𝙞𝙣𝙚𝙨𝙨?”
Once that has been answered, it is important to consider what are the mostly likely risks to those key suppliers.
Risk assessment requires putting together a formal checklist to understand the potential for risks, including the financial stability of your suppliers.
This stage can also include assessing what the potential fallout of the risk may be and how it would be managed.
To assess the risks of your suppliers, consider these strategies:
𝑴𝑨𝑷 𝒀𝑶𝑼𝑹 𝑩𝑨𝑺𝑰𝑪 𝑺𝑼𝑷𝑷𝑳𝒀 𝑪𝑯𝑨𝑰𝑵
Before you can evaluate suppliers (and perhaps your suppliers’ suppliers), you need to map out who they are, what they provide and where they’re located.
𝑽𝑨𝑳𝑼𝑬 𝑨𝑻 𝑹𝑰𝑺𝑲 (𝑽𝒂𝑹):
This Metric compares the amount of risk that various suppliers present.
A company will consider categories of risks, whether they be risks related to politics, weather, ethical practices, quality or other categories and assign probabilities to the likelihood of occurrence.
𝑾𝑬𝑰𝑮𝑯𝑻𝑬𝑫 𝑹𝑨𝑵𝑲𝑰𝑵𝑮:
You can use a basic system that assigns weighted importance to risk factors like economic or political disruption, financial dependence, credit history and natural disasters.
You give each of those factors a weighted importance and each supplier a score of 1-5( highest) for each.
✳ Hey there, it’s Onkar Gill
🔺 A Supply Chain Expert!
✅ Let’s work together to take the procurement game to the next level!”
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