Whether it’s for performance management or for risk, it’s important to know who your suppliers are and have a close business relationship with them.
It’s a given you should already have a strong relationship with your key suppliers, but how often does your supplier request the following items?
- Urgent repricing
- Sending payments to a different address
- Check pickup
- Funding for capital expenditures
- Requests to purchase materials on supplier’s behalf
- Inventory buy-back
- Accommodation agreement (i.e. loan)
- Delay of cost reductions
- Re-sourcing all or some of the components it supplies
- Lengthening delivery times
If your supplier frequently asks for these things then it’s time to reevaluate what other ways your supply chain is being put at risk.
Warning Signs that Your Supplier is Causing Problems
- Past due debt
- Lower responsiveness to new RFPs and order acknowledgment
- Complaints of non-payment from sub-tier suppliers
- Creditor committee formed missed or late debt payments
- Changes in top management
- Lack of equipment maintenance
- Unplanned downtime resulting in loss of critical business
- Problem with their lenders
- Breach of banking covenants
- Changes or turnover of supplier contacts or representatives
- Sporadic adoption of dynamic discounting offers
- Reduced involvement of legal representation in negotiations
Ways to Leverage Supply Risk Management
Supply chain risk management tools can range from the technology you already have or new software to leverage your supply chain strategy. In the case of suppliers causing higher risk, it’s important to know the supplier as a basic supply management principle.
One way to do this is to measure the supplier’s performance with an evaluation to highlight areas that the supplier can improve. Set up a few basic key performance indicators (KPIs) to identify what how the supplier has overcome performance issues.
For more ways to leverage what you already do to manage risk, download the Ivalua whitepaper.
Perhaps your supplier is the problem, but there are factors in your supply chain that also involve risk. Take a few minutes to self-assess your organization’s strategy to see how much vitality lives within your supply chain. Take the Supply Chain Vitality Quiz.