Nearly half of chief procurement officers say that vendor threats are their biggest concern, according to the results of the Global Procurement & Strategic Data Survey. A blog post on the Supply Management website from Altius Vendor Assessment provides six strategies for reducing supplier risk:
- Assess each potential supplier’s economic health by reviewing several years worth of its published financial records. Talking with the supplier’s current customers and doing some research on the Internet can give you a broader picture of the supplier’s financial health.
- Organize supplier information properly so you can generate useful management reports. If the idea of maintaining spreadsheets is overwhelming, consider switching over to a compliance management system. Being able to map historical data will help you to spot trends and predict weaknesses.
- Ensure that you and your suppliers are cyber-compliant to help avoid data breeches. Put a comprehensive cyber defense strategy in place and update it regularly.
- Develop a strong set of pre-qualification standards for any contractors employed on company sites. Key health and safety checks should include whether workers are insured, if they have suitable asbestos-safety training and if they are qualified to work with or in close proximity to electricity. Do not place a subcontractor on your approved list unless it meets these pre-qualifying standards.
- Know your suppliers’ reputations. As far as is possible, ensure that supply partners are operating in a safe and ethical manner.
- Don’t plead ignorance. Claiming that you were never told you were supposed to check a supplier won’t hold up in a court of law. You are responsible for having strong systems in place to check and monitor suppliers.
According to a report by The Conference Board, risk and sustainability should be addressed concurrently in strategic and operational plans.