Risk Management

How to Build a Stellar Supplier Risk Management Structure

It’s a complex job to get your supplier risk management strategies together, and further integrate them into sourcing and procurement processes. However, Tanya Bragg, in this article in DigitalistMag.com, provides a handy framework in which to deal with this issue.

To begin with, you need a comprehensive supplier risk strategy that lets you:

  • Mine risk insights to help manage the supply base
  • Set workflows and metrics to ensure business continuity and avoid disruptions
  • Address ethical supply chain management and sustainability
  • Deploy secure solutions that incorporate everything seamlessly

Further, divide your suppliers into three levels as described below.

The Top Level

This level is made up of 5-10% of your mission critical suppliers who must be closely watched. It may seem like something insignificant like a label supplier, but a missing label could undo all your previous efforts. Therefore, it’s important to keep an eye out for errors of this nature.

The Middle Level

These suppliers represent those you’re mandated to watch so as to meet legal or compliance requirements and comprise of 25-30% of your suppliers. Owing to regulatory complexities, risk assessment and resolution will take a longer amount of time. An intelligent supplier who can provide insights to mitigate risks, reduce time and qualify the source in a more efficient manner must be identified.

The Lower Level

These comprise 60% of your suppliers and are non-mission critical suppliers. While they don’t merit extra scrutiny, they need to be monitored for basic issues and supplier performance risks, as they could impact your brand or operations.

The following risks must be integrated into your strategy as well:

  • Regulatory and compliance issues
  • Environmental and social issues
  • Financial issues
  • Operational issues

A robust supplier risk management solution should be able to combine the resources required to effectively manage all three levels of suppliers. These capabilities will empower you to conserve procurement cost, time, and labour by focusing on right-sized and right-timed risk assessments along with monitoring and mitigation for your supply base.

Click on the following link to view the original article in full: https://www.digitalistmag.com/digital-supply-networks/2019/01/08/building-sound-supplier-risk-management-structure-06195554

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