Businesses tend to do a great job of monitoring stability in their customers – but pay less attention to the financial, legal, economic and environmental reliability of their suppliers.
Consequences When Transparency Falls Short
Increasing globalization and complexity of supply chain management have removed many manufacturers from the loop regarding critical financial, performance, legal and compliance information involving their suppliers.
One of Dun & Bradstreet (D&B) Corporation’s clients was unaware that a supplier had gotten an EPA violation for mismanaging radioactive material, until D&B informed them of the fact. D&B Senior Vice President and General Manager of Supply Management Solutions Jim Lawton notes that “we work with a lot of companies that find out about bankruptcies months after they happen. Or, they learn about them, but not in time to be able to continue to make sure they have parts coming into their facilities.”
Risks to Watch For
In addition to the risk of supplier viability, you need to ensure visibility when it comes to the following:
- Risks that suppliers may pose to your brand or reputation. Remember, your customers only know your product as your product. Whatever glitch traces back to a supplier really doesn’t matter to them; the ultimate responsibility for quality is yours.
- Potential safety or environmental risks posed by suppliers. This issue has reemerged in recent years in light of much-publicized recalls with a number of Chinese produced goods.
- Capacity risks. You can’t afford to take a chance on suppliers not meeting your needs for parts or products. This may be more likely as the economy recovers and demand rebounds.
Your Solution: Take a Global View
Supply chain transparency can be a daunting prospect, but with the right predictive strategy, you can achieve a robust risk management infrastructure that will provide early warnings to any potential issues, so you can address or eliminate them before they become threats.
- Establish a global view of every supplier you deal with. Build a standard dashboard that helps them understand the inter-dependencies of all the companies involved in your value stream process. Remember, for a chain to hold, every link needs to be equally strong. D&B’s Lawton cites the example of a client that has 72 ERP systems. “They don’t have a single view of all those companies that ties together all the interrelationships, in terms of this company being partially owned by that company … and so, risk in one is potentially setting up risk in the other.”
- Form a complete picture of your suppliers. Supplement available internal information with external information; for instance, suppliers’ current financial conditions, on-time delivery histories, OSHA or EPA violations, pending lawsuits, and liens or criminal charges. Use multiple sources to ensure data quality.
- Invest in current hardware and software to enhance supply chain visibility. The technology has come a long way in recent years. Many companies are opting for Web-based systems using a software-as-a-service model. This offers the advantage of rapid implementation: as soon as you complete your list of suppliers, the best systems can be turned on immediately.
An acute and realistic focus on understanding all the potential risks in your supply chain is critical to your smart business strategy. To learn more about this and related success tactics, read our related posts or contact the experts at Premium Staffing today.