Managing Supplier Risk: It’s All About the Information
What was once “nice to have” information has been defined by law. As social and environmental concerns grow, governments and related third parties are demanding, with regulatory backing, that businesses manage ethical supply chains. What can large organizations with complex supply chains do to help mitigate supplier risk?
Regulations demand that organizations provide and fully understand certain supplier information. Getting this wrong can result in penalties that range from fines running into millions of dollars to exclusion from bidding for government contracts. It also can damage business reputation; a recent Deloitte study reveals that 45% of Gen Z consumers stopped purchasing certain brands because of ethical or sustainability concerns.
Keep it Clean
Equally, there is an opportunity to appeal to stakeholders by ensuring clean and conscientious sourcing and production, which is at the heart of many marketing strategies. A more internally focused opportunity is managing the value that suppliers generate, for the lifetime of the relationship. To achieve this, organizations must have good supplier management practices in place that help them to receive relevant information and recognize where more may be required.
It’s crucial that organizations have a structured way to gather information from suppliers at the beginning of the relationship and keep it updated.
Once the most robust, accurate, and extensive information is in place, it can be put to good use. But the reality is that organizations are painfully dependent on suppliers for information. Therefore, they need healthy supplier partnerships in place.
Companies can achieve supplier-centricity by prioritizing a single source of truth in supplier data, then removing all relationship friction. One such point of friction experienced by suppliers is simply providing this information.
The way in which information is requested can be unhelpful. For example, it’s common for suppliers to be inundated with a steady stream of complicated questionnaires. What’s more, the questions do not always apply to all recipients.
The systems suppliers utilize to respond also can be difficult to use. Often, suppliers need to remember login details for multiple portals, each of which must also be maintained.
In reality, suppliers simply want to get paid and renew their contracts. When providing information is difficult, they’re likely to treat it as a tick-box exercise.
One-to-One Supplier Experience
The way to mutual success is for organizations to treat their suppliers like partners. This empowers suppliers to work toward a common goal and provide the best information.
To achieve this, organizations can use a single source of truth in supplier data to segment suppliers into groups. Once clustered—by country, category, or spend—the organization can drive an efficient workflow where it requests and receives the right information from each recipient group. This is crucial when managing risk.
It also helps to craft a better supplier experience. By removing communication bugbears, suppliers can provide better information more often. This further propels a healthy supplier experience, and so the cycle continues.
Pressure to manage supplier information will continue. But with the right processes, organizations can receive robust supplier information. In today’s business climate where resilient supply chains are vital, partnering with suppliers to mitigate risk and generate value is the way forward.