PROACTIS: “Act Now to Analyse & Minimise Supplier Risk Before Your Next Crisis”

The number of suppliers in crisis is on the rise as a result of the credit crunch and general economic weakness. Companies are advised to take immediate action and establish an early warning system to mitigate the impact of supplier failure and the risk of serious problems that could be caused directly by the actions or inactions of suppliers.

As the economic climate deteriorates, executives have an increased responsibility to manage risk and the viability of their critical suppliers: There were 4,242 compulsory liquidations and creditors' voluntary liquidations in total in England and Wales in the third quarter of 2011 (on a seasonally adjusted basis). This was an increase of 6.5% on the same period a year ago*.

Prudent management teams are taking note of the rising number of failed suppliers and in response are initiating actions to assess and mitigate potential near-term supplier risks - financial and operational. This includes a framework necessary to:

  • Collect and maintain accurate and complete supplier information
  • Gain a thorough understanding of suppliers' capabilities, certifications, policies and procedures
  • Evaluate suppliers' ability to deliver a set of products, or perform a project or service
  • Monitor all of the possible changes, required actions, and actual performance of suppliers
  • Enable suppliers to maintain much of their profile information themselves

In many organisations, the challenge to maintaining the necessary level of visibility comes from the way in which supplier information is collected, stored, and managed.

"Organisations must eliminate the reliance on paper information and documents that cannot be easily analysed," said Simon Dadswell, Director of Marketing, PROACTIS. "Companies are exposed to supplier risk and potential supply chain failure if they have: multiple, dispersed systems containing different types of information; manual and disconnected processes that don't use or contribute to a single view of suppliers; and information that may have been accurate at one time, but is now out of date."

Now - before economic pressures intensify - is the time to put in place a true supplier risk management framework. It should be a natural part of everyone's daily activity, and a natural part of your ongoing engagement with suppliers. To be truly effective, risk management processes must be thorough, consistent, continuous, and cover virtually all of your suppliers in the following ways:

  • General supplier qualification
  • Supplier selection for a specific purchase, project, or contract
  • Monitoring of ongoing supplier performance and compliance
  • Rapid access to alternative suppliers if/when a replacement is needed
  • Through supplier engagement documentation if/when a problem needs to be addressed

"You can put in place a cloud-based supplier risk management system that will also significantly enhance your source-to-contract processes and get started in a matter of weeks," continued Simon.

To assess your current position, download " Supplier Risk Management - Do You Really Have the Right Level of Visibility to Minimise Risk" white paper from PROACTIS. This paper addresses:

  • The wide range of risks involved in both direct and indirect procurement
  • How to proactively manage a diverse range of suppliers and risk
  • The key elements of an effective supplier risk management system

*Source: The Insolvency Service