Businesses work with a wide variety of external partners to obtain supplies and services.
Supplier Risk Management must not only capture the vast number of a company’s suppliers but respect the different characteristics of the vendors, too. Inherent risks must be visualized in a way to recognize those specific suppliers with increased risk potentials, but also to take selective steps of individual action, and finally reduce risks.
- In Strategic Supplier Risk Management it is advisable to always look from multiple directions to derive information for risk identification: The first one is to tackle the Procurement organization along its processes all the way from demand to deliveries (top-down-method). And the second one is to collect and compare individual relevant supplier indicators (bottom-up-method). The aim of that double approach is to identify and effectively reduce the full range of risks.
- As crisis situations or incidents may threaten or break the chain of uninterrupted supply, procedures must be planned, implemented and trained which allow the company, departments and teams to react systematically and adequately. In such cases, Supplier Risk Management must employ special crisis management methods on specific suppliers or situations.
- Sophisticated Supplier Risk Management often results in intensified cooperation when the buying company is able to assess and understand suppliers and their inherent risks more precisely. In certain cases, however, a wider diversification of the risk may be indicated or a complete replacement with alternative suppliers.
- Comparative evaluations from Supplier Risk Management can be seen and used as an effective management tool to motivate suppliers achieve useful progress in certain topics.
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