How do you use supplier risk assessment to create a competitive advantage?

1 Define your risk criteria

The first step is to define your risk criteria, which are the factors that determine how much risk a supplier poses to your business. These may include financial stability, compliance, delivery time, quality, innovation, sustainability, and social responsibility. You should align your risk criteria with your business goals, values, and standards, as well as the expectations of your customers and stakeholders. You should also prioritize your risk criteria based on their importance and impact.

2 Assess your suppliers

The next step is to assess your suppliers based on your risk criteria. You can use various methods and tools to collect and analyze data about your suppliers, such as audits, surveys, ratings, benchmarks, and performance indicators. You should also consider the external factors that may affect your suppliers, such as market conditions, regulations, competitors, and geopolitical events. You should assign a risk score or rating to each supplier based on their performance and potential.

3 Categorize your suppliers

The third step is to categorize your suppliers based on their risk scores or ratings. You can use different models and frameworks to segment your suppliers into different groups, such as strategic, critical, preferred, or non-preferred. You should also consider the value and importance of each supplier to your business, as well as the level of interdependence and collaboration. By categorizing your suppliers, you can identify the ones that are most likely to affect your competitive advantage, and the ones that need more attention and management.

4 Mitigate your risks

The fourth step is to mitigate your risks by developing and implementing strategies and actions to reduce or eliminate the negative impacts of your suppliers. These may include negotiating better terms and conditions, diversifying your supply base, increasing your visibility and control, improving your communication and coordination, enhancing your quality and compliance standards, and fostering innovation and improvement. You should also monitor and measure the results and outcomes of your risk mitigation efforts, and adjust them as needed.

5 Leverage your opportunities

The final step is to leverage your opportunities by exploiting and enhancing the positive impacts of your suppliers. These may include strengthening your relationships and partnerships, creating value and differentiation, expanding your market reach and access, gaining insights and feedback, and sharing best practices and knowledge. You should also recognize and reward your suppliers for their contributions and achievements, and encourage them to continue to support your competitive advantage.

By using supplier risk assessment to create a competitive advantage, you can not only protect your business from potential disruptions and losses, but also improve your performance and reputation in your market. You can also build trust and loyalty with your customers and stakeholders, and gain an edge over your competitors.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?