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Last updated on 2024年6月14日

What are the best practices for managing supplier risk in your supply chain?

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In today's complex market, effectively managing supplier risk is a critical component of a robust supply chain. Supplier risk can come from various sources, including financial instability, geopolitical issues, or natural disasters, and can have significant impacts on your business operations. The best practices for managing these risks involve a combination of thorough assessment, strong relationships, and strategic planning to ensure your supply chain remains resilient and responsive to potential disruptions.

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naheed khan

united bank ltd served till 2018 ,

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1 Risk Assessment

Understanding the potential risks associated with your suppliers is the first step in managing them. Conduct regular risk assessments to evaluate the financial health, operational stability, and geopolitical context of your suppliers. This involves analyzing their credit ratings, reviewing their business continuity plans, and staying informed about any regional instabilities that may affect their operations. By identifying risks early, you can take proactive measures to mitigate them, such as diversifying your supplier base or developing contingency plans.

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Jim M.
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In my experience, businesses often overlook basic principles of risk associated with suppliers and supply chain management. Don't forget these key areas: 1. Diversification - always have at a minimum one back up supplier for your critical items and services. Service disruptions occur due to natural and man-made disasters, labor disputes, and business failures, among many other causes. 2. Reputation - Do you ship products by truck? Do your shippers have satisfactory safety scores from FMCSA? What impact would a driver hauling your products have if that driver fell asleep and caused a fatal accident with the subsequent investigation showing the driver falsified his logs and the carrier had a bad safety score?

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2 Build Relationships

Cultivating strong relationships with your suppliers is not just about securing better prices and services; it's also a risk management strategy. By developing a deeper understanding of your suppliers' business models and challenges, you can anticipate potential issues that might affect their ability to deliver. Regular communication and collaboration can lead to more transparency and trust, which are essential for quick and effective problem-solving when risks materialize.

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3 Diversify Suppliers

Relying on a single supplier or a concentrated group of suppliers for critical components can be risky. To reduce this vulnerability, diversify your supplier base across different geographic regions and industries. This strategy helps to spread risk and ensures that if one supplier faces issues, you have alternatives in place. Diversification also encourages competitive pricing and innovation, contributing to a healthier overall supply chain.

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4 Monitor Continuously

In an ever-changing business environment, continuous monitoring of supplier performance and risk factors is essential. Implement systems that provide real-time data on supplier delivery times, quality metrics, and compliance with contracts. This ongoing vigilance enables you to identify and address issues promptly, minimizing the impact on your supply chain. It also allows for better forecasting and more informed decision-making.

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5 Contract Clarity

Clear and comprehensive contracts with your suppliers are your first line of defense against supplier risk. Ensure that contracts include terms that address quality standards, delivery schedules, and penalties for non-compliance. It's also important to have clauses that cover unforeseen events, such as force majeure, allowing for flexibility in extraordinary circumstances. Regularly review and update contracts to reflect any changes in the business landscape or your supply chain needs.

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naheed khan

united bank ltd served till 2018 ,
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Supply chain is the backbone of any business. Supply chain ensure the product availability at right place, at right time, in minimum cost with maintaining the quality of the product. Goal of the supply chain is to provide the high value in minimum price to the customer. Supply chain represent single largest expense of the businesses and offer us huge area of improvement and increase the savings and profit margin. For most of the product the price of the product are competitive in market but it is the supply chain which decide the profit margin of the product. Demand of the products and services keep fluctuating because of various reasons and fulfilling this fluctuating demand with higher degree of efficiency

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6 Plan Strategically

Finally, strategic planning is crucial for managing supplier risk. Develop contingency plans for various risk scenarios, such as alternative sourcing strategies, inventory buffers, or local sourcing options. These plans should be integrated into your overall business continuity strategy to ensure a coordinated response across all departments. Regular drills or simulations can help test the effectiveness of these plans and identify areas for improvement.

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naheed khan

united bank ltd served till 2018 ,
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Basically, what can go wrong will ultimately go wrong; it’s a matter of time So U ponder in the interest of your biz what’s the likelihood and impact if something does not go according to expectation eg some of the items delivered by the supplier are deemed bad or not accd to specs This way U will able to assess the possible, probable impact and try to figure out a way to ensure U safe-guard your biz’s interest In the above example U can come to an agreement with the supplier on how to identify goods not accd to specs and the way to go about settling the case eg with replacement or what

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7 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?

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What are the best practices for managing supplier risk in your supply chain?

1

2

3

4

5

6

7

1 Risk Assessment

2 Build Relationships

3 Diversify Suppliers

4 Monitor Continuously

5 Contract Clarity

6 Plan Strategically

7 Here’s what else to consider

Business Management

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What are the best practices for managing supplier risk in your supply chain?

1

2

3

4

5

6

7

1 Risk Assessment

2 Build Relationships

3 Diversify Suppliers

4 Monitor Continuously

5 Contract Clarity

6 Plan Strategically

7 Here’s what else to consider

Business Management

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