Seven Steps to Secure Your Supply Chain: Due Diligence for Medium-Sized Businesses

In today's business landscape, procuring reliable and ethical suppliers is more critical than ever. Medium-sized businesses must take steps to protect their interests and ensure that they are working with partners who are compliant with regulations and share their values. Conducting due diligence is a crucial process that allow businesses to evaluate potential suppliers and make informed decisions about who they choose to work with.

This article outlines seven steps for medium-sized businesses, to build a trusted supplier network that supports growth and success.

Step 1: Define Your Criteria - The first step is to define your criteria for due diligence. This includes the type of suppliers you want to work with, their geographic location, the products or services they offer, and any regulatory or industry-specific requirements. You should also consider any risks associated with the supplier, such as their financial stability, reputation, and compliance with laws and regulations.

Step 2: Conduct Initial Screening - Once you have defined your criteria, conduct an initial screening of potential suppliers to assess their suitability for your business. This includes gathering information about the supplier's business, such as their business registration, legal and regulatory compliance, financial position, and references from previous customers.

Step 3: Request Information - Ensure you receive necessary information from the supplier about their business practices, including their policies on ethical sourcing, environmental sustainability, and human rights. This information must include their supply chain practices, labour practices, and any certifications they may have received or audits they have undergone.

Step 4: Verify Information - Verify the information provided by the supplier through independent research and third-party verification. This includes conducting background checks on the supplier, verifying their financial stability and reputation, and checking their compliance with industry-specific regulations.

Step 5: Visit the Supplier's Facility - Visit the supplier's facility to assess their operations and ensure that they are complying with your requirements. This includes verifying their compliance with environmental and social standards, assessing the quality of their products or services, and ensuring that they have adequate processes in place to manage risks.

Step 6: Review Contracts and Agreements - Review contracts and agreements with the supplier to ensure that they meet your requirements and that you are protected from any potential risks. This includes reviewing the terms and conditions of the contract, ensuring that they include provisions for compliance with laws and regulations, and establishing clear expectations for quality and delivery.

Step 7: Monitor and Evaluate - Monitor and evaluate the supplier's performance on an ongoing basis to ensure that they are meeting your requirements and that any potential risks are identified and managed. This includes establishing regular communication with the supplier, conducting periodic audits and tracking their compliance with regulations and industry standards.

Conducting due diligence on suppliers is a critical process for medium-sized businesses to protect their interests and ensure that they are working with reliable and ethical partners. By following these steps, businesses can establish a sustainable procurement policy and build a trusted supplier network that supports their growth and success.