Your relationship with your supplier is probably one of the most important that your business can forge.
Get it right and you’ll find yourself in a mutually beneficial and satisfying arrangement that will give your clients and buyers confidence and propel the strength of your brand to giant sized proportions.
Get it wrong and you’ll inflict damage upon yourself from which you may never recover. Remember the horse meat scandal a couple of years back? That equine debacle dealt the food industry a blow from which it is still reeling.
Arrests were made, slaughterhouse bosses were hauled over the coals and a number of retailing and manufacturing giants (most notably Findus and Tesco- the latter facing a drop of 360m EUR in market value.
Readers of a certain vintage will still cringe at the name Group 4 Security as they remember the various calamities they stumbled through while under contract to HM Prison Services.
While there was a macro-economic upside in consumers returning to their independent butchers, a lot of big names in the food industry are still trying to scrape the egg from their faces while Group 4 had to change its name to be in with a chance of appearing credible again. Suffice to say, your choice of supplier can make or break you.
You could be forgiven for thinking that properly risk assessing your prospective suppliers is a complicated and time-consuming affair but there are resources out there to help you devise a risk assessment template than can help you complete the process in around 15 minutes.
Jason James, VP of Evantix Risk Management neatly sums up the scope of the problem here.
“Supplier risk can span across industries and crises—a key production component isn’t suddenly unavailable; an embarrassing geopolitical factor comes to light; an organization merges into another.
Contracting companies must do what they can to protect their interests when outsourcing. A supplier risk assessment template is a good start in identifying potential concerns and liabilities.” – Jason James, VP of Evantix Risk Management
The specifics of a supplier risk template are entirely up to you but the golden rule is… Set your criteria stick to it! Once you’ve established this isn’t simply a matter of asking your supplier the right questions.
These should include:
Is the vendor financially secure enough to ensure that you they’ll still be able to meet your needs 5 years down the line? There are myriad factors that might determine this. Have a look at our Risk Management Solutions for more information.
Do they match/compliment yours? What is their attitude to risk?
Is the vendor currently facing or pending any litigation or disputes with other / similar businesses?
Most suppliers have the costs of supplier insurance baked into their pricing but it’s worth doing your due diligence on their policy and ensuring that it effectively covers your needs as well as theirs.
Check facebook /twitter /google reviews for any fires that haven’t been put out (this is especially relevant to smaller suppliers).
You’ll sleep better knowing how you’ll move forward if the worst should happen and a key supplier ceases trading. Options are industry-dependent but it’s always worth considering data and document storage with third party Escrow-type solutions so you can access any relevant I.P in the case of a commercial meltdown.
Finally, don’t assess any areas that aren’t relevant to your business. This will only waste time and give you a skewed sense of the vendor’s suitability. Once you’ve assessed your supplier and established a contract to protect your interests then you’re all set for years of profitable, risk free trading.