In managing any business it is important to take into account risks or potential risks with suppliers. This is a facet of the management system that is sometimes overlooked. If critical suppliers are not able to deliver the goods or services you need to operate your business, you could lose customers. An important facet of planning for the customer includes supplier risk management. Specifically, supplier risk assessment should include factors like:
1. Financial stability of the supplier: In order to assess financial stability several key questions should be answered. These include: 1) Is the supplier generally stable and profitable or headed for possible bankruptcy; 2) Do they have a history of not paying their suppliers which could affect the ability to provide you with the necessary goods or services; 3) Do they have a heavy debt load and very low profit margin? As you look at this factor, there may be more questions that you identify as important to your situation. In any case, begin with attempting to assess financial stability of your key suppliers.
2. Transportation: Consider factors like modes of transportation, alternate providers, alternate routes, natural disasters or weather related issues. Of course, transportation costs, delivery schedules and protection of goods during transit must also be considered.
3. Regulatory issues and compliance. Discussions with your critical suppliers should involve any known or pending notices of violations and/or fines as these could affect a company's ability to meet your needs. Significant regulatory concerns could lead to a supplier being shut down or facing heavy fines that could impede their ability to supply.
4. Labor stability: Factors like union contracts, legal status of workers, availability of workers and even succession planning could affect a small or large company's ability to supply your business.
While there can be much more detail involved in risk management, these factors should be considered at a minimum. After risks have been assessed and a determination made concerning the ability to meet your needs, then you are ready to take the next steps for insuring the quality of incoming materials or services.
1. Financial stability of the supplier: In order to assess financial stability several key questions should be answered. These include: 1) Is the supplier generally stable and profitable or headed for possible bankruptcy; 2) Do they have a history of not paying their suppliers which could affect the ability to provide you with the necessary goods or services; 3) Do they have a heavy debt load and very low profit margin? As you look at this factor, there may be more questions that you identify as important to your situation. In any case, begin with attempting to assess financial stability of your key suppliers.
2. Transportation: Consider factors like modes of transportation, alternate providers, alternate routes, natural disasters or weather related issues. Of course, transportation costs, delivery schedules and protection of goods during transit must also be considered.
3. Regulatory issues and compliance. Discussions with your critical suppliers should involve any known or pending notices of violations and/or fines as these could affect a company's ability to meet your needs. Significant regulatory concerns could lead to a supplier being shut down or facing heavy fines that could impede their ability to supply.
4. Labor stability: Factors like union contracts, legal status of workers, availability of workers and even succession planning could affect a small or large company's ability to supply your business.
While there can be much more detail involved in risk management, these factors should be considered at a minimum. After risks have been assessed and a determination made concerning the ability to meet your needs, then you are ready to take the next steps for insuring the quality of incoming materials or services.
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