Why is Supplier Risk Management Essential for Organizational Success?

Supplier risk management is a continuous process of identifying factors that may adversely impact the supply chain operations. Businesses must devise risk prevention and mitigation strategies beforehand by identifying the root causes that could possibly wreak havoc in the supply chain. Supplier risk management frameworks coupled with analytics and market intelligence tools help procurement professionals to understand the value network processes and operations. Today, organizations are directing their efforts towards building agile supply chains and leaner processes, creating a sustainable competitive advantage, and devising new market entry strategies to guard their value chain against the increasing competitiveness in the global market.

Supplier Risk Management Not a New Concept

Supplier risks exist in every industry and have caused significant harm to companies. What are the supplier risks any business could face, you ask? Here’s what. Damage to brand reputation, delay in new product launch, and regulatory fines are among the several risks that a company could face without an effective supplier risk management program in place. Organizations often fail to gain a holistic understanding of the market conditions and supplier landscape and fail to obtain the required data to assess the risks. Once they gain access to data, analyzing it and predicting supplier risks is another uphill task without a proper supply market intelligence and a robust supplier risk management framework in place.

Supplier Risk Management – From Where Do You Start?

Before embarking on a supplier risk management journey, organizations must gain a 360-degree view of the supply chain by leveraging supply market intelligence and monitor every stakeholder such as active suppliers, downward suppliers and distributors, and preferred suppliers who have an impact on the value chain processes. Categorizing suppliers based on their impact on the business, collecting real-time data to identify potential risks, and devising contingency plans and measures to mitigate future risks helps the company to gain a better understanding of the supplier landscape. The risk mitigation strategies facilitate a structured, coordinated, and continuous approach, which helps businesses to promptly address the risks.

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