CASE STUDY

Improving Supplier Segmentation for an Industrial Machinery Manufacturer by Conducting Supplier Risk Analysis

Jun 20, 2019

Companies of today are exposed to ever-growing counterparty risks. It is, therefore, recommended to evaluate supplier risk continuously to minimize disruption in the production process. Also, to maintain a competitive advantage, manufacturers must improve their supplier risk analysis process.

The Business Problem

The client is a leading industrial machinery manufacturer in the US who engages with approximately 100,00 suppliers in over 35 countries worldwide. Despite having different audit programs in place for a few suppliers, the US and foreign supplier concerns and distribution disruptions were impacting the growth of the client. Poor supplier segmentation and rising overhead audit costs were further forcing the client to adopt best-in-class supplier risk analysis methods. The client, therefore, approached SpendEdge to leverage their expertise in offering supplier risk analysis solution. By adopting SpendEdge’s supplier risk analysis methods, the industrial machinery manufacturer wanted to overcome shortcomings on the part of suppliers that were exposing them to a variety of risks.  

Segregating suppliers based on the risk they pose is crucial for organizations to mitigate risks. Request a free proposal and access our complete portfolio of supplier risk management solutions.

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Solutions Offered and Client Journey

The experts at SpendEdge conducted a comprehensive supplier risk analysis to integrate supplier information across operational systems. They effectively consolidated supplier data across the organization to provide real-time information on suppliers and improve visibility for informed supplier risk management. This facilitated a smooth workflow for the client across different departments and business units, offering clear insights into risk factors, apart from implementing actionable supplier risk analysis techniques.

The experts also utilized due diligence data from different internal and external sources to identify suppliers that were important for the organization but posed the highest level of risk. They assigned risk categories based on supplier segmentation and provided detailed insights regarding suppliers that were likely to disrupt operations impacting the supply chain.  Such risk analysis methods enabled the client to engage with suppliers and develop effective contingency plans while predicting supplier failure. In addition, the suggested risk analysis methods helped the client to plan ahead for potential disruptions from critical suppliers by engaging with suppliers who were already vetted and approved.  

Key Findings and Outcome

Improved supplier segmentation

The solution offered helped the client to segment their suppliers based on each supplier’s risk profile. This allowed them to plan and prioritize supplier audits more efficiently and reduce the number of audits performed. In addition, the supplier risk management solution helped the client to calculate the risk profile of each supplier based on audit ratings, supplier self-assessments, and other such factors

Enabled supplier rationalization

The supplier risk analysis methods helped the client to gain better visibility into supplier capabilities, maturity, and risks levels. This provided them a comprehensive understanding of where suppliers need to improve their internal processes and scale up operations. For detailed insights on the complete list of solutions delivered, request for more information.

How to Improve the Supplier Risk Analysis Process?

According to SpendEdge, following these six supplier risk analysis methods can help companies to improve their supplier risk management process.

  • Identify active suppliers, analyze the spend, and cleanse the data to develop a comprehensive overview of the supply base.
  • Figure out suppliers posing the highest level of risk who can disrupt ongoing operations.
  • Collect supplier data from different sources and gain a better understanding of risks.
  • Analyze the data to predict risks in the context of business activities and the impact they can drive.
  • Implement risk analysis techniques to address risk more quickly, efficiently and effectively.

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