Monitor suppliers to keep on top of risk management

Gurjit Degun
21 November 2013

Purchasers must monitor their suppliers and build strong relationships if they want to avoid risks in procurement.

That’s the message from Jaguar Land Rover’s director of purchasing Ian Harnett, who was speaking at the ‘Resilience, sustainability, integrity and emerging trends – managing supply risk in the 21st century’ event. It was hosted by CIPS, the Supply Chain Academy, the Chartered Institute of Logistics and Transport and LCP Consulting.

Harnett explained that the company looks at risk management on a regular basis because it demonstrates “certain things that you cannot ignore”.

He explained that as the company has grown significantly over the past years – it is opening a plant in China, as well as an engines factory in the UK next year – it needs to ensure that it is not putting too much pressure on suppliers. He also recommended meeting with suppliers regularly to talk generally about business.

Harnett said the team uses a programme called ‘risk evaluation data system’ (REDS) to monitor its suppliers to pick up on trends that may lead to problems.

“Part of this is that you have to look at trends for telltale signs. So if a supplier comes along and says: ‘I’ve signed a 60-day payment but I need to be paid in five days’. That’s a telltale risk, he’s got a cash flow problem therefore don’t ignore them, at the end of the day if they go bust that will have an impact on your supply chain. We try very hard to help them.

“We have a process and I would recommend that you do this. When you need to look at suppliers, some of the data is always out of date therefore you need to look for better data, better telltale signs.

“Part of it is visiting the suppliers and spending time with them before there’s a problem. The best thing for me is to go when there’s no reason to go, just turn up, have a chat and a cup of coffee, explain what you’re doing and ask what’s important to them. You’d be amazed what you find out because there’s no pressure, no threat, it’s a much more relaxed situation.”

He added: “Risk is never going to go away, you have to believe you can solve any problem that comes along.”

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