Suppliers in Difficulty

Why Do We Need to Assess Suppliers?

It has always been important for P &SM Professionals to be aware of the financial health and trading position of suppliers. With the increasingly challenging and uncertain conditions currently faced by many organisations it is arguably more important than ever that we are close to our suppliers.

How Do We Assess Suppliers?

There is much that the P&SM professional can pick up from “day to day” dealings with a supplier. One of the most effective ways of assessing a supplier’s position is through regular visits to their premises. These visits should increase in frequency if there is a belief that the supplier may be in difficulty.

In addition to this, it is prudent to undertake risk analysis by way of a supplier questionnaire, it is advised that this is not always done remotely and as a tick box exercise, the ability to audit critical suppliers on their premises may highlight unseen challenges that may not present themselves from conducting an assessment from a desk.

What Types of Risk Do We Need to Assess Suppliers For?

When managing risk for your organisation, it is important to consider all of the risks that a supplier may pose to your organisation; these are some areas to consider:

  • Financial
  • Reputational
  • Cyber security
  • Modern slavery/ethics/CSR
  • Environmental impact
  • Health and safety/legal compliance
  • Supplier/category/country risk
  • GDPR compliance
  • Supplier/workforce diversity/equality/HR
  • Accreditations/ISO standards

You can find out more about managing these risks, by visiting the Mitigating supply chain risk area on the CIPS Knowledge website

What Are the Signs to Identify a Supplier in Difficulty?

There are a few early warning signs that buyers could look out for:

  • A reduction in the number of staff may indicate a downturn in the activity of the business
  • A change to working patterns may signify a downturn in the suppliers business
  • If there is evidence of work only being carried out for a small number of customers
  • A sale of assets such as premises or equipment may point to a contraction in the business
  • A lack of investment in the business, possibly the supplier is increasingly reliant upon old technology and working practices in comparison to its competitors

To find out more about this subject read the full knowledge paper: Suppliers in Difficulty

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Suppliers in Difficulty

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Suppliers in Difficulty

 

For addition reading on this topic visit: Supplier Relationship Management

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