Supplier Risk Assessment: Mitigating Supply Chain Risks

With the advancing globalization and the aftershock from the economic crisis in 2008, manufacturers are becoming more aware of the importance of the risk management in the supply chain.

It’s easy math. Mitigating an reducing risks in the supply chain almost equals to saving you tons of money, gaining you more insight into the industry, and driving your supplier performance. All these contribute to winning the competitive edge for your businesses. It’s a win for all parties involved.

In the supply chain, there are 5 factors contributing to the success of a project: man, machine, material, method and environment. This is why supplier risk assessment is the first step for many companies.

You might wonder, can supplier risk assessment really mitigate supply chain risks?

TL;DR version: Yes, supplier risk assessment can mitigate the overall supply chain risks.

The reason why we say mitigating risks in the supply chain, but not eliminating the risks is because risks can’t be eradicated. They are everywhere, from the beginning of the mass production, to shipping your product to customers. The best you can do is to, as the saying goes, prepare for the worst and hope for the best.

So how should you assess your supplier to mitigate the supply chain risks? Here are a 4-step approach for your reference if you are to do an onsite supplier assessment.

4 steps onsite supplier risk assessment

Questionnaires for your supplier is acceptable when you plan for a supplier assessment, but it’s far from enough when you want to dig deeper to the root causes of the problems in the supply chain. So we suggest an onsite assessment when you can. If your supplier is overseas, you can reach out to professional supplier assessment company for help.

Decide the purposes of the assessment

The first thing you do on the assessment process is to decide your goals. What risks or threats do you see now that could affect the well-being of your business? Can you categorize them? How do you expect your supplier to help?

Define the assessment or evaluation criteria

When you’ve categorized the possible risks that could harm your business, try to define their value as well. For instance, if financial and business well-being of the supplier contribute a lot to that of your business, rank factors such as supplier’s company operation strategy, financial steadiness and profitability at the top of your list. By appointing scores to other aspects, and you make your own assessment scorecard.

Confirm with your supplier on the assessment schedule

The supplier risk assessment could take up to 1 or 2 weeks to complete. And you need to interview or talk to some engineers to get the information you need, or observe their work on the side. So it’s important that you schedule an appropriate time with your supplier so you won’t interrupt their daily operations.

It’s also common that some suppliers would refuse the assessment, because they would think of such evaluation as a form of disbelief in them. This makes transparent and effective communication between the two parties all the more important.

A local team would be a great asset in helping with the communication of this sort. If your supplier is in China, feel free to reach out, and we’d be glad to help you out.

Highlight risks and provide mitigation solutions

When you’re in the factory, go around, talk to as many people with different functions as you can, and gather as much information as you can.

Benchmark the results you’ve got with your assessment criteria, then give them appropriate scores and also illustrate your reasons for the scores. Here is an example of what you can do:

 Highlight the risks that stand out from the crowd, and seek mitigation solutions accordingly. You might need help from some professional to do so.

The all-in-one solution

If the above approach is too much for you, or you don’t have the time or budget to do the onsite assessment by yourself, Insight Solutions Global is here to help. All you need is to let us know what you need, and we’ll take care of the rest for you.

We are a dedicated team of experienced and skillful engineers, committing to your success and that of our own. With us by your side, there’s no need for you to worry about not knowing how to compile your own scorecard, how to communicate with your supplier, or how to mitigate the risks in the supply chain. Because we’ve got you covered.

Click to see what and how we help you assess your suppliers. Feel free to let us know if you have any question.

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