We were just reading through an article posted by Supply Chain Management Review that discusses Four Best Practices for Minimizing Global Supplier Risk. As a third-party quality engineering and consulting firm, we get questions about this often and have written a handful of articles related to the topic.
We like the SCMR’s four best practices, but did want to add some additional comments.
1) Make routine site visits.
It can be quite costly to manage routine site visits, whether your supplier is domestic or abroad. All of the benefits discussed in the article can be achieved by partnering with a third-party to represent your interests on-site. From facility audits to product inspections, a third-party has more local knowledge and specific experience in supplier development.
“Site visits allow procurement officers to ensure that workplace practices and product quality are consistent with their expectations, as well as to increase the likelihood of early discovery of major problems—from supply chain hiccups to unsafe working conditions.”
2) Invest in local advisors.
Local advisors can be the third-party QC organization or agent if one is being used, but a solid relationship with suppliers isn’t an impossible achievement either. Open communication goes a long way here. Third-party quality providers (3PQs) are unbiased and can offer extensive local expertise. Many third-parties are actually perceived as extensions of an organization’s own in-house quality representatives.
“Investing in consultants or other advisors on the ground in the countries where your risk is greatest, who understand the dynamics relevant to your business and can flag problems early, is critical to maintaining a smooth foreign procurement experience.”
3) Reward supplier performance.
Supplier development is more than a reward system for supplier performance. When organizations work with suppliers to develop partnerships, evaluation and corrective action is seen as more of a continuous improvement effort rather than a grading and/or carrot-stick system. When weighing risk vs. reward, many suppliers that feel they are in a partnership are thinking long-term.
Rewarding supplier performance is good though.
“Getting out in front of potential disasters with a program that benefits suppliers for avoiding or mitigating risk is one of the best investments a procurement department can make in protecting the procurement function and the company.”
4) Build internal support.
Pick up any quality book, and it’s going to mention the necessity of top-down support. Communications become especially relevant here. Make sure you’re capturing the right data and using it to communicate effectively to whoever your audience is.
Getting buy-in from the top corporate brass, as well as from senior executive peers in other departments, can be critical to securing the resources necessary for a robust and effective risk-management program.
Also check out our recent post on 3 Ways to Improve Supplier Communications. Pro QC’s VP/Americas also contributed a newsletter article regarding Reducing Outsourcing Risks and Cost. Read this one to learn more about the third-party quality provider (3PQ) value.