Nearly Everyone's Got One so What's Your Supplier Bailout Program?

Supply risk is a topic that seems to be getting more and more play of late, but despite the media -- and even boardroom -- saturation, it's one that deserves the current mantle that it's sitting on. Quantitatively, PRTM's latest research into the area confirms that a significant majority of companies are actively taking supply risk mitigation and management steps. Supply Chain Standard recently did a good job summarizing some of the findings from PRTM's latest research that shows "global companies are increasingly moving to support suppliers and safeguard their supply chains ... [and that] Supporting suppliers has become a critical supply chain issue."

Referencing the PRTM study, Global Supply Chain Trends 2008-2010: Extended Edition, quotes that "75 per cent of participants say they have recently helped at-risk suppliers to ensure deliveries; 67 per cent are using new risk analysis tools to spot threatened suppliers early; [and] 45 per cent say they have provided financial support to suppliers in the form of revised payment terms or risk financing." Of all of these numbers, the one I call into question the most is the percentage of companies using "new risk analysis tools" to identify at-risk suppliers early in the process. Based on our own research for Spend Matters and for practitioner, vendor and content provider clients in the area of supply risk, I'd suggest that this number is far lower than stated.

What I'm guessing that happened here is that respondents considered "tools" anything as simple as buying periodic supplier credit/risk scores or using Excel to model Altman-Z scores for some subset of their suppliers. But we'd all agree -- at least those of us living and breathing supply risk everyday -- that one-time, un-automated or batch-based efforts to proactively manage supply risk are bound to let at least some supply disruptions slip through the supply chain cracks. So next time you think about your own supplier bail-out program, please, please consider the need to proactively monitor as close to 100% of your supply base as possible. And don't accept supplier excuses (e.g., "we're a private company and don't disclose financials") for withholding key information that is essential for continuous analysis -- and could potentially help your suppliers as well if you decide to step in and support them based on what the data shows.

Jason Busch

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