Considering Brand Reputation as a Component of Supply Chain Risk

Here at Spend Matters, we spend quite a bit of time considering all the different components that can increase supply risk for an organization. From supplier financial viability to vendor non-compliance when it comes to materials usage and disclosure to protecting against natural disasters that bring certain regions to a supply standstill, supply risk is a multi-headed spend hydra. But one area we haven't dug into much is how suppliers can threaten our brand reputation in the market. A recent article in ISM's Inside Supply Management highlights many of the different elements of brand risk that suppliers can pose. The article (registration required) begins by suggesting that "Brand-centric supply management is a strategic approach that evaluates and integrates supply programs such as supplier-managed inventory, relationship management and total quality to support, enhance, manage and protect a company's brand."

Among other recommendations, the article suggests conducting a "thorough examination of suppliers" on a multi-tier level. As an example of considering the extending supply chain, the article offers as an example "When lead paint was found in its toy products, Mattel, Inc. discovered that the paint supplier that was substituting the paint on the specification with lead-based paint was far down in its supply chain." As a result, "It's no longer sufficient to qualify just the first-tier supplier -- knowledge about second-tier and even in some cases third-tier suppliers' sourcing practices may be necessary."

I also strongly second the suggestion the article makes about the importance of continuous monitoring of suppliers. In this regard, "To maintain brand quality, supply management organizations should continually monitor suppliers for negative changes in quality or delivery performance. These changes could be an indication of operational or financial problems. Constant monitoring allows the supply organization to be proactive and avoid a major disruption or a deterioration of brand quality...supplier surveillance is a key to maintaining a company's brand." Yet the article comes up short on recommendations on how to make monitoring a reality through aligning the right set of technologies with expert teams and resources. Our Spend Matters Compass and Perspectives research on the subject is a good place to start in this regard:

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management – Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

Beyond Basic Scorecarding – Supplier Performance and Development Approaches to Drive Competitive Cost and Risk Advantages

Jason Busch