Does your firm fall into the 66 per cent of businesses that don’t have a plan B in place in case of a supply chain emergency? If so, you need to seriously reassess your supply chain strategy.
What’s the situation?
Recent research carried out by the Chartered Institute of Procurement and Supply (CIPS) led to the discovery that two-thirds of buyers in the UK do not have a risk mitigation strategy for their supply chain, despite the fact disruption to it could lead to significant and potentially irreparable financial, reputational and legal damage.
CIPS also found that just 11 per cent of the country’s supply chain managers feel they have a close relationship with their suppliers, with 65 per cent either having a relationship with their tier 1 suppliers or not having any relationships with suppliers at all. This raises a whole host of concerns regarding supply chain visibility, risk management, ethics and sustainability.
Group chief executive officer at the Institute, David Noble, commented: “Businesses can outsource the production of their goods to remote suppliers, but they cannot outsource accountability and responsibility for the conditions in which these goods are produced and where raw materials are sourced.”
“Best practice requires a thorough understanding by companies of who their suppliers are. Many procurement professionals will be confident they have this understanding, but this knowledge is incomplete.”
How can buyers mitigate risk in a supply chain emergency?
Improved supplier information visibility can be achieved through the Achilles community model, as this allows buyers to find out a wealth of information relating to their suppliers, which we gather for them through our pre-qualification questionnaire. This includes everything from a supplier’s financial performance to their health and safety record, allowing buyers to mitigate risk more effectively.
For instance, buyers will be able to see if suppliers have struggled financially in recent months or if they have a poor record when it comes to health and safety, meaning they can make better-informed decisions about the firms they want to work with. Additionally, when one supplier lets you down, we provide you with a host of pre-qualified suppliers within our communities that meet legislation, and comply with relevant standards and policies.
But what else should a supply chain plan B involve?
CIPS recommended that regular supplier audits can help. At Achilles, not only do we validate the information provided during the pre-qualification process but we also provide both desktop and on-site audits of suppliers’ management systems.
The CIPS research showed that regular audits and strong supply chain relationships go hand in hand, with 65 per cent of the buyers who felt they had a good relationship with their suppliers conducting audits several times a year, but this fell to just 35 per cent among those that did not work closely with their suppliers.
This further emphasises the importance of validating suppliers to prevent supply chain disruption and the subsequent consequences.