How to manage disruption risk when a supplier goes into administration

6 Jun 2017
Article by Achilles

The UK economy has made significant strides towards a strong recovery in the past few years following a challenging period in the late 2000s.

As a result, the number of businesses going into administration has begun to decline, but unfortunately, this does still happen from time to time. When it does, entire supply chains can be disrupted, compromising an organisation’s ability to operate effectively.

How often do suppliers go into administration?

According to statistics compiled for the Construction News Barometer at the end of last year, more than three-quarters (82 per cent) of organisations in the UK had seen one of their suppliers fall into administration during 2016 alone.

These figures related to the third quarter of the year and showed a marked increase in comparison to Q2, when 76 per cent of organisations experienced such disruption.

Additionally, according to research by CIPS, fewer than half of procurement professionals had strategies to mitigate supply chain risk.

Organisations should have a strategy plan in place should one of their suppliers go into administration. However, if you don’t, how can you manage the associated disruption?

Managing risk

There are steps you can take to ensure your business is less vulnerable when it comes to disruption:

Understand your risk

How much do you really know about each supplier you work with? Try to avoid a tick-box approach to evaluating supplier risk. Rather concentrate on building a rigorous prequalification process, that provides you with the necessary due diligence up front to minimise risk.

Achilles’ supplier pre-qualification products, services and online tools help you to manage and mitigate risk.

Have a plan

You should also have a plan for that day when things don’t quite go right.

You’ll need to have processes in place to be able to determine what is affected, what services and products are at risk, what your plan is to access alternative suppliers, and what your suppliers’ mitigation plan is also.

You may also want to look up suppliers for any of your critical services and products to make sure there are credible qualified suppliers out there, in case you need them.

Watch out for warning signs

We gather all supplier information in one place through our prequalification questionnaires. From the information available to you, you can look for warning signs such as suppliers who are not able to provide documentation required by law or fail to submit up-to-date documents like insurances. You’ll also be able to set up alerts to monitor suppliers to make sure you can manage your supply chain much more effectively.

Take action

If the worst happens and a supplier does unfortunately enter into administration, buyers can easily use Achilles’ solutions to source alternative qualified suppliers within minutes.

 


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