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3 rules for reducing supply chain risk

Posted by Altius on Nov 11, 2015 11:30:00 AM

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The complexity of supply chains introduces and amplifies the risk that your business could face – whether related to physical security, economic stability or supplier loss. Recognising where these risks are the greatest threat to your business and which are the most potentially disruptive can help to focus your resources on reducing potential problems.

The Altius Supply Chain Performance Framework (affectionately known as the wheel of compliance) is broken down into three main areas: capability, management and monitoring. If you put these core principles at the centre of your supply chain compliance management, you will have the right building blocks to mitigate the risks associated with supply chain management.

Here are the three rules that you should follow to help in reducing supply chain risk:

Assessing Capability

Finding the right supplier can be a hard task – and finding one that meets the industry’s and your high standards is even harder. As standard, all your new and existing suppliers must be authorised by relevant industry bodies to carry out the work that they specialise in, this is vital, not only for legal reasons but so that you are confident they will remain compliant and won’t have a negative impact on your supply chain.

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By doing this, you will ensure that your suppliers can verify that they can fulfil the tasks that you request of them so that they bring value to your business.

Management

Whilst external, industry level standards are essential for your supplier to meet, you must also have set internal levels that you always stand by.

Your management of suppliers should include policies and rules that they need to be aware of. From this, a contractual and specification agreement can be made which will detail work and deadlines that they are obliged to meet for you. A document that details controls and restraints is also necessary, for instance when a maintenance contractor could arrive on site and find that work is more extensive than anticipated – rather than a contractor undertaking this extra work, regulations should be in place so that they know they shouldn’t.

By implementing these important steps, you will be able to understand and identify what risks you could be open to. Having this visibility will also give you the ability to prioritise the risks to your supply chain, using segmentation you will be able to mitigate the risks that would be the most disruptive and have the greatest impact on the day to day running of your business. Therefore, you will be able to develop a plan so that you are protected should the worst happen.

Monitoring

To ensure that your supplier abides by your contractual agreements and meets their targets, you need to have a system in place so that you can monitor their progress.

This can be in the form of an audit which will assist in identifying areas for improvement, it can also assess the performance of your suppliers, which is crucial to maintaining high standards.

The route to successful mitigation

By ensuring that you implement each of these stages, you are taking the right steps towards mitigating supply chain risk. Each of these rules is vital and need to be in place for every supplier that works with your business so  you don’t leave yourself exposed to unnecessary risks.

That’s where Altius can help. In any stage of the supply chain process, we can offer you the most efficient solution possible to reducing supply chain risk and increasing compliance, performance and efficiency.

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Topics: Assessment Focus

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