How Supplier Data Can Mitigate Risk and Improve Agility During a Crisis

With the COVID-19 pandemic disrupting global supply chains, organizations everywhere are under intense pressure to mitigate risk and maintain agility. Close supplier partnerships are central to this effort, with the quality and quantity of supplier data being an important factor in determining a supply chain’s resilience. 

An Unparalleled Advantage 

Traditionally, supply chains were built solely around cost control. The priority was looking for bottom-line savings. They were reactive, and relationships weren’t a priority. Over time, businesses have increasingly asked for more from their vendors, recognizing that vendor partners can help not only decrease costs, but improve quality and achieve competitive advantages. 

Achieving these outcomes has meant developing closer, more collaborative relationships with suppliers. Even under normal circumstances, this has proven challenging. In 2012, McKinsey & Company surveyed over 100 global firms and found that although 30% stated they collaborate with vendors, fewer than 10% showed systematic collaboration efforts. Companies that make it work see the results: Firms with close vendor relationships had earnings before income and tax (EBIT) growth rates double that of their peers (2). 

Strong Relationships Mitigate Risks

In times of crisis, both the risks and opportunities associated with supplier relationships are heightened. Firms with quality supplier data have a clear advantage, enabling them to respond, communicate, and adapt faster than their peers. 

Buyers should continue to follow the basics. Best practices include requiring suppliers to provide third party risk certifications, cybersecurity audits, business continuity plans, and data protection policies (GDPR, FISA, SOC2, etc…). Approaches for strengthening bonds include paying vendors on time to promote goodwill; providing adequate lead times while being aware of a vendors’ production methods and needs;personalizing relationships with strategy meetings and visits; and sharing relevant business information with vendors (3).

Starting a Vendor Data Strategy

To begin implementing a supplier data strategy, there are a few factors that need to be considered. First, key stakeholders should work together to determine the vendor data that’s most important to their organization. Buying organizations should optimize their internal collaboration efforts first before turning to their supply chain partners, as this builds a stronger foundation for communication and engagement. Buyer organizations should also design programs that outline specific and measurable business initiatives, which in turns enables buyers and supplies to align their overall strategy. 

Finally, building data transparency and trust in the supply chain is vital for implementing positive change and addressing problems that might occur throughout procurement (2). This framework supports tangible actions that strengthen buyer-vendor relationships. Buyers should understand how their vendors work before supervising them and developing their technical abilities and share information intensively but selectively to conduct improvement activities (1). 

Conclusion

In conclusion, a good supplier data strategy and collaboration within the buyer organization are vital components to successful business relationships and a more sustainable supply chain. Organizations that maintain and utilize accurate supplier data will mitigate risk and increase agility as they navigate crisis events. 

References

  1. https://hbr.org/2004/12/building-deep-supplier-relationships
  2. https://www.mckinsey.com/practice-clients/operations/the-power-of-successful-supplier-collaboration
  3. https://www.entrepreneur.com/article/205868

Daryl Hammett, CSP, CSMP, C3PRMP, CIAP General Manager/Chief Operating Officer at ConnXus a Coupa Company

 

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