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Supplier Risk Assessment

All business entities are now facing different risks in many ventures. Suppliers, above all, are posing to be potential things that can be affected by these risks.

This is the particular explanation why there is a need to use a supplier risk assessment in order to lessen the negative impacts of these various risks.

Almost all headlines that you will read and hear today are about financial failures and natural disasters. The risk of the disruption in supply chain is getting more real each day that passes. It is then your responsibility to aid in the prediction as well as prevention of supply risks. With this, it will be best if you know some of the best practices when it comes to assessing supply chain risks when you evaluate your potential suppliers.

Supplier Risk Assessment: Include it in the Process

You will never have an idea as to when disruptions might happen, therefore, all of the suppliers must go through risk assessment levels. Good procurement practice comes with the evaluation process of suppliers depending on the performance that they give. Make short as well as long term kind of risk assessments in order to assure that you will get sufficient diligence level done. Some of the factors that should be assessed for every supplier include financial stability, political situation and geography.

Knowing the Categories

In order for things to stay sustainable, you will surely have to prioritize the assessments of supplier risk. Utilize the risk assessment for a longer term for all of the prospective suppliers of your CTO categories as well as for all the suppliers who did not pass the risk assessment that is for short term only.

Going on Field Trips and Understanding the Supply Chain of Suppliers

When you are selecting your spend categories, site audits are regarded to be really critical for this one. This is for the reason that you cannot just rely on some secondhand information when you evaluate suppliers. It is much better if you can see things for yourself. Also, try to find out if the potential supplier gets the raw materials they use from a similar supplier of that of your previous supplier. Know also if the supplier has as systems for risk assessment for his own suppliers. Being able to understand as well as examine the supply chain can surely prevent any future disruptions.

Creation of Contingency Plans and Early Warning System

The real secret here is to classify first the factors that can alter the risk levels of your suppliers as well as monitor them way before they create a disruption in the supply chain. There are several companies which offer kinds of services that help in monitoring changes in the profiles of supplier risks. Never forget that above anything else, the best means of dealing with these supply risks will be to prevent them even before they happen.

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