Checklist: 4 Important Points to Be Kept in Mind While Conducting Supplier Risk Analysis

Does your business rely on a group of critical suppliers? Any risk to one or more of these suppliers could disrupt your supply chain and affect your overall revenue. For this reason, you need to conduct supplier risk analysis and assessments to keep you aware and updated on any potential risk that any critical supplier could cause. Here are four important points to keep in mind while conducting supplier risk analysis:

1. Collect, centralise and aggregate all the necessary information on your critical suppliers. Have a centralised database of data on your suppliers to improve your efficiency and ensure compliance with acceptable supplier risk analysis practices. Remember to keep the data updated.
2. Look into the supplier's financial health. Do a thorough analysis of every supplier's financial status. Be sure to cover the sustainability performance and the business ecosystem to find out any potential risk.
3. Identify the suppliers that are able to contribute a lot to your business. Different suppliers have different effects on your supply chain. Group them into four categories: critical, strategic, approved, and used. ‘Critical’ suppliers are those that could potentially disrupt manufacturing, delivery, and other operations in your businesses. ‘Strategic’ suppliers are those with whom you have strong, mutually beneficial relationships with and are involved in your business planning model. ‘Approved’ suppliers are those that have passed due diligence but can be replaced without any serious repercussions. ‘Used’ suppliers are low-value entities that never went through formal due diligence and can easily be replaced or dropped.
4. Have a disaster recovery plan in case of supplier failure. Proper planning will protect your business in case a supplier fails to deliver.
   

Outsourcing supplier risk analysis can help you perform all these tasks and can free up some manpower in your company. This way, you can focus on other important aspects of your business, such as increasing your revenue and generating ideas that can help you sell.