The Emerging Business of Supply Chain Risk Management

Is Your Company Safe to Work With?

As reported by Forbes, there’s an emerging category of business - supply chain risk management - of which many companies aren’t yet aware.

For the largest companies, this is a jugular area - imagine the exposure of a large oil company or a large online retailer when a supplier they’ve contracted with makes a mistake or even causes an all-out disaster? (Think oil drilling contractor, for example.)

And imagine how much worse any such disaster would be if in the fallout it’s determined the organization you approved has failed to meet compliance requirements or carry proper insurance?

The level of risk, the cost and the complexity of managing an increasing network of partners an organization may use has made this a jugular issue and a vital area of business that enterprise organizations know well.

In conversations with Richard Parke, Avetta’s leader of the Integrated Supplier Organization at the company’s Utah headquarters, David K. Williams Contributing editor for Forbes learned about another aspect of supply chain risk management that applies to the majority of smaller organizations and contract suppliers as well.

Avetta has created one of the strongest - perhaps the very strongest - networks of qualified supplier organizations.

What this means: beyond meeting the requirements for hire by the organizations Avetta supports (such as major oil & gas concerns, construction, online marketplaces, etc.), participation in the system helps suppliers grow their businesses faster and better.

Risk Management Overview

For many organizations, globalization, outsourcing, and extended supply chains are effective strategies to increase efficiency and achieve economies of scale.

However, these benefits are accompanied by the significantly increased risk of quality, safety, business continuity, reputation, and more.

Commitment to and practice of effective supply-chain risk management (SCRM) is now essential to running a successful and sustainable business.

Avetta helps the world’s leading organizations identify and manage risk in their supply chains through:

Avetta's cloud-based technology and expert insight help mitigate risk and enable sustainable business growth.

Identifying Risk in the Supply Chain

Organizations are always at risk for losses through cost volatility, supply disruption, non-compliance fines, and safety incidents that cause damage to their brand and reputation.

Knowing what’s at stake is the first step to understanding, measuring, and managing risk in your supply chain.

Supply Chain Safety

Among the highest priorities for companies across all industries, safety concerns are often magnified in chemical, oil and gas, construction, and manufacturing.

Workplace accidents can jeopardize contracts, result in fines, and cause significant damage to a company’s reputation.

Supply Chain Quality Control

Do your vendors and suppliers meet your standards for quality and consistency?

Customers are quick to react when they perceive a drop in quality; and, even the smallest product issues can be difficult to recover from.

Supply Chain Financial Challenges

Any disruption to the supply chain due to financial challenges has the potential to impact business continuity and, ultimately, your bottom line.

Taking a proactive approach to understanding supplier financial strength can prevent disruption and unnecessary costs.

Supply Chain Compliance

Are your contractors insured? Do they have the right type of insurance, the right limits?

Knowing this information will help you to manage insurance risk and avoid potentially costly litigation.

Supply Chain Reputation

Damage to a company’s brand or reputation can be long-lasting, extremely costly, and sometimes unrecoverable.

Committing to a supply chain risk management strategy can not only prevent brand damage but can also serve to foster new partnerships with organizations that share like values.

Supply Chain Sustainability

It’s no longer enough to assess risk within the traditional construct of a supply chain.

Organizations must look beyond and consider environmental impacts and corporate social responsibility, including adherence to labor laws and sustainable practices.

https://www.avetta.com/clients/risk-management

Mitigating Risk in the Supply Chain

Mitigating risk in the supply chain starts with the procurement process and is dependent on having an effective methodology for evaluation.

When the managing contractor and supplier relationships, loss control or risk mitigation is most effective when you can Communicate, Evaluate, Select, and Monitor:

Communicate
Communicate expectations. Before you award the contract, ensure that you detail safety expectations in your contract with the supplier or contractor in mind.

Evaluate
Evaluate progress. Use objective criteria and both leading and lagging indicators, like Experience Modification Rate (EMR) and Total Recordable Incident Rates (TRIR) to determine how the contractor’s performance is measuring up to stated expectations.

Select
Select contractors based on qualification standards. Once you have established the criteria against which contractors will be evaluated, be clear that all elements of qualification will be weighted and that price is not the only factor on which they will be judged.

Monitor
Monitor contractors using a real-time database. Enforce company-wide standards by keeping a database of all contractors in a regularly updated format.

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