How Well Do You Know Your Greatest Vendor Management Risks?

Published : March 19, 2015

pencil-quiz-bookIf your company has dedicated set of vendor management best practices, there's a good chance that security is discussed somewhere in them. The path between recognizing security as a generally need and efficiently implementing specific solutions is a wide one, however. How savvy are you about your supply chain's risks and risk management initiatives? Take our quiz to find out.

Where are you likely exposing sensitive information to your vendors?

A.) On boxes, packaging, labels and other input material shipments.

B.) In casual phone calls and update emails discussing projects.

C.) In written contracts and agreements.

C. The answer, according to Steve Durbin of Supply and Demand Chain Executive, is in written contracts. The knee-jerk response may be to standardize contracts with as little information as possible, but this can also open liability loopholes as necessary language and explanations fall by the wayside in the name of security. The answer is crafting a basic catch-all template for vendor relationships, referring back to a specific page detailing information on that single vendor. This approach is scalable— a single page of specifics on a company won't take long to gather— and keeps sensitive information on a need-to-know basis instead of inadvertently broadcasting it to every vendor.

What is the biggest challenge in terms of drafting effective vendor contracts in a growing business?

A.) Negotiating fair prices that entice vendors not to sell to competitors.

B.) Finding a good balance between immediate benefit, reference and scalability options.

C.) Keeping physical drafts of signed contracts organized for legal compliance.

B. While good negotiations and sound record-keeping have their place, the ability to be both practical and forward thinking is critical to your success. Most relationship-building in vendor management has a close eye on the here-and-now, but that doesn't mean that contract framework shouldn't recognize the potential for growth. As Robert L. Mitchell explains to ComputerWorld, short-sighted moves like prepaid contracts for cloud storage can leave your supply chain professionals without leverage for further negotiation or recourse in the event of a problem.

What is the best strategy for fact-finding and problem solving for material or product issues in the supply chain?

A.) Find the supply chain vendor closest to the problem and demand they take steps to fix it down the chain.

B.) Go two steps down chain (your vendor's vendor), but still place the responsibility on mid-chain vendors.

C.) Develop a total transparency plan that allows you to track material movement and take responsibility from source to finished product.

C. If you don't already have a transparent, top-down approach, it's past time to get one in place. From legal compliance to consumer education, it's never been more important to know where your materials and products are being created; the usefulness of this knowledge in a crisis is simply an extended benefit. The time it takes to track down information or contacts for a distant— often international— down chain supplier in a time crunch is valuable time wasted.

Don't wait until an emergency hits to discover you know precious little about the backbone of your supply chain, or you may find yourself untangling major issues while your competitors prosper in a transparency-driven marketplace. In fact, Forbes' Celia Brown draws a correlation between the consumer demand for transparency in the wake of Lululemon's "see-through pants" debacle and the type of missteps the modern business needs to strive to avoid.

Be Smart about Your Supply Chain Decisions

Any efforts towards security are generally positive ones, but designing your own vendor management best practices with a lasting impact will take a slightly more detailed pen. Tighten up your contracts, your scalability pre-build and your transparency for internal control and consumer relations, and you're well on your way. Security, much like growth, is constantly changing. Thankfully, a little attention makes the difference between getting caught in the undertow or surfing the wave.

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Topics: Vendor Management

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