supply chain risk

Recognising Supplier Red Flags

Mitigating supply chain risks is one of the most important roles of a procurement professional, and it is especially critical to identify issues before they have the potential to cause serious disruption.

The more procurement can work to strategically prevent these issues before it's they happen, the better. Suppliers can show red flags fairly early in the relationship but it's easier said than done to spot them, and evaluating your existing supplier portfolio for issues is also not an easy task.

But now, more than ever, the need for suppliers that are trustworthy, reliable, and who are always delivering high-quality services is high, so having the tools and the knowledge to recognise suppliers falling short of the mark is going to ensure your supply chain remains healthy and risk-free

What red flags should you be looking for?

1. Trouble with communication

Good communication is the most effective way to build a great supplier relationship. 

If suppliers go weeks or even months without answering calls or emails. Of course, if there's no need for daily or weekly communication then this will not be an issue, but when big projects or big collaborations are happening, the supplier needs to be able to deliver effective communication on demand.

2. Employee turnover rates

One red flag that can be recognised, even before initiating business with a supplier, is the number of employees leaving the company and the frequency – if their own employees aren't happy, chances are, they won't be doing a great job for you. 

Also, constant disruptions to the workforce can definitely mean issues delivering what they promised and on the agreed timeline. Turnover checks can tell you a lot about the supplier and save you potentially money and time.

3. Cutting corners

Quality is a non-negotiable asset for most companies. And before starting a partnership with a new supplier, this is one of the things that you need to be sure they can deliver. So if you notice a steady decline in their delivery quality, it's time to sit down and understand what happened – and even start looking for a new supplier. 

4. Keep an eye on the price

Keeping projects within budget and saving the company's money is the goal, but suppliers bidding extremely low for a tender is a major red flag. 

If you know the average price for a high-quality delivery on the scope you're working with, the outlier prices should be examined with precaution. If the response is too quick and too cheap, it could be the supplier trying to win the project without regard for the quality of the deliverables and not caring about a long-term work partnership.

Maistro's supplier health check gives a real-time look at your supply chain and quickly highlights areas of weakness or possible red flags using readily available company finance data. Used in conjunction with our eSourcing procurement platform and smart SRM solution, anyone in your organisation can make better and more informed buying decisions in any category of spend whilst automatically reducing risk.

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