Managing supply chain risk isn’t easy. With countless variables outside of an electronics buyer’s control, it’s easy to feel overwhelmed by detailed regulations and ever-changing risk factors. But reducing risk doesn’t need to be difficult, Coupa points out in “4 Spend Management Decisions to Cut Supply Chain Risk.”
“In every supply chain, risks lurk constantly,” Coupa warns. “They can materialize from financial missteps, unresolved litigation, cybersecurity attacks, outright fraud, and more.” Noting that most organizations probably have processes in place to confirm their top vendors’ financial, legal, and product information, Coupa says critical information gaps—from which the most severe risks often grow—could be lurking beneath the surface.
4 Steps to Take Now
In its report, Coupa outlines four actions that companies can take to reduce liabilities while also enhancing supply chain visibility and predictability. Relevant for any procurement professional tasked with helping to reduce supply chain risk for their organizations, the steps include:
- Automating compliance verification. Organizations that are audit-ready and fully compliant are best positioned to reduce supply chain risk. “You also need to ensure every vendor is compliant with relevant standards and your organization’s tolerance for risk,” Coupa adds, noting that this process includes checking vendor credit ratings, legal judgments, financial liabilities, and other details. It recommends using a business spend management (BSM) platform to automate this process and take the burden off the procurement team. “Take advantage of today’s technology to amplify your team’s power,” it advises, “and automate this work, so you are no longer limited to investigating [only] your top suppliers.”
- Identifying potential risks before they actually materialize. This used to require a crystal ball, but thanks to the advanced technology, buyers can do a better job of identifying and warding off supply chain risk before it becomes a serious problem. “If you don’t know you have a problem until a shipment of supplies fails to show up, you’re in trouble,” Coupa warns. “You need to identify these types of risks before they materialize, so you can protect your business and provide the best products or services.” Good spend management strategies and modern BSM platforms, for example, help procurement proactively monitor for risk; prioritize serious vulnerabilities; and “even recommend next steps so you can mitigate a risk as fast as possible.”
- Leveraging the business community for a holistic view of potential suppliers. When you shop online as a consumer, reading reviews of suppliers and their products helps determine the “risk” of that potential purchase. It works the same in the B2B world, where the buyer who is informed of supplier reliability and customer satisfaction ratings can better decide whether to click “add to cart” or to keep looking. Technology can facilitate this process. For example, algorithms can quantify the financial, judicial, and public sentiment health of each supplier based on sources such as income statements, court documents, and news articles. “Then, they combine this standardized information with the collective reviews of their customers,” Coupa explains in its report. “The result? A comprehensive risk score for every supplier in the database, which integrates with procurement and payment systems for a holistic view.” This, in turn, will help procurement professionals select the suppliers that pose the least amount of supply chain risk.
- Using data to keep up with the fast-changing world. Historical spend reviews may have worked in the past, but they’re just not good enough in today’s fast-paced, tech-enabled business world. “Trade sanctions, natural disasters, currency fluctuations, and hackers won’t wait for you to be ready,” Coupa warns. “You need to be able to keep up with these changing factors at a moment’s notice.” By integrating live data with procurement and payment processes, for example, electronics buyers can “instantly see what’s happening right now,” the company adds. “With this visibility, you now know which POs and invoices are vulnerable and [can] take appropriate steps.”