Rooting out vulnerabilities among supplier and vendor relationships is becoming imperative.
The more intricate overseas distribution and manufacturing connections become, the greater companies are at risk of sustaining major disruptions. A break in the logistics process isn't the only concern - procurement services often encounter poor labor practices, questionable sourcing tactics and even affiliations with businesses that are indirectly connected to criminal enterprises.
Abiding by Western standards
Advisors specializing in supplier relationship management are heavily involved in financial auditing. Why? Because Western consumers demand it. The European and North American markets are arguably the most influential economics in the world because their participants set standards for what defines quality goods.
The problem is, manufacturing products of the highest condition at an affordable price isn't necessarily easy when "quality" is not only defined by usability, but by whether the products were made in regard to sustainability. While satisfying these demands can be frustrating, doing so is imperative.
Assess before request
Contemporary enterprises acknowledge that haphazardly conducting reviews of potential suppliers before moving into the RFP process isn't going to cut it. Thorough assessment and scrutiny must occur before a partnership is even considered.
Han Kieftenbeld, CFO of United Kingdom-based bakery technology developer AB Mauri, spoke with The Wall Street Journal about his responsibilities, citing the following tasks:
- Settling agreements between AB Mauri and contractors, giving the former company the authority to conduct qualification surveys and audits whenever Kieftenbeld or his subordinates deem it necessary.
- Sending people to facilities and supplier-owned properties to thoroughly determine whether quality standards (including sustainability goals) are being met.
- Ensuring that constant communication is being maintained with overseas vendors, contractors, subcontractors and partners.
Four necessary steps
Manufacturing Business Technology Magazine contributor Donna Fritz advised her readers to follow a four-step process to meet consumer quality expectations and reduce supply risks:
- Start with regulations: Not only should a company comply with standards set by domestic agencies, it should ensure its suppliers' practices are meeting those defined by foreign authorities.
- Look at the accounts: In order to eliminate fraud, enterprises should strongly consider automating their accounts payable processes, which will also help them better abide by the Sarbanes-Oxley regulation.
- Move toward procurement: Create a scorecard of a logistics provider's and suppliers' practices. Are there any red flags that are going unnoticed?
- Look at the environment: Surveying the political, economical and cultural atmosphere of areas where an enterprise does business allows it to anticipate any demographic shifts that may affect operations.
The global market is one entrenched in complexity, which can make it easy for unfavorable practices to fall through the cracks. Putting every effort forward to dismantle such endeavors is incredibly important.