| In managing any business it is important to take into | | | | natural disasters or weather related issues. Of course, |
| account risks or potential risks with suppliers. This is a | | | | transportation costs, delivery schedules and |
| facet of the management system that is sometimes | | | | protection of goods during transit must also be |
| overlooked. If critical suppliers are not able to deliver | | | | considered. |
| the goods or services you need to operate your | | | | 3. Regulatory issues and compliance. Discussions with |
| business, you could lose customers. An important | | | | your critical suppliers should involve any known or |
| facet of planning for the customer includes supplier | | | | pending notices of violations and/or fines as these |
| risk management. Specifically, supplier risk assessment | | | | could affect a company's ability to meet your needs. |
| should include factors like: | | | | Significant regulatory concerns could lead to a supplier |
| 1. Financial stability of the supplier: In order to assess | | | | being shut down or facing heavy fines that could |
| financial stability several key questions should be | | | | impede their ability to supply. |
| answered. These include: 1) Is the supplier generally | | | | 4. Labor stability: Factors like union contracts, legal |
| stable and profitable or headed for possible | | | | status of workers, availability of workers and even |
| bankruptcy; 2) Do they have a history of not paying | | | | succession planning could affect a small or large |
| their suppliers which could affect the ability to provide | | | | company's ability to supply your business. |
| you with the necessary goods or services; 3) Do | | | | While there can be much more detail involved in risk |
| they have a heavy debt load and very low profit | | | | management, these factors should be considered at |
| margin? As you look at this factor, there may be | | | | a minimum. After risks have been assessed and a |
| more questions that you identify as important to | | | | determination made concerning the ability to meet |
| your situation. In any case, begin with attempting to | | | | your needs, then you are ready to take the next |
| assess financial stability of your key suppliers. | | | | steps for insuring the quality of incoming materials or |
| 2. Transportation: Consider factors like modes of | | | | services. |
| transportation, alternate providers, alternate routes, | | | | |