Supplier compliance is a potential liability for procurement teams everywhere, and will undoubtedly remain to be so, given the unpredictable nature of human beings. Although it is understood that we simply cannot predict and avoid every single negative situation possible, there are many ways to minimize your business’s risk of dealing with a non-compliant supplier. At the Institute for Supply Management annual conference, associate vice president at SAI Global Kirsten Liston said: “There is a burden of proof for the company as a whole, the business unit as a function, and the people in it, to say what could go wrong? What is going wrong that I am not asking the right questions about? And how do I find that out?” Through these words, she identifies the entire company’s ongoing responsibility to think out of the box when identifying risky suppliers, and not just that of those of us in supply management.
She provided purchasers with a few helpful tips to promote healthy supplier compliance, which you can find here on supplymanagement.com. What caught my attention was the second tip listed: “Target and segment suppliers by importance and compliance risk. There are a lot of companies out there that have a pretty minor supplier in a high-risk country. That supplier is not crucial to the company, so it should think hard whether it wants to be associated with that vendor at all. Is there somewhere else we can get the goods or service that avoids this troublesome relationship?” This is an important point to consider. Your first thought in evaluating this minor supplier might be just that – that it’s minor, so why worry? But no supplier is too small, and no worry is too minor when considering supplier compliance. Liston’s advice to try and seek these goods or service elsewhere is merited. Even though the supplier is minor, why not eliminate all identified sources of potential risk, in order to be best prepared for any unknown risks that may sprout up?
Ultimately, whether or not risks like these are worth taking is entirely up to you and your business. What do you think? Would a minor vendor in a high-risk country warrant serious consideration of alternate supplier options? Or would you be content, given its non-crucial status?