Supplier Risk Management: 4 Things To Look Out for During On-Site Evaluations

supplier risk management

Editor’s Note: We continue our collaborative blog series with Ben Goldwasser of Spendrix, a company who helps shippers determine which carriers operate best in certain regions, and conditions, allowing you to be more thorough. This post is the second in a series of “How to Spot Supplier Risk.” In the process of business procurement and especially in the supply chain, supplier risk management is a skill set that needs focus day in and day out. For example, the Cerasis Rater, our mutli-carrier rating TMS, allows our shippers to choose which carrier is best for their specific shipment from one portal and then create the bill-of-lading along with other features. It is of great interest to us to find other resources that can help aid our customer shippers in continually improving through data and analytics. Spendrix brings that to the marketplace with their products.

Enhancing Supplier Risk Management Through On-Site Evaluations

In our last post, we discussed how to spot risky behavior when communicating with suppliers. The second article in our series on identifying supplier risk explores what to look for during on-site evaluations. Specifically, in the transportation and logistics industry it can be very beneficial to visit your carriers in person. While on-site evaluations aren’t required, visiting your carriers can help you build better relationships, improve communication, and improve supplier risk management skills. Furthermore, visiting your carriers on-site allows you to evaluate them for risky behaviors that could potentially affect your company.

Here are some things to look for the next time you visit a carrier on-site:

Well-Trained Employees and Getting the Fundamentals Correct

When you originally vet your carriers, you make sure they are qualified to do the job at hand, right? A part of this vetting process includes ensuring your carrier’s employees are proficient. Therefore, when you arrive on-site, it is important to check out your carrier’s training capabilities. Top carriers will have dedicated classroom space, a well thought-out training course, and experienced instructors. When you’re on-site, simply ask to review their training course to get an idea of how well it is preparing your carrier’s employees to work with your company. Does the training cover how to properly perform pre-trip inspections, how to properly secure cargo, or what to do in the case of emergency? Awareness and paying attention are cornerstones of supplier risk management. According to a  2011 Commercial Vehicle Safety Alliance study, the most prominent securement violations are “failure to prevent shifting cargo, and “leaking/spilling/blowing/falling cargo.” Ensuring that drivers are properly trained to handle securement and deal with emergencies is critical to your business

If your carrier can not answer simple questions about their training program or it seems their course lacks substance, you may need to ask yourself if that carrier is the best fit for your company. Overall, your carriers represent less risk to your business the better their employees are trained.

Properly Stored & Inspected Equipment

Another crucial factor in supplier risk management to look for during on-site evaluations is how your carriers store their equipment, spare parts and securement tools. The way that a carrier stores excess equipment can tell you a lot about their attention to detail and the value that they place on having their over the road equipment be in excellent condition.

While on-site, have a look at their inspection areas. Inspection areas should be well-lighted, and have spare chains and straps to replace defective securement.  It’s important that your carriers are taking all measures to minimize violations and damage during hauls.

In addition to securing cargo, also evaluate how well your carrier’s equipment is being maintained. Are tractors and trailers assessed for potential damage, parked in an organized and safe location, and repair areas kept clean? How promptly are mechanical issues taken care of? Are spare parts well organized and in safe locations for the mechanics to access them? Carriers that do not properly maintain their equipment can put your company at serious risk.

If your carrier fails to secure cargo, or neglects their fleet, their number of breakdowns, violations, and freight damage claims will soar; directly impacting your business.

Visual Inspections of Equipment

In addition to how your carrier stores their equipment, do they keep their fleet up to date and safe? When performing an on-site evaluation, take an opportunity to perform your own assessment of your carrier’s equipment for physical damage. To hone your supplier risk management skills, you must understand that personal assessment is key to not only know for yourself but to have curiosity opening up collaborative dialogue with suppliers. As we’ve said in previous posts, supplier collaboration can go a long way towards sustainable working relationships. Identify things that could lead to supplier error, and thus, put your business at risk. Check tires for adequate tread and proper inflation. Inspect trailers for any internal or external damages. Also, make sure securement equipment is functioning properly. Evaluate cabs to ensure they are safe for the driver and free of excessive distractions.

Ensuring your carrier properly maintains their fleet can help to dramatically reduce the potential for errors. Therefore, it is crucial while on-site to inspect your carrier’s equipment, and in turn, protect your business.

Proper Compliance

A final way to minimize risk when performing an on-site evaluation of your carrier is by inspecting how they handle compliance. If  awareness and paying attention are the cornerstones of supplier risk management, compliance is the foundation. Does your carrier maintain organized and up to date logbooks? Do they have a detailed understanding of their drivers’ hours of service, and work to avoid violations? Also, have they had any recent drug or alcohol violations? Or even worse, are there any drugs or alcohol on-site?

By evaluating your carriers for compliance issues, you are communicating your company’s values. You also can spot risky behaviors before they dramatically impact your company.

Overall, on-site evaluations and honing your supplier risk management skills allow you to get a closer look at your carriers day-to-day practices, and determine if they are the best fit for your company. If your carriers do not have an effective training program, properly store or maintain their equipment, or follow proper compliance protocol, it may be time to look elsewhere for your transportation and logistics needs.

How do you spot supplier risk with your carriers? What tips would you provide to enhance supplier risk management skills? Let us know in the comments section below!

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