Editor’s Note: This post is a continuation of an ongoing collaborative blog series with Spendrix, a company who was made for procurement teams of all sizes and we currently serve customers in Manufacturing, Oil & Gas, Construction, Logistics, and the Food & Beverage industries. Spendrix is the easiest way for shippers to evaluate carriers on quality and risk factors. You can find the first post in the series, “How Data Can Improve Supplier Decisions” here.
In our previous blog post, we discussed why supplier risk profiling is important when it comes to protecting your business. As a follow-up, we’re starting a three part series on how to identify various types of supplier risk. This post kicks off the series, examining how to spot supplier risk in communication.
Communication is a critical component of any business and is no less crucial in supplier relationships. When your company has great communication with suppliers, it can be like adding another department to your organization. There are a large number of suppliers who do an excellent job communicating with their customers. You probably have several suppliers you can think of now that practice excellent communication. What is it that sets these suppliers apart? First, better communication leads to more efficient business practices. This can be seen in being able to respond to customers quickly and with thorough information. Also, suppliers that communicate well understand your company’s objectives, and how their business fits into these objectives. As you know, when a supplier has these traits, errors related to communication issues are much less common.
Unfortunately, there are a number of suppliers that are not as transparent with their customers as they ought to be. This break down in supplier communication can introduce various risk factors into your supply chain. The question then becomes, ‘how can you spot supplier risk in communication?’
You may have a contact you normally deal with when working with a supplier. This is the person you go to with new jobs, or when you have any questions to clear up. However, what happens when your contact provides you with inaccurate information? For example, your contact may have quoted a new job at a certain rate, but the official documentation says otherwise. Another example may be stating that a truck is in transit when the GPS tracking shows that the truck is stagnant at a truck stop.
Accidental or not, these mistakes slow down your business, cost you money, and damage that supplier’s relationship with your company. If misaligned details become a recurring problem, it’s probably time to find a new supplier. Supplier risk is never a good feeling at the end of the day and a tough decision may have to be made.
When you can not reach your supplier, or attempt reaching them multiple times without any follow-up on their part, you should start to be wary. Does the supplier not value your business? Do they lack the man-power or technology to field incoming communications and respond accurately and promptly? More importantly, how will their delayed responses affect your company if something goes wrong during a job or you need a piece of vital information to relay back to your customer?
A delayed response could have devastating costs in situations where there is supplier risk. Overall, it is hard to put a lot of trust in non-responsive suppliers as you never know when you’ll hear from them next.
As you know, suppliers with great communication can be relied upon time and time again as valuable components of your company. Generally, you have a detailed knowledge of these suppliers, and trust the information they provide. However, the same can’t be said for suppliers who routinely dodge difficult questions or provide you with answers that don’t get to the core of what you’re asking immediately.
Whether they aren’t actively listening during your conversations or simply don’t have the adequate industry knowledge to appropriately answer, these are major causes for concern in this area of increased supplier risk.
Effective communication is a cornerstone of strong relationships between your company and suppliers. Such relationships, especially with strategic suppliers, are often collaborative, and both your business and your supplier’s business grow together. Conversely, poor supplier relationships present a threat to your business; however, it is possible to hedge against supplier risk. By identifying supplier risk via their communication practices, you can work to eliminate these suppliers from your business or reduce their role in your supply chain.
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