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What Vendor Risk Criteria Do You Monitor Constantly?

Posted by Lutz Peichert on October 7, 2011

Most of my clients today monitor at least their key suppliers to mitigate risk. But the criteria they look at are mostly limited to the contractual ("Do I get what I pay for?") and financial ("Are they stable?") performance of those vendors in scope. While the delivery performance information comes from the SLA tracking, the financial information comes either from the supplier's balance sheet or from services firms providing such information on a subscription basis.

I am interested if you are monitoring other criteria? If yes — which ones, and how do you get the data needed for such analysis?

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Vendor Risk Mitigation

Comment from Jack Daniels (not verified) on Wed, 10/12/2011 - 17:54

Buyers selecting new vendors in Greater China often fail to perform due diligence including review of the the supplier's financial pedigree and manufacturing capability, performing an on site audit,carrying out reference checks, utilizing a written purchasing agreement... No nothing.

We have a three stage protocol that guides the qualification of new vendors in Greater China. This has been developed over time and has been very effective at screening the good from the bad. Please see below:

Step I
Determine the Entity Foundation Date
Determination of Business Profile
Confirmation of Factory Location
Obtain the Factory Manufacturing Scope
Identify Principal Products

Step II
Confirm the legal status of the business entity
Obtain certified copies of the factory's Business License
Determine the identity of the vendor's Chief Representative

Step III
Schedule factory visit
Conduct a Plant tour and Evaluation of Vendor's Manufacturing Processes
Review of Key Accounts and Customers
Inspect Major Production Equipment and Manufacturing Lines
Interview key executives.
Obtain copies of Tax Payer Registration and Export License Certificates

Following these steps greatly minimize enterprise and supply risk.

Jack Daniels
www.EB-INTL.com