The best line of defense against supplier quality and performance challenges is to rigorously institute a programmatic effort that seeks to identify, manage and mitigate risk based on early warning signs. In addition, our experience suggests that the more an organization integrates financial risk indicators with quality and performance ones as part of a supplier risk management program, the more likely it is to reduce its overall supply chain risk profile.
Moreover, the integration of quality and performance indicators with financial indicators can reduce the chance of false positives. However, it's also essential to remember that risk indicators are just indicators — even when they encompass multiple views into a supplier's past and current performance and health. But perhaps the most critical point to remember is that if an organization does not have the right set of professionals ready to jump into action when a true risk arises, all the effort expended to create the optimal program to identify risk in the first place will be for naught.
About the Author: Jim Lawton is vice president and general manager of D&B Supply Management Solutions. More information at www.dnb.com.