Effectively managing the risk associated with vendors adds new complexities to the challenges faced by supply chain professionals juggling the demands of the business. Mismanaging or overlooking the occupational health and safety performance and compliance of vendors working on their company’s behalf is risky business, yet organizational silos and unclear processes often make it difficult to create and enforce a safety-conscious workplace among contracted workers.
Undoubtedly, worker safety is a responsibility that supply chain professionals cannot afford to get wrong. According to estimates from the National Safety Council (NSC), preventable workplace injuries and deaths cost the U.S. economy $161.5 billion in 2017. And, according to a study by the NSC’s Campbell Institute, contracted workers are particularly vulnerable, given common risk factors such as working under financial- and timeline-related pressures, lax training and supervision, and insufficient contractor safety standards. Leaving safety unchecked among vendors can have serious consequences, leading to worker injury, while also interfering with workflow and product quality, and ultimately impacting an organization’s financial security and its reputation. By forging stronger partnerships within their organization, supply chain professionals can gain insights into contractor safety compliance and help promote its critical importance, in turn protecting their business.
Supply chain professionals are five steps from better protecting their third-party workforce and their organization. Here’s how:
1. Understand the value of safety data
Proactive companies rely on robust contractor management safety solutions. These programs, often managed by the organization’s safety department, define and enforce occupational health and safety prequalification criteria, requirements that verify that a contractor company is compliant with OSHA and company-specific standards before they are hired as an approved contractor, or awarded more work. Data points and criteria often used for determining hiring eligibility include:
- OSHA injury rates (TRCR, DART, and fatalities), vehicle incidents, Experience Modification Rate, and safety manuals, which should be reviewed and translated to an overall safety compliance status or letter grade based on evaluation of safety performance.
- Results from safety audits and ongoing assessments in conjunction with corrective measures, and any other findings from safety observation programs.
These data points provide a contractor rating and level of risk, which can be incorporated into vendor risk profiles or vendor performance management programs. The data can be leveraged to significantly enhance contractor risk management and evaluation processes, drive ongoing improvement to contractor safety, and more effectively mitigate supply chain risk.
2. Embrace safety as part of risk management
Supply chain risk management means getting in front of potential problems before they happen. When an organization hires a third party to do work on its behalf, it assumes the repercussions of safety-related incidents that can happen when the vendor is at work. The most likely risks associated with working with outside contractors include reputational damage to the hiring client’s business, operational disruption that causes work to be delayed or projects halted, and diminished production quality that often requires additional expenditures in time and money. Each of these risks negatively impact an organization’s bottom line.
By incorporating contractor safety data into vendor due diligence processes, supply chain professionals gain closer, more accurate assessment of contractors’ safety performance and can make smarter hiring decisions. They are also better able to monitor risk and potentially prevent damage before it occurs.
3. Partner with Safety colleagues
If an organization’s functional teams, including safety and supply chain departments, work independently and fail to communicate or share information -- as many do—supply chain professionals may lack visibility into important vendor safety performance history. For instance, it’s not uncommon for supply chain professionals to be unaware of third-party safety track records or compliance status, and have little to no information about past incidents related to safety or the risk they may present to job sites where the contractor is hired to work.
By forging partnerships with their safety colleagues, supply chain professionals will gain access to data and critical metrics from their organization’s safety prequalification program and can incorporate it into risk management processes. This enables them identify and select the safest, highest-performing contractors, contributing to higher-quality work product and increased revenue.
4. Leverage technology to support communication and simplify compliance
Keeping track of vendors’ safety performance and compliance is no easy task when it’s done without guidance or process. Technology offers a solution to harness the data by centrally collecting it in web-based applications and making it accessible to all stakeholders, including safety, supply chain, and third-party vendors.
Best-in-class contractor management safety software is easy to integrate with other risk and/or vendor management software. It can streamline and simplify data submission and collection processes for both internal groups and vendors and enable easy visibility into a vendor’s current approved/unapproved status as well as trending data to assist in evaluating vendor performance. It can also highlight gaps so that vendors know what must be completed to meet hiring companies’ compliance requirements, getting them approved and to work more quickly. And, it can even help supply chain professionals find potential new vendors that are already part of the software provider’s network and have been vetted based on their safety performance.
5. Reap the rewards of a strong safety partnership
Partnering with Safety and leveraging technology can contribute to measurable benefits that extend beyond risk management, including:
- Improved Vendor Management and Performance
Incorporating critical safety data into contractor evaluations before a bid is awarded helps to mitigate risk, but this same data can also serve to strengthen ongoing performance monitoring and evaluation programs. For instance, safety performance metrics and trend data captured by contractor management safety software can be incorporated into a vendor scorecard or regular performance review discussions. It can also highlight the need to find a new vendor when safety isn’t improving over time. Given safety’s very direct influence on quality, reputation, and a company’s bottom line, it just makes good business sense to include safety in a comprehensive analysis of vendor performance
- Tools for Vendors to Monitor and Improve Their Safety
Incorporating safety metrics, such as letter grades, safety audit scores, and recommendations for corrective actions into vendor performance monitoring and review programs also serves to provide third-party contractors with greater visibility into their own safety performance, clarifies opportunities for improvement, and offers tools and resources for program improvement should any safety gaps be identified. As contractors’ performance improves, they benefit from more work and new business opportunities, reduced insurance costs, and higher revenue.
- Enforced Business-Critical Safety Program
Working closely with vendors gives supply chain professionals a unique opportunity to set the tone regarding the importance the organization places on safety. It’s a chance to extend their organization’s safety culture to the third-party workforce and emphasize its firm commitment to enforcing a safety-conscious workplace.
Undoubtedly, strong safety partnerships help to protect your workforce and your company’s reputation and financial stability. By leveraging a strong contractor management safety solution to monitor your vendors’ safety compliance and provide you with visibility into the quality of their safety performance, you effectively instill a safety-conscious workplace culture among your vendors and mitigate risk for your organization.