Using eSourcing to manage supplier risk

supplier-risk

Learn how eSourcing enhances transparency, strengthens supplier relationships, and ensures continuity. Safeguard your supply chain with proactive eSourcing strategies. 

For buyers, supplier risk is one of the factors that’s always been difficult to control. Its complexity defies proper management, as each and every supplier carries its own set of risks and challenges. Cutting edge eSourcing software gives buyers a simple solution to mitigate risks, but how can a single software platform successfully monitor, identify, and manage these risks so they pose less danger to buyers and the overall supply chain?

In this article, we will discuss the different ways buyers can reduce risks, and demonstrate how eSourcing solutions bring supplier risk management under control.

 

Growing Supply Chains

One the advantages of the Internet is that it brings people from around the world together and helps forge various business relationships. Procurement in particular has benefitted from this extended reach because buyers have global access to suppliers with new ideas, systems, and processes, which could potentially revolutionise industry-specific supply chain practices. 

 

However, it’s a lot of work for buyers to integrate multiple new suppliers into existing frameworks and include them in current risk assessment and management procedures. Adding to the challenge is the need to be as thorough and accurate as possible to minimise risk at all levels.

 

This is where eSourcing proves its value. eSourcing supplier risk management software provides a flexible risk management framework that organises data in a structured, transparent format that provides a constantly updated overview of each chain and each element of the chains in operation.

 

Supply chain management software, such as that from Delta eSourcing, collects and stores essential supplier information on a single platform. Thanks to the system’s transparency, all interested buyers can access supplier information, including performance issues. The information can be used to categorise suppliers according to predefined lists which helps keep a flood of information in order.

 

4 Types of Supplier Risks Buyers Need To Manage 

Generally speaking, there are four types of supplier risks that must be managed.

 

1) Failure to deliver

Delivery failure occurs for two reasons: The supplier simply can’t provide the goods, works or services agreed upon in the contract, or delivery is delayed.

 

2) Substandard products

This could go all the way back to the first supplier who saved money by using materials not up to spec. Flaws can go undetected until they become a problem during the buyer/supplier role in the supply chain.  

 

3) Tarnished reputation

Your supplier’s tardiness reflects badly on your business. When they don’t deliver, neither can you and there is the risk that your company will get a reputation for being unreliable.

 

Furthermore, you can be tarnished with the same brush as your suppliers if you unintentionally do business that has a poor reputation, perhaps for cutting corners. Other companies in procurement and supply might attribute the same characteristics to your company.

 

4) Financial risk

Financial risk takes many forms, all of which have the potential to interrupt the supply chain, impact your cash flow, and increase costs. Not to mention the effect on your revenue. The most common risks buyers face include:

 

Credit: This occurs when suppliers can’t pay their invoices on time or simply can’t pay them at all. This affects your company’s ability to meet its financial obligations and puts you in the unenviable position of having to find replacement suppliers at the last minute.

 

Solvency: This is about as bad as it gets for suppliers and your supply chain. Suppliers who flirt with insolvency can’t make good on their financial obligations. Again, buyers have to scramble to find replacements before the company’s solvency also becomes an issue.

 

The risk isn’t always quite so dire. Malfunctioning equipment could put a temporary halt on supplies, which will affect your supply chain. However, it just takes some repairs or replacements and everything will be back on track, hopefully with the bare minimum of damage.

 

Buyers can reduce financial risks by using eSourcing software’s management feature, combined with real-time data, to monitor suppliers and keep lines of communication open so both parties can raise concerns before they escalate into financial problems.

 

How eSourcing Enables Buyers to Manages Supply Risks

The inherent nature of eSourcing software solutions address the risks listed above, and more. The two primary advantages are communication and transparency. 

 

Communication is the cornerstone of any relationship. Healthy communication facilitates growth. Miscommunication can tear relationships apart, which can have devastating knock-on effects in the supply chain.

 

eSourcing software’s central hub doesn’t just facilitate communication, it encourages communication among suppliers and buyers who might ordinarily never have come into contact with each other.

 

Transparency in communication facilitates networking and collaboration, taking the process from idea sharing to contract management. 

 

The manner in which eSourcing software is structured ensures transparency in supplier information. This enables buyers to dig into suppliers’ past performance, where they can see patterns in project completion, be they good or bad. 

 

Armed with this information, buyers can make insightful decisions about constructive and productive partnerships that have the least risk and the greatest potential. 

 

ESourcing Automation

ESourcing software further helps buyers with supplier risk management by allowing them to set assessment criteria through online questionnaires and then delivering automatic evaluation, guiding you to the best results. This saves you an enormous amount of time because you don’t have to sift through dozens of profiles. 

 

It also saves you time when it comes to risk assessment because you only have to look into the suitable prospects that are delivered to your virtual doorstep.

 

Furthermore, by receiving a selection of suppliers, you’re exposed to vendors who might be perfect for other projects. As these projects come up, you can send out invitations to tender to a wider audience. This removes the risk of supplier bias, which is when you have one or two regular suppliers and are reluctant to experiment with others. 

 

ESourcing Data Management

eSourcing and eProcurement can generate a lot of data for buyers to gain a more comprehensive view of suppliers. ESourcing solutions store the data in an ordered and easily accessible manner. All it takes is a few clicks and buyers can instantly assess suppliers based on their reliability, value, spending, and location. Buyers are further aided by constant updates, allowing them to access data in real time. 

 

eSourcing and Supply Chain Management

Advanced eSourcing software has been a game changer in supply chain management, especially as it provides buyers with essential information that enables them to mitigate supplier risk. In this article we looked at how eSourcing platforms like Delta facilitate risk management through two fundamental factors, transparency and communication.

 

The internet continues to link buyers and suppliers on a global level. ESourcing frameworks provide consistency in the way data is automatically logged and managed, regardless of the country of origin. This makes it easy for buyers to categorise suppliers according to set specifications, which ultimately streamlines risk and supply chain management.

 

By prioritising transparent communication, eSourcing solutions foster collaboration between buyers and suppliers while effectively managing key supplier risks – delivery failure, substandard products, and financial risk. The software’s structured approach provides buyers with essential, real-time data that enables informed decision making.

 

One of the biggest advantages of eSourcing’s automation is the shortcut in risk assessment when the software provides buyers with suggested suppliers who fit company requirements, saving time and minimising bias. Furthermore, automated real-time data management enables buyers to make decisions quickly.

 

Embracing eSourcing software enables buyers to benefit from bolstered supplier data security and facilitates internal and external collaboration. This ensures supply chain resilience and sets up your business for greater growth and efficiency.

Contact us if you want to see our streamlined Delta eSourcing platform in action. We offer a free demo for buyers.

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