A few weeks ago I was attending a meeting of my local ISM chapter. I was speaking with the purchasing manager for a local college about supply risk and mentioned the risk track and the session at the ISM Conference in San Diego in April, “Understanding and Choosing Supply Risk Solutions: Software, Content and Analytics” that Jason Busch (Editor, Spend Matters) and I are giving on April 28th. He replied that he didn’t have the budget to attend the conference nor did he have the resources even to think about buying a supply risk software solution. Was there anything someone in his situation can do? I told him that there are still things a smaller organization can do to address supply risk, even if they can’t buy a software solution. The key: know your suppliers.
Here are some of my suggestions about the most important things small businesses can do to reduce supply risk are:
- Make sure you have a good process for selecting suppliers
- Determine who your critical suppliers are
- Develop closer business relationships with those suppliers and get to know them
- Understand their business issues and challenges
- Measure and understand their performance
For a small business, none of the above requires fancy software. And none of those items cost anything other than time. Sure, it would be easier to have a supplier performance management system to measure supplier performance. Being small can (and should) mean fewer suppliers to get to know and track. Just the vital few; that is, the 20% of suppliers who have the most impact on your business. Understanding their performance can be done with a few simple metrics and even using Excel spreadsheets to track them. Or simple survey tools on the Web to ask your internal stakeholders about how suppliers are doing. Understanding supplier performance is probably the best and most underrated way to prevent supply risk.
Being a smaller business can give the advantage of not being stuck in an airless silo and not knowing what’s going on in the other silos or the rest of the business. You may have to wear more hats and therefore have a broader perspective on the business than your large-company compatriots. And as long as you don’t let suppliers turn into an airless silo unto themselves, then you can reduce the chances of a risk buildup that can explode unexpectedly.
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