Supply chain risk management isn’t just for the big guys*. As supply risk continues to grow as a business challenge, supply risk information and awareness have been spreading. Many approaches to supply risk identification, management and mitigation have been evolving. Firms can choose from many software solutions, hire consultants, read books, and attend meetings and conferences on the subject. As supply risk has become a more mainstream issue for firms and addressing it has gone beyond just early adopters, more solutions have become available. However, addressing supply chain risk still remains a larger challenge for the small to medium-size business, which doesn’t typically have the budget or resources for niche software solutions or expensive consulting services. What, if anything, can these smaller organizations do to address supply risk?

The key is: know your suppliers.

Here are some important actions small businesses can take to reduce supply risk:

• Make sure that you have a good process in place for selecting the best and most reliable suppliers for your business
• Identify your critical and key suppliers
• Develop closer business relationships with and get to know those suppliers. Understand their business issues and challenges.
• Measure and understand a few basic key performance indicators (KPIs) in order to identify, understand, and prevent risk situations. Supplier performance is a leading indicator for risk and often the best (and only) indicator for smaller suppliers for whom publicly available information can be unreliable.
• Understand the early warning signs of supplier trouble (e.g., lengthening cycle times and delivery times, top management changes, etc.)
• Communicate regularly with other stakeholders in your organization to share information about issues that can impact your firm’s supply risk (e.g., with accounts payable, quality, customer service).
• Develop plans to address supply risk situations when they do inevitably occur.

For a small business, the above suggestions cost more time than money. Being small can (and should) mean fewer suppliers to get to know and track. Identify and focus on the vital few; that is, the 10-20% of suppliers who have the most impact on the business. Understanding their performance can be done with a few simple metrics. Or use web survey tools to ask internal stakeholders about how suppliers are doing. Developing closer relationships with key suppliers and understanding supplier performance are among the best and most underrated ways to prevent supply risk.

Small businesses can use their size to their advantage, as they often have more flexibility to make decisions and can react and make changes more quickly than a larger company. Key decision makers are often more accessible. These advantages can help reduce the disadvantages of fewer resources.

Small businesses are not exempt from supply risk. And even small businesses can plan for supply risk, take steps to prevent it and mitigate it when it occurs. Doing so can prevent potentially costly and devastating impacts.

*Note: The ISM Supply Chain Risk Management Group recently published its Q2 newsletter, A Bit on Risk, which is available on its website. I’m a Director on its Board, and this is an article that I wrote for the publication.