10 Supplier Management Risks:
Managing Your Supply Chain

Supplier Management RisksIf you are in supplier management, then you know that supplier management risks can be a big problem for your company. There are many risks involved with supplier management which is why it’s important to try and minimize them as much as possible. 

In this blog post, we will discuss supplier management risk factors and how they can affect your company negatively if not dealt with properly.

1. Suppliers Defaulting on Their Contract Obligations

This can lead to a huge loss of revenue for your company if a supplier has exclusive rights with you and they try to avoid their responsibilities or even worse, don’t exist anymore. 

If this happens then start thinking about how much it will cost in order to find another supplier who is comparable enough that would be able to fill those needs.

The costs associated with sourcing out new suppliers include travel expenses, time lost while looking for supplier alternatives, technology implementation from transferring data over (if necessary), legal fees incurred by contracts being broken which cause delays because of negotiations etcetera so it’s important not only to keep track of profits but also supplier management risks.

It’s always best to prepare for the worst so that you’re not left with a supplier emergency or have your company be vulnerable if anything should happen.

2. Failure to Build Relationships with Diversity Suppliers

When organizations fail to include and build relationships with diverse suppliers, supplier diversity can be negatively impacted.

Not only does this leave the company with an over-reliance on a specific supplier, but it also leaves them vulnerable if that supplier goes out of business or is unable to provide products for whatever reason. Diversity suppliers represent not just ethnic and racial minorities but different types of businesses too – like veterans, women-owned, and minority firms they represent all facets of society so as you look at supplier risks remember to have diverse suppliers in your pipeline.

3. Exclusive Supplier Rights

Exclusive supplier rights can lead to huge loss of revenue and time lost on finding new supplier alternatives. There is also a risk in customer satisfaction when there is an interruption from suppliers due to delays caused by negotiations, technology implementation and legal fees incurred as contracts are broken which causes further delay because of negotiations etcetera.

4. Supplier Emergencies

If something bad happens like fire, theft, natural disaster then it might cause disruption in the supply chain leading customers to contact you about what has happened but this could not be revealed to them until the supplier issues have been solved which might lead to a loss of customers.

5. Supply Chain Vulnerability

Some supplier management risks are suppliers going out of business, supplier bankruptcy etcetera so this could be costly if you have not already made contingency plans for such occurrences.

Supplier fraud is also an issue and it can happen with getting paid or what they provide which leads us back into supplier emergencies because how will we know when something bad has happened?

Alongside these risks, there is supplier non-compliance that occurs with quality standards being breached and then legal action might ensue from your company as well as customer dissatisfaction if delivered goods do not meet specifications etcetera.

Your company could lose a good reputation due to poor service and supplier performance, and supplier management risks also include the risk of supplier non-compliance because you could end up in a situation where suppliers are not meeting your requirements.

6. Not Monitoring Supplier Compliance with Quality Standards

The ability to monitor supplier compliance with quality standards is the number one supply chain risk for any company. The consequences can be significant if these standards are breached.

Your company may lose good reputation due to poor service or goods that do not meet specifications etcetera, but on top of that legal action might ensue from both your company as well as dissatisfied customers who don’t receive correct products…

Your business will then suffer losses in terms of time and money which wastes resources unnecessarily (and this just extends across all aspects). This means they’ll have higher overhead costs when monitoring their supplier where quality standards are not met.

7. Poor Quality Products

The product you purchase from your supplier could be of poor quality if they do not comply with high production standards or safety measures which means that the wrong goods might get delivered to customers.

This can give a bad impression on both you as well as the customer because it is an indication that their needs were overlooked by the supplier (poor management).

This will in turn lead to trouble for all parties involved – including yours! You’ll have a hard time trying to recover from this problem when consumers find out about it and stop buying those products altogether.

8. Inadequate Supply Chains

If suppliers fail to provide the right products by their due date, this can lead to major disruptions in your supply chain. You might find yourself scrambling and trying to figure out how you’ll make up for supplier-related delays that cause inventory shortages which could result from supplier bankruptcy or personnel crises among other things.

9. Poor Business Relationships

Unreliable suppliers and their failure to meet your expectations can lead to a poor business relationship. This might even affect the supplier’s ability to continue in business which is why you need to always keep an eye out for potential issues so that problems do not escalate.

10. Supplier Bankruptcy or Supplier Personnel Crisis

You can go from having a supplier to none in a blink of an eye. Supplier bankruptcy or personnel crisis is very costly so it’s important to have contingency plans in place for such occurrences.

Inventory shortages caused by supplier bankruptcy or personnel crises could lead to major disruptions in your supply chain and difficulties getting necessary products delivered on time which means a ton of inventory shortages.

When a supplier goes out of business or has a personnel crisis, there’s no way they can provide you with the services you need to have your customers satisfied. This means going to another supplier becomes a huge inconvenience and could be very costly.