Welcome to the fourth article in a five-part series that will focus on how procurement, finance, and other professionals effectively build a “compliance management” checklist that addresses multiple avenues of spend management and the compliance ramifications behind strategic spend categories. The first four articles will highlight the dozen items that should be included in an enterprise’s procurement compliance checklist, which span across supply management, risk management, and complex spend management, while the fifth and final article in the series will detail how collaboration plays a vital role in both building this checklist and amending it when the need arises.
Depending on the function, the notion of globalization is either regarded as a positive-impact concept or one that causes more stress on business processes. The “reach” that is needed to conduct business on a global scale requires companies to build supply management programs that can easily prepare for unanticipated disruptions in the flow of goods and services from key suppliers.
While globalization certainly allows for a much deeper supplier base (and in today’s economy, the average enterprise will do anything it can to gain a competitive advantage, including leveraging suppliers in different global regions), there are various risks that are at the forefront. The threat of supplier disruptions lurks in every global corner, forcing the average enterprise to consider these additions to the procurement compliance checklist:
- An effective “Plan B” that utilizes “backup” suppliers. Some supplier disruptions, like bankruptcies and delays, certainly affect a company’s supply chain. The reactions to these types of instances must be concise, but the procurement and supply chain management teams have some level of time to react. A natural disaster, however, leaves zero time to act; in these cases, a viable “Plan B” supplier that offers similar (quality and cost, in this case) materials can be a “hero.” These “Plan B” suppliers must be identified, vetted, and negotiated with, and, in the event of a severe supplier disruption, can step in immediately.
- Real-time, actionable supply chain intelligence. While there is no way to accurately predict a natural disaster or similar event, other supply risk aspects can be prepared for with a deep level of real-time and actionable supply chain intelligence. Understanding the financial health and quality of suppliers via negative news items (such as layoffs or fines), can help the Chief Procurement Officer (CPO) and his / her team accurately develop a picture of supply risk threats and formulate a proper response.
- Supplier vetting process. Only a fraction of enterprises actively vet their suppliers in the same way they do with potential employees. The same level of rigor that goes into background checks and employment screening must be applied to supplier vetting programs. Does a supplier’s messaging align with that of the enterprise’s corporate branding? Are there undesirable qualities that may cause supply chain hiccups in the future? Are suppliers compliant with regional and global trade standards? These are important aspects to address to avoid supplier disruptions further down the line.
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