Reducing Supplier Risk With A Source-To-Pay Solution
WHAT IS SUPPLIER RISK
Comprehensive management of an enterprise?s spend is ever-critical to efficiently operating business. To achieve the maximum benefit from its spend, the finance department of an enterprise must monitor supplier risk in the ecosystem. Supplier risk is the risk of harm that is caused to the enterprise by the actions of suppliers. These actions can mean disruptions, lead times, and inadequate performance, which can create major issue for the enterprise as its solidity is vulnerable to changes in the current suppliers’ performance. Companies must take this risk into account in order to release the full amount of potential in the current system.
The implementation of Source-to-Pay (S2P) solution is an important measure to manage the costs and risks of enterprise supplier base. This technology assists organizations in efficiently managing and controlling their spend while reducing supplier risk. Below are steps that provide rudimentary understanding of using S2P to take control supplier risk:
1. Determine your enterprise’s supplier risk objectives: Before beginning to use the S2P solution, enterprise’s should determine the objectives for reducing supplier risk. These objectives should be set on three levels. The first is the operational risk level, the second is the financial risk level, and the third is the compliance risk level.
2. Assess Supplier Risk: Once the objectives are set, the next step would be to assess existing supplier risk. This assessment can include understanding of supplier performance, market and technology trends, identification of spend in related indirect categories, supplier performance, and organizational policies and procedures. The assessment should also include review of the supply base.
3. Analyze Current Supplier Performance: Analysis of current supplier performance should then be conducted to assess the actual performance being delivered. This analysis should include cost, delivery schedules, quality, customer satisfaction, and contracts signed with the suppliers.
4. Create Supplier Risk Profile: Based on the assessment and analysis, detailed risk profile should be created. The profile should capture the risk inherent in the supply base including the risk associated with any suppliers which are not actively monitored.
5. Implement S2P Solution: After the profile is created, the next step is to implement Source-to-Pay (S2P) solution. The S2P will enable more efficient and transparent spend management process and reduce the potential for supplier risk.
The S2P platform should be customized to fit the unique requirements of the business. It is important to make sure that the software is straightforward and simple to use, so that all users can access the system without difficulty.
6. Monitor Risk Performance: The risk profile should now be evaluated periodically along with the performance data. it ishould be checked to ensure that any suppliers with poor performance or bad practices are removed or replaced. The performance data should also be monitored to ensure that the suppliers are delivering the expected level of performance.
7. Escalate Risk Performance Issues: The stakeholders at the enterprise should be notified when any risk or performance issue arises in the supplier base. This ensures that any risks or issues can be addressed quickly and effectively.
Using Source-to-Pay solution can help organizations reduce supplier risk while also creating more efficient and transparent spend management process. This type of platform allows businesses to understand their suppliers better and expedite the process of identifying and eliminating any potential risks. By following the steps outlined above, enterprises can reduce supplier risk across the entire organization.
