The supply chain is a difficult thing to manage. The entire process— from creating a finished product to transporting it to an end user— involves a number of different partners. These suppliers, providers, and manufacturers are responsible for making sure your product arrives at its given destination unaltered and on time. If just one supplier fails to hold up its end of the bargain, your well-oiled machine could putter to a stop—costing you a substantial amount of money. It’s for this exact reason that businesses are ramping up their compliance programs.
As a procurement leader, not only are you responsible for building partnerships with trustworthy suppliers, but you’re also accountable for making sure vendors remain in compliance. Try these five ways to drive supplier compliance:
1. Be Selective
Suppliers are integral to your business. You want to select ones that will be around for the long haul and nurture strong relationships. Don’t be tempted to partner with a supplier just because its prices are too good to be true, as this could lead you down a troubled path. Make sure to do your due diligence when researching potential vendors. Look into their financials and history to ensure they’re a safe bet.
2. Weed Out Unnecessary Risk
Do you have a noncrucial supplier that’s located in a high-risk country? Do yourself and your business a favor and get rid of it. Find a low-risk supplier that can provide you with the same goods and services. To help weed out undesirable suppliers, target and segment vendors by importance and compliance risk.
3. Create Compliance Profiles
Once you’ve completed Step #2, create detailed profiles for each vendor on your short list. A vendor’s status can change at the drop of a hat, so make sure you continuously monitor any changes that could affect compliance, such as change of ownership or any suits, liens, or judgments.
4. Appoint Ethics Personnel to Major Suppliers
Chances are you rely on a core group of suppliers to keep your business running efficiently, meaning you can’t afford to have one of your crucial suppliers slip up. Assign ethics and compliance personnel to your major suppliers to ensure that they are kept up to speed on the latest compliance procedures.
5. Ask for Feedback
To build a trusting relationship with vendors, you must keep the lines of communication open. Have ongoing conversations to regularly assess supplier ethics; ask for feedback.