The ability of any business to perform its operations in a smooth manner is directly tied to the reliability of the performance of their suppliers. This means that every business that intends to be able to undertake its internal processes without fail or hindrance would do well to invest in supplier performance management. What this does is to help the business to establish an acceptable and expected level of performance from its suppliers. This is what makes the business confident in its ability to perform under any and all circumstances.
Currently, there are industry standards that have been established in this area of compliance risk management. However, the methods of enforcing these standards have not been standardized across all business segments. It implies that, in most cases, the business will have to develop its own strategy. The only way a business succeeds at this is by creating a framework based on its intended targets. The business can then implement the framework and adjust it as it sees results. The framework must be built on several underlying objectives.
The first objective is that the business needs to have access to a wide range of suppliers. This is achieved through the creation of a supplier database. The business needs to get the contacts of all the suppliers that offer products or services that it needs within their area of operation. Businesses that operate nationally and locally are the best choice. This is because localization means that they operate in the same business environment economically and will, therefore, price their service accordingly. Nationally enables them to have a wide supply network of their own. This means that all needs of the company will be met.
The business can now move on to compliance risk management stage one. Here, the business will prequalify all of the suppliers that it has shortlisted in order to get a shortlist of the few selected ones that it is likely to use in its operations. The process of pre qualification is particularly valuable as it determines the strength of the supply network created. It needs to check the level of service that the supplier claims to be able to provide. This is useful in establishing what the supplier is actually capable of doing. It is useful to assume that the level of actual performance will be lower. They can then create a list of suppliers who meet their compliance risk management standards and ensure that their supply contracts reflect this, thus ensuring a reliable supplier source for themselves.
