Organisations are increasingly relying on complex supply chains to deliver services efficiently and cost-effectively. If, like many, you’re outsourcing to focus on your core strengths and boost profitability, you’re likely aware that this also increases your risk exposure. When services are managed externally, it becomes more challenging to ensure they are delivered efficiently and, more importantly, in a resilient manner that protects your business. Are you confident your outsourced services are being effectively managed to safeguard your operations?
This growing complexity hasn’t gone unnoticed by regulators. More attention is being directed toward the risks embedded within supply chains, as organisations are ultimately responsible for the services their third-party suppliers provide. While outsourcing can lighten the load for a business, the risks cannot be outsourced. A rigorous process for monitoring critical suppliers is essential, especially when suppliers themselves face issues that could threaten operations.
This blog explores the growing regulatory focus on supply chain risks, the importance of contingency planning, and how to identify and monitor your critical suppliers to ensure the continuity and resilience of your operations.
The Role of Contingency Planning
When it comes to supply chain management, it’s not enough to simply monitor your primary suppliers. Organisations must also have contingency plans in place to deal with potential disruptions. This goes beyond basic monitoring and involves planning for worst-case scenarios — situations where your primary supplier fails to deliver, whether due to financial difficulties, operational challenges, or external factors such as geopolitical issues.
Identifying one or two alternative suppliers who can step in at short notice is a smart risk mitigation strategy. These backup suppliers should be vetted, tested and ready to fill gaps immediately if your primary supplier is unable to meet their obligations.
Contingency planning should not be a reactive measure, but a proactive strategy embedded into your overall supply chain management process. In doing this, you can make sure that your organisation continues to function smoothly, even when the unexpected occurs.
It is important to remember that you should assess you suppliers own contingency plans. Do your critical suppliers have their own backup providers? What steps do they have in place so they can continue delivering their services if they face a disruption? By aligning your contingency planning efforts with your suppliers’ strategies, you can create a more resilient supply chain.
Identifying Your Critical Suppliers
One of the most challenging aspects of supply chain management is determining which suppliers are truly “critical” to your operations. Not all of your suppliers pose the same level of risk or provide services of equal importance. A supplier that is responsible for delivering essential services (such as IT infrastructure, data storage, or a core operational function) is far more critical to your organisation than one that provides a non-essential service.
To identify critical suppliers, ask yourself these three key questions:
1. What services are these suppliers providing? Are these services essential to the day-to-day running of your organisation?
2. Who within your organisation relies on these services? Which teams, departments, or processes would be affected if these services stopped?
3. What would the impact be if these services were suddenly disrupted? Could a disruption lead to financial losses, reputational damage, or regulatory violations?
Once you have identified your critical suppliers, you should start to implement processes for monitoring their performance and resilience. This will involve regular assessments of their ability to deliver services reliably, even under adverse conditions. Organisations should also validate that these suppliers have effective contingency plans in place and are prepared to meet their obligations no matter what challenges arise.
Finally, regular communication with your critical suppliers is key to maintaining operational alignment and ensuring that both parties are prepared for potential disruptions. You should establish a process for monitoring supplier performance, including conducting risk assessments and testing to ensure compliance with industry standards.
Conclusion
As global supply chains become more complex, organisations need to adopt more sophisticated strategies to maintain supply chain resilience. Regulatory scrutiny is increasing, and the stakes are higher than ever. By identifying critical suppliers, implementing effective monitoring processes, and developing strong contingency plans, you can mitigate the risks associated with outsourcing and maintain the continuity of your operations.
Proactively managing your supply chain and its associated risks isn’t just best practice — it’s a necessity for long-term success and supply chain resilience.
Need Some Help?
Building and maintaining resilient supply chains is no easy task, but as a trusted partner, we’re here to help.
Our business impact analysis helps you map out (amongst other things) key suppliers and their dependencies, ensuring you understand not only which suppliers are critical and why, but also how long you can be without them in the event they have an issue themselves. Using our cutting-edge Shadow-Planner tool, we can streamline this process, offering both automated solutions and expert manual support. Through our managed service, we can also conduct third-party supplier Business Continuity Management audits, giving you the confidence that your suppliers are also prepared for an incident impacting them.