{"id":2724,"date":"2009-07-24T14:03:00","date_gmt":"2009-07-24T14:03:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2009\/07\/24\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/"},"modified":"2021-08-10T11:01:12","modified_gmt":"2021-08-10T15:01:12","slug":"the-most-common-type-of-supply-risk-that-most-experts-usually-ignore","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/","title":{"rendered":"The Most Common Type of Supply Risk (That Most &#8220;Experts&#8221; Usually Ignore)"},"content":{"rendered":"<div class=\"fusion-fullwidth fullwidth-box fusion-builder-row-1 fusion-flex-container nonhundred-percent-fullwidth non-hundred-percent-height-scrolling\" style=\"--awb-border-radius-top-left:0px;--awb-border-radius-top-right:0px;--awb-border-radius-bottom-right:0px;--awb-border-radius-bottom-left:0px;\" ><div class=\"fusion-builder-row fusion-row fusion-flex-align-items-flex-start\" style=\"max-width:1144px;margin-left: calc(-4% \/ 2 );margin-right: calc(-4% \/ 2 );\"><div class=\"fusion-layout-column fusion_builder_column fusion-builder-column-0 fusion_builder_column_1_1 1_1 fusion-flex-column\" style=\"--awb-bg-size:cover;--awb-width-large:100%;--awb-margin-top-large:0px;--awb-spacing-right-large:1.92%;--awb-margin-bottom-large:0px;--awb-spacing-left-large:1.92%;--awb-width-medium:100%;--awb-spacing-right-medium:1.92%;--awb-spacing-left-medium:1.92%;--awb-width-small:100%;--awb-spacing-right-small:1.92%;--awb-spacing-left-small:1.92%;\"><div class=\"fusion-column-wrapper fusion-flex-justify-content-flex-start fusion-content-layout-column\"><div class=\"fusion-text fusion-text-1\"><p>Sheesh. Everywhere I turn these days, I hear \u201csupply risk.\u201d<\/p>\n<p>Magazine articles. Conferences. Webinars. Blog posts. Conversations. Twitter. Everywhere.<\/p>\n<p>As if supply risk is something new (which it is not). I do think the rough economic times we\u2019ve been in has a lot to do with that (which it should).<\/p>\n<p>But what concerns me about the discussions about supply risk, particularly those involving \u201cexperts\u201d in the field, is that a lot of them are focused on risks that aren\u2019t predictable, haven\u2019t been common, and are of low-probability. You know, the next tsunami. The next lead paint scare. The next terrorist attack.<\/p>\n<p>And it is OK to think about those things. I\u2019ve always advocated having contingency plans.<\/p>\n<p>My concern is that procurement professionals will spend so much time worrying about these types of risks (which, don\u2019t get me wrong, shouldn\u2019t be ignored) that they\u2019ll forget about the most common type of supply risk that gives heartburn to procurement professionals day-in and day-out. This supply risk causes daily late deliveries, quality defects, and supply chain breakdowns.<\/p>\n<p>What is this common supply risk?<\/p>\n<p>Simple.<\/p>\n<p>Poorly managed suppliers.<\/p>\n<p>Yep, if you are doing business with a poorly managed company, your risk of supply disruption is high constantly, not just when a natural disaster strikes. So, it is important to mitigate this supply risk with an evaluation of how well-managed your suppliers are.<\/p>\n<p>How do you know when a supplier is well-managed?<\/p>\n<p>As I am writing this, I can immediately think of a number of <strong>characteristics of well-managed businesses<\/strong>. Here are a few (certainly, this list is not exhaustive):<\/p>\n<ul>\n<li><strong>A culture of continuous improvement.<\/strong> A well-managed business will have a culture of continuous improvement, evidenced by several goals that aim to improve performance over the previous year(s). For example, a well-managed business may look to grow its sales by x% compared to last year, reduce returns by 50% from the previous year, improve on-time delivery to x% from y%, etc.<\/li>\n<li><strong>Measurements.<\/strong> A well-managed business will measure its performance in many ways. From things like units sold to productivity of every machine operator, a well-managed business will know how well it is performing (and its employees will know how well they are performing, too).<\/li>\n<li><strong>Stability in employment.<\/strong> If a company has to replace half of its workforce every year, something is clearly wrong. A company who has constant turnover cannot usually be counted on for consistent performance as a supplier. A well-managed business hires people who are a good match and works to retain them.<\/li>\n<li><strong>Profitable financial performance.<\/strong> This is self-explanatory.<\/li>\n<li><strong>Employee engagement.<\/strong> A well-managed business will have happy workers and those that know why doing a good job is important for the business\u2019 customers. If the workers do not know what is important to please a customer \u2013 even if management does \u2013 the chances of you being pleased are slim.<\/li>\n<li><strong>A good reputation.<\/strong> A well-managed business will have no shortage of satisfied customers and will have a good public reputation. Any business is subject to criticism and the occasional mess-up. But a well-managed business will have more positive things said about it than negative.<\/li>\n<\/ul>\n<p>So there are a few things to think about. Yes, they may seem boneheadedly simple.<\/p>\n<p>But, you know what? In my experience and observations, the most supply disruptions have occurred due to companies doing business with poorly managed businesses than the armageddon-type occurrences.<\/p>\n<p>As we teach in our online course \u201c14 Purchasing Best Practices,\u201d part of supply risk management is identifying risks, assigning a probability of occurrence to those risks, and establishing priorities for mitigating those risks. Make sure \u201csupplier is poorly managed\u201d is one of those risks and that it is assigned a higher probability of occurrence than the moon crashing into a supplier\u2019s facility.<\/p>\n<p>Supply risk is real. Some risks are \u201cmore real\u201d than others.<\/p>\n<p class=\"p1\"><b>Recommended Reading<\/b><\/p>\n<ul class=\"ul1\">\n<li class=\"li1\"><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/supply-risk\/\">Supply Risk<\/a><\/li>\n<li class=\"li1\"><a href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/courses\/supply-risk-and-sustainability-management\/\">Supply Risk and Sustainability Management<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/appetite-for-taking-risk-in-your-supply-chain\/\">Appetite for Taking Risk in Your Supply Chain<\/a><\/li>\n<li class=\"li1\"><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/risk-checklist\/\">Risk Checklist<\/a><\/li>\n<\/ul>\n<p class=\"p3\"><span class=\"s1\"><a href=\"https:\/\/lms.nextlevelpurchasing.com\/\"><b>NLPA Learning<\/b><\/a><b>:<\/b>\u00a0Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in\u00a0NLPA Learning.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":12,"featured_media":4129,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2724","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Most Common Type of Supply Risk - NLPA<\/title>\n<meta name=\"description\" content=\"Make sure \u201csupplier is poorly managed\u201d is one of those risks and that it is assigned a higher probability of occurrence than the moon crashing into a supplier\u2019s facility.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Most Common Type of Supply Risk - NLPA\" \/>\n<meta property=\"og:description\" content=\"Make sure \u201csupplier is poorly managed\u201d is one of those risks and that it is assigned a higher probability of occurrence than the moon crashing into a supplier\u2019s facility.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2009-07-24T14:03:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-08-10T15:01:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-139.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1064\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/the-most-common-type-of-supply-risk-that-most-experts-usually-ignore\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"The Most Common Type of Supply Risk (That Most &#8220;Experts&#8221; 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