For 20 years procurement has been transforming with increasing speed amid trade globalisation, successive economic crises and digital transition. Previously responsible for cost killing and sourcing suppliers, the procurement department is now at the heart of business strategy.
For big groups, supplier risk control is becoming a major driver of competitiveness, having a direct impact on performance and contributing to the organization’s overall efficiency. We must look ahead and put in place systems that facilitate risk control in a pertinent way. Franck Le Tendre, MD of SynerTrade France, gives us the keys for understanding the new challenges around supplier risk and some solutions for supplier relationships management.
Supplier relationship: multiplied external risk factors
Supplier risk is an issue to consider from many angles. Knowing the nature of potential supplier risk and considering it with precision is to be equipped with the ability to take a proactive approach that will benefit your business.
The client/supplier relationship was previously a simple contractual relationship. The right supplier was the one to combine the right price with the right quantity. The risks linked to the supplier relationships were essentially internal. Problems in interdepartmental communication, unfamiliarity with the regulatory framework, distance between subsidiaries and a proliferation of actors in the supply chain could outweigh the price cut expected of any good buyer.
With technological and digital progress, globalisation and the drive for growth in the context of the economic crisis, the internal risks are joined by more external risk factors. Franck Le Tendre explains:
“Risk factors can be extremely varied in nature. A supplier factory shut down after a natural catastrophe results in the loss of millions. If health and safety conditions are not respected in a production centre abroad the business again makes a loss in the event of a media crisis. Legislators introduce new potential risks too: missing payment deadlines and exceeding supplier dependency limits can risk heavy financial sanctions. Any crisis (whether it be reputational, financial, geographic or legislative) also exposes companies to the risk of a fall in stock market valuation”.
A right supplier is no longer a supplier that just gives the right price to the right purchase commitment. It also offers the best guarantees for a risk-free relationship for the business; reputational, geographic, geological or legislative.
Supplier risk: careful control to make the right decisions
Faced with all these risks it is imperative for the Procurement department to control the supplier relationships carefully, anticipating potential crises and protecting the business and business growth. This is a radical transformation of its responsibilities and mission. It must be able to act as a partner to the Finance Department and General Management to manage the business well.
Franck Le Tendre explains:
“Acting on risk requires the right tools; the right control panels to make the most informed decision. Synertrade has developed systems that can give procurement departments a 360° supplier vision not provided by traditional ERPs, with simple and clear interfaces. All this means integrating more information, either from external data or enhanced internal data. Today’s buyer must have a quantitative and qualitative vision of suppliers”.
Information systems must adapt to the new face of procurement
The information system must cater to this new dynamic by being able to collect, store and enhance supplier data, whether it comes from internal or external sources. “Far from the sole quantitative criterion that prevailed until recently, the ideal information system must offer procurement departments the capacity to obtain, process and offer precision and simplicity”.
From CSR grades to detailed financial data, the information system must make it possible to establish a precise score for each supplier, measuring the scope of the commitment no matter how many departments or branches the contract covers. It must ensure supplier information is available and can be shared by all the colleagues and departments concerned. All this will have a direct impact on business performance and forecast securing.
The best-managed crisis is always the one that doesn’t ever happen, by looking ahead and being continually proactive. Managing the procurement process efficiently at every stage optimises business performance. This is the challenge of the information system in the procurement department of the 21st century. Synertrade is committed to exactly that every day.