Distressed Supplier Management
Why manufacturers should monitor their suppliers’ health
With unpredictability resulting from the economic downturn’s effect on a global supply chain combined with geopolitical issues, it has become quite clear that monitoring the health of your supplier’s health is an important initiative.
You may not able to precisely predict the level of distress in the supply base, but manufacturers can implement several strategies to prepare for and react to events:
- Design a process or monitoring system to gather supplier data and evaluate health, continually — not just during contract award.
- Understand “trigger points” based on trends and business rules when intervention with a supplier is appropriate, that is before any distress is apparent and impacts your operations.
- Designate teams empowered to expedite qualification of alternate sources of supply.
- Assign teams to use data from the sourcing model and the monitoring system to engage in rigorous scenario simulations, which establish business case criteria for implementation of improved processes and systems.
- Develop a playbook for higher likelihood or higher-risk scenarios.
- Confirm that data is readily available to facilitate an appropriate rapid response. This should include:
- A broad bill of material through the tiers.
- An inventory of tooling within the supply chain, with detailed information on location, identification, and condition.
- Data on characteristics of specific machinery and equipment.
To learn more, download the full report "Distressed supplier management," from the top of this page.