As your business and network of suppliers grows, so too does the potential risks. Having locally based suppliers will allow you pick up information on their reputation and viability more quickly. If you stretch your suppliers outside of your defined geographical area it is more important to undertake ‘due diligence’.
Without sufficient information on suppliers, the smooth operation of your business could be effected. This is why it is important to know if they engage in unethical practices, if their reputation could damage your own, or if they could hurt your financial standing. Another factor that needs to be considered is their data security procedures especially if you intend to share data. Background checks will help you increase your control over any given link in the supply chain.
By having a good relationship with suppliers which we looked at in a previous post, you can ensure transparency in all your supply chain dealings which helps to reduce and eliminate risks.
It is possible that suppliers will also look into your reputation before deciding whether or not to enter into business with you. One of the main things they will look into is if you have a reputation for paying on time.
Paying your suppliers on time will help create trust within your supply chain management system. If you value customers that pay on time then you should do the same with your suppliers. If a situation arises in which you won’t be able to make payment as scheduled it is important to inform suppliers in advance. This helps to avoid a situation in which stock isn’t supplied due to non-payment.
This supply chain due diligence is essential to consider in most businesses. For more on the supply chain, as well as collaboration within the supply chain, read our guide. This guide provides you with a checklist for managing your supply chain which is hugely beneficial.
