The risk will always be a part of our everyday lives. There’s no escaping it, honestly, but that doesn’t have to be a bad thing. In fact, the right risks, made with calculations and well-founded information, yield some of the best rewards. That being said, there are certain times and places that we want to minimize risk. When we’re watching our kids, when we’re traveling abroad, and certainly with sensitive personal information. The pandemic that started nearly a year ago now revealed a lot, especially in the context of supply chain management. At the onset of the pandemic, supply chains across the country were in jeopardy of shutting down. That’s why supplier risk management in procurement must be a priority. 

Supplier risk management in procurement is one of the vital indicators of a procurement team’s operation. There are different categories of supplier risk, and unfortunately, no supplier is ever going to have a risk of absolute zero. However, there are techniques, tactics, and strategies that you and your procurement team can implement to minimize supplier risk and secure your supply chains. 

Poor supplier risk management in procurement can lead to a variety of inefficiencies, financial issues, and cause other operational obstacles as well. For instance, some of the issues that occur without the proper supplier risk assessments in procurement are a breakdown of supply chains entirely, missed deadlines that freeze up production cycles, and even cause a product-shortage that leaves your customers unhappy. 

These are only some of the reasons that building and implementing an effective strategy for supplier risk management in procurement is so vital. 

Defining Supplier Risk Management in Procurement

Supplier risk management is a growing and evolving field. As such, there isn’t necessarily a one-size-fits-all definition for what supplier risk management actually is, or looks like. However, that being said, there are tactics and strategies that you and your organization can implement that should immediately assist in minimizing your potential risks and bolstering your procurement team overall. 

This is good because, like with anything else in our organization, we need to be able to continue monitoring the supplier risk management in procurement and make informed decisions based on the available data and information. 

Contract Management Software

One of the best places to start assessing your supplier risk management in procurement is by investing in contract management software. Implementing contract management software is growing as an industry standard that’s recognized as a best-practice in procurement fields. Contract management software is becoming more sophisticated and more powerful, as it includes updated features that ease the life of procurement professionals and contract managers through-and-through. 

As supplier risk management in procurement advances and evolves, so do the procurement contracts. Not only in volume and size as your organization grows, but also in the complexity of terms and language. Therefore, using contract management software your team can more quickly and easily move contracts through their lifecycle. Not only this, but with contract management software, powerful AI, or artificial intelligence, takes data-entry and analytics to a whole new level. This saves employee time, which allows them to allocate those hours elsewhere, and gives deeper insight into the available data. 

Further still, contract management software is able to identify cost-savings on existing and future contracts while at the same time marking duplicate contracts, contracts with unfriendly terms, or other red-flags that may have been missed by the human eye.

Assessing Supplier Risk Management

Beyond implementing contract management software, though, there are other methods and tactics that you and your procurement team can use to properly assess the risk of current and potential future suppliers. 

Procure-to-purchase software is also important when asking the question of what does the future of procurement technology looks like. Procure-to-purchase software is important to supplier risk management in procurement because of the way that it allows professionals in procurement to vet out suppliers’ information before bidding on a contract even begins. 

Additionally, this is software that streamlines the vendor short-listing process and RFP process as well. Being able to conduct efficient and effective RFPs will reveal important data on potential suppliers before a contract is signed; allowing your company to begin making informed decisions on suppliers to partner with from the moment a contract is available. 

Putting It Together

So, when looking at your organization and trying to assess the supplier risk management in procurement, there are a few simple things you can check off the list in order to put you on the right start toward a more transparent risk-management strategy. 

Investing in the right procurement software, like contract management software and procure-to-purchase software takes loads of work off your staff in regards to data entry and analysis and allows them to focus on more meaningful work activities on the back end, while on the front end it makes for easy supplier-vetting, and a more efficient procurement process overall. 

Wrapping Up

Procurement is complicated. With so many moving parts, and the entire organization relying on the acquisition of materials, products, and services, it makes sense that it’s an organizational area in which risk-reduction is not only preferred but vital. As such, it’s your job as a manager or organizational leader to equip your staff with the right tools that boost efficiency and reduce risk. 

For more information on supplier risk management in procurement, or anything else procurement, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement from information and knowledge, to software and technology, and everything in between.