Supplier Risk Management
Industries ranging from healthcare and finance to consumer electronics and fashion are increasingly relying on outsourcing to develop and deliver their products and services to customers. Companies are outsourcing manufacturing, logistics, and an array of other services to third-party organizations to cut costs, quickly scale up or down in response to changing conditions, and spend more time focusing on their core competencies.
Without an effective supplier risk management program, however, organizations may suffer significant downstream operational implications—damage to their bottom line and brand reputation—as a result of third-party supplier delays, failures, and other issues. The need for holistic supply chain risk management is especially great in the pharmaceutical industry. Pharma companies around the globe have renewed their focus on supplier risk management as a means to avoid disruptions, better serve patients, and thrive in in uncertain times.
The need for and benefits of effective supplier risk management
Top firms use supplier risk management to evaluate their relationships with key suppliers. They carry out supplier risk management to assess and manage the risk posed by third parties in order to reduce vulnerability and ensure the continuity of the supply chains.
When done right, supplier risk management enables companies to evaluate and address the potential impact of supplier delays and failures more quickly and effectively. It helps organizations make smarter decisions about their supply chains, improve operational resilience and cost efficiency, and drive compliance with applicable regulations. It helps them protect their brand reputation and build a more robust and agile supply chain.
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Activities involved in supplier risk management
Supplier risk management is carried out through the regular monitoring and mapping of suppliers. It typically revolves around the process of supplier auditing. On-site or desk audits are done on a periodic basis to identify and address risk in a timely manner and to ensure product and process quality across the supply chain.
An organization will use a qualification audit during the initial stages of their relationship with a supplier to analyze their capabilities, quality systems, and potential for risk, and then categorize, or qualify, each supplier as a low, medium, or high risk. A supplier that is categorized as "high risk" means that the service or product they provide has a critical impact on the quality and availability of the final product or service. Companies use for-cause audits to investigate specific issues as they arise. These could be a failure on the part of the supplier to meet product specifications, a delivery delay, or a customer complaint, for example.
Digitizing supplier risk management
Forward-thinking firms are now using supplier management software and other digital tools to carry out supplier risk management more easily and effectively. They are adopting new technologies such as digital supply networks and multienterprise work management applications to facilitate information sharing between them and their supply partners, streamline core business processes and document management activities, improve supply chain visibility, and foster collaboration.
They are using digital technology to eliminate time-consuming manual processes, enhance transparency across multiple systems and stakeholders, and simplify supplier risk management and supply chain quality management. They are leveraging innovative and powerful tools to transform how data is shared across trading partners and obtain the information and insights they need to identify potential disruptions early, resolve issues faster, and create responsive and resilient supply chains.
Supplier risk management in the pharmaceutical industry
The pharmaceutical industry is one in which mitigating risk and maintaining quality across the supply chain is both challenging and vital. Pharmaceutical companies are increasingly relying on contract manufacturing organizations (CMOs), contract packaging organizations (CPOs), and other third parties to produce and deliver medications. They use supplier risk management to ensure the highest level of quality in their finished products—to prevent quality incidents that may not only hurt their brand reputation but may result in patient harm.
With TraceLink's digital supply network and supplier risk management tools, which are designed specifically for the needs of the pharmaceutical industry, drug manufacturers can better monitor and manage the third-party suppliers on which they depend. They can involve suppliers in the quality process, extending their pharmaceutical quality system across the supply chain.
Companies can leverage TraceLink's network of over 300,000 partners in the healthcare supply chain to enable seamless communication and constant information flows with their suppliers and customers. They can use TraceLink's suite of supplier management applications to manage partners as an extension of their own team and to streamline and expedite quality review, issue tracking, and change management.
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Supplier Risk Management FAQs
What is supplier risk management?
Supplier risk management is the process through which companies assess and manage the risks posed by suppliers to their business. It is used to identify and address vulnerabilities and ensure continuity of supply chains. It helps companies better gauge the potential impact of supplier delays, failures, and other issues that impact their business.
Why is supplier risk management important?
Supplier risk management is important because it helps organizations ensure corporate social responsibility and improve operational resilience. By properly assessing risk, organizations can avoid supply chain disruptions and help ensure business continuity. It also helps companies meet compliance requirements and safeguard brand reputations.
Why is supplier risk management so important in the pharmaceutical industry?
Supplier risk management is important to the pharmaceutical industry because pharmaceutical companies are increasingly relying on a complex and globally distributed network of suppliers. Effective supplier risk management is essential for safe delivery of medicines to patients who need them.