Which suppliers are most critical to your supply chain?

[Randy Littleson]

I came across this at Supply Chain Management Review entitled “Reducing supply chain risk - a data driven approach” today. The article does an excellent job describing the need to assess your suppliers from various standpoints; financial data, operational data and on-the-ground intelligence. The point is made that each of these data sources have strengths and weaknesses. For overseas suppliers, this data is either unavailable, unreliable or extremely expensive to acquire. The article points out that the first step in any supply chain assessment is to determine where you are vulnerable.


Unfortunately, the article doesn’t explain how to determine which suppliers are most critical to your supply chain.


I’d like to fill that gap. You need to look at each supplier, determine which parts they supply, determine which end items those parts go into, then look at the projected revenue that you plan to receive from the sale of those end items. This is the potential loss you can expect should this supplier go out of business. Some suppliers will naturally float to the top as being critical to future revenues. Those are the suppliers that you need to focus on. You can do a similar risk assessment by component part to identify critical components that are single sourced.


Once you’ve created this list of critical suppliers, then it’s time to gather all the financial, operations performance and on-the-ground data for those suppliers. As the article points out, you need to maintain and monitor this information on a regular basis.


This is a tough time for all of us. Don’t let a failed supplier add to today’s already significant challenges.


John Westerveld is a Product Manager for Kinaxis, provider of the on-demand RapidResponse service that empowers multi-enterprise manufacturers with collaborative and integrated demand-supply planning, monitoring, and response capabilities.

[Riletom]

Spot on assesment, I would also factor in ease and cost of replacement...if any supplier is that critical to your business there should be a back up or contingency plan in place in case of "Supply Chain Failure" with that supplier.