How to reduce supplier risk?

What is supplier risk?

The best way to start, before discussing how to reduce supplier risk, is to explain what this concept really means.

Generally, supplier risk refers to the degree of likelihood that a supplier will not honour the agreements that have been reached with it. Among the possible mishaps that trigger this problem are delays in the delivery of goods, the breach of one or more clauses of an existing contract, or failure to provide the requested services.

With this in mind, you can imagine that reducing supplier risk should be a priority for your SME. Unreliable suppliers can have serious consequences. Depending on your company's business model, it can damage your brand reputation and can cause your customers to identify your company itself a risky supplier.

Identifying the most frequent failures to reduce supplier risk

Now that you are clear on what it is and why we need to reduce supplier risk, it is time to find out what the most common problems causing it are:

• Failure to meet delivery or quality deadlines. This has a direct impact on your company's production and delivery of goods and services, with significant collateral damage: customer relations.
• Unilateral changes in prices and terms. The consequences of this problem are conflicts and loss of profitability. Moreover, this could reveal that a supplier is unreliable.
• Dependence on a single supplier. In this case, it is a mistake on the part of the company. Being in the hands of a single supplier for most supplies raises the risk of interruptions in the manufacture of products or the provision of services.
• Financial or capacity problems. When the supplier does not have the means to meet the demands of your SME or its viability is not assured, it becomes a dangerous partner.
• Failures in communication and collaboration. The absence of a fluid relationship and the lack of an effective collaboration tool causes disadvantages in the medium and long term.
• Fraud by the supplier. This point should not be underestimated. Imagine that one of your suppliers commits fraud, falsifying documents or charging for goods or services that are not delivered. The financial effects on your SME can be significant.

SAP Business One, the ERP that helps you reduce supplier risk

To a greater or lesser extent, all SMEs need suppliers. In that case, what tools allow these relationships to be managed efficiently? The ERP system offered by SAP Business One with its numerous functionalities is the solution you are looking for.

Let's take a look at some of the aspects of supplier management where this powerful tool excels.

Automation and agile order creation

SAP Business One allows you to automate purchasing processes to streamline the ordering and receipt of goods and services. The platform also facilitates the quick and easy creation of supplier requests, which is essential to improve productivity and save time.

Real-time reporting and tracking

Real-time order status tracking allows you to keep up to date on the progress of your purchases. In addition, all data entered into the application are processed to provide detailed reports. This allows for more accurate and faster decision-making and better evaluation of existing suppliers.

Examination prior to contracting

The platform also allows for a pre-procurement assessment of suppliers, which helps SMEs to select the best suppliers.

Integration with other departments

An ERP is much more than supplier management software. In reality, we are talking about a comprehensive tool that allows you to manage all aspects of the SME from one place.

That's why SAP Business One is the preferred choice of hundreds of companies to integrate accounting, marketing, sales and production with purchasing. It establishes efficient communication channels, both with suppliers and between the different departments of the company.

Contracts without mishaps

Another area where a top-tier ERP like SAP Business One comes into its own is in the creation of seamless contracts. Its tools make it possible to set out all the points clearly in order to avoid ambiguities that lead to various interpretations of the same agreement.

Diversification of supply sources

Thanks to SAP Business One's supplier management, it is easier to diversify sources of supply, avoiding serious consequences.

Reducing supplier risk with SAP Business One and SEIDOR

Everything we have discussed in this article highlights the imperative to reduce supplier risk in your SME. First, we have explained exactly what this concept means. But we have also helped you identify the most common problems that increase risk and which software tools allow you to minimise it.

It is clear that only top-tier software tools such as SAP Business One will help your SME manage supplier relationships with surgical precision. But how do you implement such a powerful platform in your business?

Your only concern in this regard is to find a reliable partner to take care of everything. At SEIDOR we have been working for decades shoulder to shoulder with small and medium-sized companies in all sectors to improve their profitability and competitiveness. Contact us now, get advice from the leading team of specialists, and start reducing supplier risk. Take your SME to the next level!