Wednesday 12 November 2014

Relationship of Buyers with Vendors Attenuate Purchasing Risks

Authored by Fahad Amjad

Buyers should encourage vendors to mitigate risks themselves by including a risk management element in the overall sourcing process. Managers could give themselves a basis for shortlisting vendors in a tendering process by incorporating a risk management  element requests for proposals (RFP), asking vendors how they would stop risks transpire and how they would reduce the impact if they did happen.

Risk management using your supplier to mitigate risk, by having a clear objective of what should be achieved and giving it an appropriate weighting in the selection criteria, it is easy to then turn this into one of the key areas of negotiation and selection. Roles and responsibilities can be agreed and penalties introduced if the risk is not managed accordingly. Most suppliers would welcome working more closely with buyers and involvement in developing a risk management program. Procurement is in a commanding position to work across the business, building security into operations and contracts and ensuring as much continuity as possible. In the present business scenarios, managing risks should not be an afterthought and suppliers should be included from the start.