Most organizations deal with multiple external suppliers to support their business. One way to minimize supply chain disruptions is to learn whether your key suppliers have business continuity and disaster recovery (BC/DR) plans. More importantly, you’ll need to know how your supplier views the importance of BC/DR plans, how they manage their own plans, as well as how frequently those plans are updated and tested by the supplier.
Download this detailed supply chain management checklist, which can help you ask the right questions to assess and audit key supplier BC/DR plans and associated programs. This makes it easier to determine if your key suppliers are committed to BC/DR activities, as well as documenting and regularly testing those plans.
Evaluating supplier BC/DR plans
If a prospective or existing supplier is likely to become a key resource to your organization (e.g., suppliers of raw materials or shipping companies), be sure that the vendor has the resources and operational capabilities to stay in business even with the potential for a disruption. In both cases, examine each vendor’s BC/DR program and associated plans. The absence of such programs may not be deal-breakers, but if any of your suppliers are critical to your organization’s supply chain, their BC/DR plans could be the difference between the success and failure of your business.
You can perform the assessment yourself or use your internal audit department. The questions are designed primarily to elicit a yes or no response to minimize the amount of time needed to conduct the audit/assessment help pinpoint areas where you’ll need to dig deeper.
If at all possible, review the vendor’s BC/DR plans instead of simply taking the vendor’s word. Remember that a vendor’s refusal to let you examine the entire plan may be tied to a company security policy and should not necessarily be cause for concern. In that case, ask the vendor to provide excerpted sections from the plan, such as the table of contents and sample pages from the document.
Also be sure to assess the following when evaluating suppliers:
- Check on the financial status of the supplier, e.g., Dun & Bradstreet reports.
- Check on the supplier’s reputation in the community, e.g., Better Business Bureau reports.
- Contact existing customers for references.
- Learn if the supplier’s business has been growing, declining or staying relatively stable.
- Review legal documents carefully, especially contracts, warranties, maintenance agreements and service level agreements.
- Determine if the supplier has faced any legal issues, such as customer complaints, regulatory violations or litigation for poor performance.
- Examine where the supplier’s offices, including warehouses, manufacturing facilities, and specialized facilities such as where fuel storage tanks are located.
- Compare supplier pricing and discounting options with other suppliers.
- Can you negotiate prices with the supplier?
- Ask the supplier’s vendors for their opinions about the firm.
Use the supply chain management checklist to protect your organization from vendors who may not be able to maintain normal operations in the aftermath of a disruptive incident. Remember that any disruption to your supply chain can affect your organization and possibly other firms that are also in your supply chain.