Operations & Systems
Your reliability depends on theirs
A supplier who delivers late, changes quality or goes out of business becomes your problem the same day. Most owners notice supplier trouble only when stock runs out. This session is about noticing it earlier, deciding how much backup is worth paying for, and keeping the relationships healthy on both sides.
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You do not feel supplier risk until it stops the work.
A business can run for years on one good supplier and never think about it. Then the supplier raises prices sharply, changes the specification, has a fire, loses a licence, or simply stops answering the phone. The stock lasts two weeks. The search for a replacement takes two months.
Supplier risk is different from the question of how dependent you are on one supplier, though they are related. It asks: how likely is each supplier to let us down, how would we know early, and what will we do? That is a monitoring and preparation question.
The aim is not to distrust suppliers, but to be a customer that is hard to surprise.
What the session works through
36 topics across 7 areas. Seven parts of managing the risk in what you buy.
Which Suppliers Matter Most?Start with a ranked list.5
- Which inputs would stop production or sales if they disappeared
- How long you could carry on from stock
- How easy or hard each input is to replace
- How much you spend with each supplier
- Which suppliers are in the same area or depend on the same route
Mark each supplier as critical, important or easily replaced. Spend most attention on the critical ones.
Early-Warning SignsSuppliers usually show strain before they fail.6
Keep a simple record for each critical supplier: promised date, actual date, quality issues. A month of notes often shows a trend that memory misses.
- Deliveries becoming late or partial
- Quality drifting, or returns rising
- Prices changing without explanation
- Sudden demands for advance payment
- Staff leaving, a change of owner or reduced working hours
- Reluctance to commit to dates or quantities
Backup SuppliersFind one before you need one.5
- A named alternative for each critical input
- A small trial order so the backup is tested and known
- What changing would cost: price, specification, set-up, delay
- Whether a second supplier could take a regular share of orders
- Whether the input can be substituted in an emergency, and how
Safety Stock and Lead TimeBuffer costs money. Stock-outs cost money.5
- Realistic lead times, from order to arrival, including the bad weeks
- How many days of cover you hold for each critical item
- Which items are worth extra stock and which are not
- The cost of holding: money tied up, space, spoilage, obsolescence
- Reviewing the level when the supplier's reliability changes
For illustration only, with made-up numbers: if a critical item usually takes ten days to arrive but has taken twenty twice this year, a buffer for twenty days of use may be worth its cost.
Terms, Records and CommunicationClear terms make problems easier to resolve.5
- Prices, specifications, delivery times and payment terms in writing
- What happens when something is late or defective
- Contacts at more than one level of the supplier
- Regular, short conversations about forecasts and problems
- A delivery and quality record for each key supplier
Paying Suppliers, and the Rules That ApplyLate payment can create supplier risk of its own.5
- Paying on the agreed day, and telling the supplier early if you cannot
- That a supplier squeezed on cash may cut corners or cut you off
- Knowing which of your suppliers may be small enterprises
- Understanding that the law sets time limits for paying registered micro and small suppliers
- Asking your accountant what applies to your payments
Under the MSMED Act, 2006, payment to a registered micro or small enterprise supplier is due by the agreed date, which cannot be more than 45 days from acceptance of the goods or services, and delayed payment attracts compound interest, as set out on the government's MSME Samadhaan portal. Rules change, so check the current position and take your accountant's advice.
When a Supplier Fails AnywayA short plan for the first week.5
- Confirm what is on order, in transit and in stock
- Contact the backup supplier the same day
- Tell affected customers early, with a realistic date
- Prioritise the orders that matter most
- Afterwards, write down what you learned and update the list
Bring to the session
- A list of your suppliers with what you buy and roughly how much
- Your last twelve months of late or poor deliveries
- Your current stock levels for key items
- Any written terms with your main suppliers
- The name of one possible backup for a critical input
What the session does not do
- Rate or name any actual supplier
- Give legal advice on contracts or on payment rules
- Recommend where to buy anything
- Promise that a backup will prevent every disruption
How the session runs
A practitioner demonstrates the ranking and early-warning record using a made-up supplier list. Participants then rank their own suppliers, choose the three most critical and write a warning-signs list for each. They name a possible backup for one of them and agree a first small step, such as a trial order or a call, to take in the coming week.
What your students leave with
- A list of your suppliers ranked by how badly you would be hurt if each failed
- Early-warning signs to watch for in your most important suppliers
- A named backup, or a plan to find one, for each critical input
- A sensible level of safety stock, set against its cost
- Written terms and a delivery record for your key suppliers
- A look at how your own payment habits affect your supplier's health
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
Be the customer a supplier failure cannot surprise.
Tell us who your students are and what stage they are at. Sessions are free for participants.