Question

Carefully checking suppliers’ references is one form of risk management. What risks does reference checking protect against?

Answer 1

Risk management is the process of assessing the risk and to take corrective step to mitigate the possible risk from various factors.

Risk management is required at each stage of the production, so as at each step of Material procurement and other parts of supply chain management.

Checking suppliers reference refers to assessing a supplier on the basis of various factors like ability to deliver quality product, ability to deliver goods on time with minimum lead time and ability to deliver quality goods at most reasonable price.

By selecting the supplier after checking these factors can help the management in mitigating various risks of Supply chain management

For example if your supplier can supply goods in very small lead time, it help the management to apply Just in Time (JIT) purchases because if you can rely upon your supplier for small lead time for the quality product only then you can take risk.

So, by assessing supplier reference in respect of his punctuality regarding delivery and quality maintenance can help the Management to think about other parts of production and leaving the risks of SCM on such a suppliers