With increased global sourcing risks such as ethical and compliance risks, it has become very important for organizations to continuously monitor global sourcing risks in their supply chain. We assist our clients in continuously monitoring global sourcing risks and in identifying sourcing issues as soon as they appear.
For instance, the Rana Plaza disaster that occurred on April, 24, 2013 in Bangladesh and that killed more than 1,000 workers has focused global attention on the unsafe conditions in overseas apparel manufacturing (Yardley, 2013).
Moreover, children as young as 5 years old are hired by firms in developing countries for their overseas manufacturing (Two Birds Apparel, 2013).
Global sourcing risks could severally impact not only operational and financial performance of firms but also their brand image. Therefore, it is very important for firms to invest appropriate resources in risk management.
Risk management typically considers investment in risk avoidance which entails creating capabilities within the organization and with supply chain partners to minimize the impact from predictable disruptive events. Through collaboration with supply chain partners and by collecting available data, companies can identify and assess likelihood and impacts of global sourcing risks present at each node and link of their upstream supply chain and accordingly prioritize investment in managing these risks.
We provide services in developing global sourcing risk management dashboards to assist global sourcing managers in prioritizing investments in risk management. Specifically, we assist our clients in identifying critical suppliers and in mapping global sourcing risk at country level to prioritize investment in global sourcing risk management by using following step by step procedure:
Step 1: Identifying critical suppliers by assessing criticality of supplier
Table below provides template to identify critical suppliers by showing the number of product categories related to individual suppliers.
Supplier criticality can be determined using following criterion:
Step 2: Assessing country sourcing risk for upstream supply sources
Sourcing risk from supplier’s country due to such risks as ethical, regulatory compliance and global compliance can be determined using following criterion:
Step 3: Prioritizing investment in global sourcing risk management
Finally, firms can prioritize investment in risk management by considering criticality of suppliers and country sourcing risk simultaneously.
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