The problem with most supplier risk assessments is that—due to time and personnel constraints—they are often limited in scope and effectiveness, with the highest-volume direct suppliers prioritized. This approach leaves companies blind to major risks in their supply chains, given that roughly 80% of supply chain disruptions originate at lower-tier suppliers. So, hidden weaknesses persist, ultimately leading to costly disruptions.
Consider this: Supply chain experts at McKinsey & Co. have calculated that large companies typically lose the equivalent of two quarters of profit every decade from supply chain disruptions—and that a 100-day supply disruption (which is not uncommon) can easily destroy 30% to 50% of one year’s EBITDA. When you think about it like this, having visibility into your supplier network, beyond tier one suppliers, and knowing any potential associated risks, is essential to business continuity.
Typically, the task of assessing supplier risk is dispersed throughout an organization: One team looks at suppliers’ corporate social responsibility (CSR) and sustainability performance, while others measure product quality data, fire safety, and…
