It’s good to know your direct (or 1st tier) suppliers. It really is. Without that knowledge – organised and structured – you won’t be able to function properly. Nonetheless, you should aim for transparency of your supply chain up to at least the 2nd tier.

Why? So that you can react as soon as the risk materialises, rather than having to wait until it trickles down the supply chain – by which time it is already too late to react! Furthermore, as you go upstream, the compound likelihood of disruption grows because:

  • as the companies grow ever smaller, they lack the necessary resources, know-how and processes and to deal with supply chain risks – you need to actively develop them
  • as the number of suppliers grows, so does the chance a disruption will appear

Sophisticated evaluation schemes

Supplier evaluation typically begins with simple individual assessments of suppliers – one assessment per suppliers. As the companies’ Supplier Management organisations mature, they become ready for a more sophisticated constructs, where the assessments are performed on a more detailed level that encompass performance per supplier site, category and project.