Supply Excellence — Credit Risk: Only Half the Story

Credit Risk: Only Half the Story

December 16th, 2008 · by Ken Miklos · No Comments · automotive sector, best practices, contract management, financial value chain, spend analysis, supplier management, supply management, supply market dynamics, supply risk

In speaking regularly with companies interested in improving their spend and supplier visibility, it is not surprising that there has been a marked up tick recently, given the ever-deteriorating economy, in the interest in supplier credit rating information. While credit ratings are useful providing meaningful directional information about which suppliers may be susceptible to failure, this information tells only half the story.

In building your spend management strategies to combat the ongoing recession, it is important to assess not only which of your suppliers may fail, but also your organization’s vulnerability to a particular supplier going out of business. To do so, you’ll need holistic visibility into your spend, your supply base, and market dynamics which will allow you to determine:

Categories where you have a large percentage of spend with a single supplier or small group of suppliers which may call for more supply diversity adding a side benefit of increased competition.
Suppliers who are underperforming against timelines and/or specifications.
Categories where market dynamics call for increased attention. Auto suppliers come to mind as an obvious example.
Maverick spend with non-approved suppliers.

The Aberdeen Group recently published an overview report on the potential benefits of spend analysis programs in a down economy. Download a complimentary copy of the report here.

Ken Miklos is a Senior Product Marketing Manager for Ariba’s Visibility and Contracts solutions.

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