Break down silos between sourcing, procurement & supply chain to manage supplier risks effectively and prevent costly disruptions in FMCG manufacturing.

Romain Fayolle

Supplier risk management is often overlooked in businesses due to high bias for action and internal silos between key teams. Depending on the function, strategic sourcing, procurement, and supply chain functions often focus on different priorities -- from contract negotiations and cost reduction to purchase orders and production targets. Critical information about suppliers’ performance is often missed to be shared cross-functionally while running around for daily priorities, especially given the complexity and interconnectedness of global supply chains.

If missed, early warning signs, such as a supplier’s financial problems or increased material requirements, can lead to vulnerabilities that surface only when it is too late. Misalignment can create issues, from sudden shortages to inventory overruns and long production delays, that directly affect manufacturers' ability to keep products on shelves.

Consider a scenario. One global consumer packaged goods company launched a new product without aligning its sourcing, only to find that it used a key ingredient that wasn’t easily available from the existing suppliers. The result was an unforeseen shortage of that raw material across the business as strategic sourcing panic to find the supplier for the key ingredient. There were no contingencies because strategic sourcing/procurement had not alerted supply chain planners to the anticipated gap. Production schedules fell, and hot items went out of stock -- resulting in reputational risks and lost sales.

This example shows that supplier risks become real supply chain disruptions when sourcing, procurement, and logistics operations do not work together. It lays the foundations for why these silos must be removed.

Developing a Supplier Risk Management Strategy

Supplier risk management involves identifying, assessing, mitigating, and monitoring risks associated with an organization’s third-party providers and supply chain. A supplier risk management strategy should include a comprehensive risk assessment, risk mitigation plans, and continuous monitoring and review.

A comprehensive assessment helps a business’s relationship with a supplier start on a stronger foot. The best way to manage supplier risk is to complete an analysis, monitor levels of risks continuously, and have mitigation plans in place. Working with supply chain management solution providers like Holocene helps improve supplier risk management reporting and ensures businesses have access to digital tools to monitor (and manage) supply chain risks in real-time.

The following discussion will explore how companies can foster collaboration between strategic sourcing, procurement, and supply chain teams to anticipate supplier issues and mitigate risks before they negatively impact operations.

First, let’s understand what each function can do to manage the supplier risks from their end:

Strategic Sourcing: Selecting the Right Suppliers

Strategic sourcing involves evaluating, developing, and managing supplier risk. It emphasizes the importance of identifying, assessing, and mitigating risks related to third-party providers and the supply chain. This team is critical in identifying supplier providers that can provide quality, competitive rates, and business continuity during disruptions.

Supplier risk refers to the potential adverse impacts that can result from a business's reliance on suppliers or third parties for goods and services. These risks can disrupt various aspects of a company's operations, making supplier risk management a critical focus for procurement departments to maintain financial performance and regulatory compliance.

Procurement: Managing Supplier Relationships and Performance

Procurement teams ensure that contracts, purchase agreements, and provider commitments conform to strategic sourcing goals. They control cost efficiency while tracking supplier efficiency, compliance, and delivery indicators.

Mitigating risks through proactive procurement strategies is crucial for enhancing supplier performance and bolstering organizational resilience.

Supply Chain Management: Ensuring Seamless Execution

Once suppliers are brought on board, supply chain teams manage the material flow to ensure timely arrival and identify and manage supply chain risk for seamless execution. They monitor inventory levels, logistics performance, and demand trends to optimize procurement strategies as needed.

Why Cross-Team Alignment is Critical

When sourcing, procurement, and supply chain teams do not work together seamlessly, supplier risk management weakens. Without collaboration:

Sourcing may select a low-cost supplier without input from procurement on financial health or supply chain teams on logistics feasibility.
Procurement may fail to communicate supplier risks to supply chain teams, leading to unexpected stockouts.
Supply chain teams may react to disruptions too late because they were unaware of supplier issues flagged by sourcing.

By aligning these functions and fostering real-time information exchange, businesses can proactively mitigate supplier risks instead of reacting to them.

The Impact of Information Silos on Supply Chain Operations

Information silos are problems that grow with the company, with blindspots arising both internally and externally as business operations widen. For removing internal silos, strategic sourcing, procurement, and supply chain teams must work together to ensure that highly effective supplier risk management is not just a function. Though these teams have distinct duties, they must collaborate to identify and minimize supplier risks early on.

Information silos can also be external to the company and can lead to unclear information and plans for the suppliers. This can lead to gaps in the supply of critical RM and PMs. Integrating external risk data with internal data is crucial for better supplier risk management, as it allows organizations to identify trends, forecast future risks, and gain a comprehensive understanding of both internal and external risks.

Internal Silos: Sourcing, Procurement, and Supply Chain Operating in Isolation

Each function collects its own supplier data but often fails to share insights with other teams. For example:

Sourcing might identify potential risks in a new supplier but not communicate them to procurement.
Procurement might track a supplier’s performance issues but not relay this information to supply chain teams.
Supply chain teams might face logistics disruptions but not loop in procurement to address supplier commitments.

These gaps delay decision-making and prevent early intervention, turning minor supplier issues into major disruptions.

External Silos: Limited Visibility Between Buyers and Suppliers

Many companies still rely on manual supplier management processes, scattered emails, and outdated reporting. When suppliers lack visibility into a company’s demand forecasts, compliance expectations, or performance metrics, they struggle to meet expectations, leading to:

Late deliveries due to a lack of demand visibility.
Quality issues because suppliers aren’t aware of evolving standards.
Inconsistent compliance due to poor alignment on regulatory requirements.

By integrating supplier data and fostering transparency, businesses can ensure faster issue resolution and better supplier collaboration.

5-Steps To Remove Information Silos for Better Supplier Risk Management

*Why Breaking Down Information Silos Is Key to Supplier Risk Management*

To manage supplier risks, companies must focus on transparency and data-sharing across sourcing, procurement, and supply chain teams while increasing visibility for suppliers. Here are five simple steps of how to do this seamlessly:

1. Centralize Supplier Data on a Unified Platform

A single source of truth for supplier data allows all teams to access real-time insights. Implementing Supplier Relationship Management (SRM) or Integrated Supply Chain Platforms can help:

Track supplier performance metrics across departments.
Monitor compliance requirements in real time.
Enable automated supplier risk assessments for faster decision-making.
Integrate external risk data with internal data to enhance supplier risk management, allowing organizations to identify trends, forecast future risks, and gain a comprehensive understanding of both internal and external risks.

Cloud-based solutions ensure all teams work from the same updated data, reducing inconsistencies.

2. Enable Cross-Functional Collaboration

Breaking silos requires active collaboration between sourcing, procurement, quality, and supply chain teams. Best practices include:

Joint supplier risk assessments to align on selection criteria and risk tolerance.
Regular cross-team meetings to review supplier performance and emerging risks.
Integrated dashboards that give all stakeholders real-time visibility into supplier data.

3. Enhance Supplier Visibility and Communication

Supplier risk management isn’t just about internal teams — it’s also about ensuring suppliers have visibility into expectations. This can be done through:

Performance reports, forecasts, and compliance guidelines are available through supplier portals where suppliers can access their performance reports and forecasts.
Issue tracking in real time enables suppliers to flag risks before they escalate.
Automated notifications of delays, compliance issues, or quality failures.

A transparent process eliminates miscommunication and increases the responsiveness of suppliers.

4. Leverage AI and Predictive Analytics for Risk Mitigation

AI-powered supplier risk management tools can analyze patterns, predict potential disruptions, and provide proactive recommendations. These systems help:

Identify financially unstable suppliers before contracts are signed.
Predict late deliveries based on historical data.
Detects compliance violations through real-time data monitoring.

5. Integrate Procurement, ERP, and Logistics Systems

To eliminate silos between procurement, sourcing, and supply chain teams, businesses should connect their ERP, procurement, and logistics platforms. This integration allows:

Procurement teams to see real-time supplier performance data when making purchasing decisions.
Supply chain teams react faster to demand fluctuations by adjusting supplier orders accordingly.
Sourcing teams to align supplier selection with operational feasibility and risk metrics.

The Future of Supplier Risk Management: Focus on Collaboration and Data-Driven Decision-Making

Businesses can not function in silos because global supply chains have become far more connected and volatile. This is a very difficult combination to manage. Supplier risk management must involve strategic sourcing, procurement, quality, and supply chain teams, with actionable details available to all stakeholders through modern-day, data-driven solutions.

To successfully manage both external and internal information silos, companies will need to:

Improve supplier discovery and expand the base to get better options and mitigate risks before signing contracts.
Improve procurement’s agility for intelligent buying and catching the risk early. Procurement will act as the whistleblower of any gaps that they see with the supplier operations.
Invest in building supply chain resilience with real-time supplier insights. This is possible with tech solutions focused on supplier quality and risk management.
Foster transparency and build trust with vendor partners for longer-term relations.

How Holocene Can Help

Holocene helps companies identify and clinically dissect any information silos. We help to build unified supplier risk management systems that can catch the signals early and help manage them in a timely manner. We link sourcing, procurement, quality, and supply chain information to deliver visibility, predictive analytics, and automated processes that boost effectiveness in minimizing risk.

Get a free demo today on how to strengthen sourcing and procurement and promote chain cooperation while enhancing vendor transparency. Let us develop a data-driven, dependable supply chain together.

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