What are the risks of supplier dependency in a supply chain?

One key way that a supply shortage can happen is from a Cyber Security incident. If you look at things like the Colonial Pipeline cyber incident, they had a stoppage of petroleum supply for a period of days and possibly weeks due to a cyber incident. Maersk had a similar issue when they were attacked and they had to slow or stop shipping for a period of time. A cyber incident can impact a variety of organizations in vastly different ways, but one consistent thread exists regardless. Most organizations rely on IT services in some capacity to deliver goods or services. Disruption of your supply chain from an IT oriented attack or incident is highly likely, and cannot be ignored in your vendor evaluations.

Always consider supplier diversification as a mitigant against supply shortage. This must be considered in negotiation as although you may be able to get a deal that is "too good to be true" from a sole supplier in reality it won't be (you can expect reductions in quality, over pricing of other products / services). By diversifying suppliers you can protect yourself from supply shortage and interruption and also provide yourself flexibility if the quality or costs from suppliers change negatively. Diversification may also be in approach or strategy to unlock use of other suppliers in the supply chain e.g. technology choices.

Here if we go with minimum and fix supplier we can settle them by setting a flat cost system by giving opportunities to existing supplier by a forecast orders and can set a base price with good percentage of discount which will be win win situation for both vendor and customer. As we are offering a continous volume of buisness which will turn a positive benifit to customer.

As it relates to pricing negotiations with suppliers, another area that is important is past performance. How can you measure if they have experienced any disruption of services? In many cases, unless it makes the news, it may not be possible. One key indicator that you can use is a Cyber Security posture look back. While you may not hear about disruptions in the supply chain as a top level news item, as a result of SEC and Federal guidelines, reporting is required for security incidents. At a minimum, if you have not investigated if a vendor has experienced a breach of any kind, you may miss these negotiating options. Being aware of past incidents gives you leverage with negotiating, and also gives you awareness of past incidents.

By diversifying suppliers you have choice to vote with your feet. Agree measures on performance and quality of the Products / Services and ensure that they are tangible and traceable back to the value that you or your stakeholders recognise. Agree pricing with your suppliers but be reasonable and encourage transparency. You won't want to be locked into a low cost contract with low skilled products / services. If there is a price increase and you have diversified then you can choose to move to another supplier if the price increase is unacceptable.

A key area of innovation is often technology solutions. If you could see into the vendor's technology stack, you could probably make a few judgements about their innovation investments, and use of more advanced or cutting edge technologies. That said, how can you know what technologies a vendor has in use? Using some OSINT oriented technologies (such as Bitsight, and full disclosure I work for Bitsight), you can see what is in their externally facing technology stack. This isn't going to be complete information, but it will give you an indication of what they have running behind the firewall. Knowing if they have a "long in the tooth" technology, versus something newer may shed insight into their innovation leanings.

Measuring a supplier by performance and value delivered is the best approach to dealing with this challenge. Do not start investing in educating and training your supplier, (that is not a motivation to use a supplier). Expect innovation to be proposed and promoted by your supplier. If they are not delivering in this area diversify your suppliers and favour those that do. Be careful not to chase bleeding edge innovation, innovation should be measurable in terms of speed to market, product/service quality or value delivered (not buzzwords or vapourware).

Diversify your suppliers. The relationship needs to be balanced with both parties acting fairly. Ensure your architecture strategy takes into account the risk of over concentration of suppliers (for both products and services). Over concentration can have significant impacts to all aspects of products and services reputation, security, quality, cost, reliability, etc.

Similar to the "Innovation Lag" response above, there are elements you may be able to see from outside. If a company is heavily dependent on a technology stack, such as Microsoft, Oracle, SAP, Salesforce, or in healthcare EPIC, you can identify some aspects of technology lock in. When you realize that real optimization comes from customization, this becomes much more relevant. SpaceX and Tesla both use their own in house built ERP tools, and do not rely on outside products, because it is too unique to their vertically integrated supply chain. Understanding what technologies are present can shed light on possible lock ins or direction if you have only begun your due diligence.

The often un-mentioned aspect of reputation damage has to do with public breaches. If a company holds a place of trust in say financial or insurance industries, and suffer a massive breach, they will have negative outcomes in time. It has been observed that cyber performance often indicates stock performance for public companies. Likewise, major brands that suffer breaches often have damages that go far beyond remediation or fines. Lost contracts, broken relationships, and other intangible outcomes often follow breach announcements. Knowing if your 3rd or 4th parties in a supply chain have suffered any kinds of incident is a key risk indicator. If you are unaware of these incidents, you may be blindsided if they are impacted later.

The risks of supplier dependency in a supply chain include: 1. Disruptions in supply 2. Limited bargaining power 3. Lack of innovation 4. Loss of supplier knowledge 5. Lack of flexibility and agility To mitigate these risks, companies should consider diversifying their supplier base, building strong relationships with multiple suppliers, regularly assessing and monitoring supplier performance, and establishing contingency plans for potential disruptions.

Supplier dependency in a supply chain refers to the extent to which a business relies on a specific supplier or a small group of suppliers for its inputs or products. Here's my perspective on the risks of supplier dependency in a supply chain: *Supply Disruptions *Price Volatility *Quality Issues *Lack of Innovation *Intellectual Property Concerns *Regulatory Compliance *Ethical and Sustainability Concerns, and most important *Lack of Leverage in Negotiations To mitigate these risks, businesses often employ strategies such as diversifying their supplier base developing strategic partnerships with key suppliers, investing in supplier relationship management, and continuously monitoring and evaluating supplier performance.