Owen West, MD - APAC

The supply chain increases risk to every organization. That risk can include failure to perform adequately, but can also include reputational risk from bad behaviours with respect to safety, the environment, sustainability and employment conditions.

The supply chain is regularly thought of only in terms of the flow of raw materials or goods that support a businesses’ end product. However, a more comprehensive and practical definition should include all the third-party service providers and contractors that assist an organization in its operations. This definition would include, maintenance, repair and operations contractors. Maintenance workers who fix broken equipment, subcontractors that oversee a facility, and the trucking company that transports materials between facilities are all part of the supply chain that could put your business at risk. How effectively contractors do – or don’t – observe safety protocols and contractual requirements may impact your company’s stakeholder value, brand reputation, compliance, and business continuity.

Globalization has led to a veritable explosion in the number of contractors that both multinational and domestic companies are working with. There are strong economic drivers for businesses that operate in other countries to hire local service providers and workers, but there is also solid domestic demand for contracted suppliers, as firms seek to partner with third parties for specific projects or needs. Many businesses have started to embrace the lean management model, choosing to call in a specialist or repair company as needed rather than have a full-time employee on the payroll, regardless of whether there is work for him or her to do. In sourcing these vendors, procurement managers need to consider the potential risks of hiring contractors. Factors such as the safety practices of a third-party service provider and the risks of relying solely on a single contractor should also be considered.

Global contractor prequalification leader BROWZ (www.browz.com/au), is helping organizations to address these risks. Because procurement managers are not only working to reduce costs in the service and materials supply chains, they must also be proactive and responsible for how their contractors comply with corporate social responsibility and safety standards.