- Client challenge
- Benefits to client
- KPMG insights
Following multiple acquisitions, our client’s third-party network had quickly grown to include over 2,000 suppliers. This rapidly expanding, increasingly complex, supplier network resulted in our client lacking visibility into the potential risks associated with each supplier. Lacking insight and unable to effectively anticipate, identify, or monitor struggling suppliers within their network, our client could only make anecdotal decisions.
This led to our client diversifying suppliers in areas they perceived to be high risk, while maintaining just-in-time (JIT) supply chains in areas assumed to be dependable. These data-absent decisions resulted in our client becoming inefficient in overdiversified areas and exposed to massive supply chain disruption in JIT areas.
There was significant risk of downtime caused by critical suppliers going bankrupt and geopolitical disasters preventing the delivery of committed supplies. Downtime for our client could have resulted in a potentially significant impact on their business, including missed sales opportunities, failing to deliver on their own commitments, and losing long-term market share.
Benefits to client
Anticipating risk: VRM provides advanced warning of disruption, allowing proactive changes to be made ahead of disruption. By switching out suppliers with poor vulnerability scores, our client was able to avoid short-term downtime costs and the potentially significant impact of long-term market share erosion.
Efficiency: Our client’s newly acquired insight allowed them to reassess their just-in-case suppliers, consolidating their sourcing pool in one area from 20 to 4 suppliers, resulting in reduced management complexities and diversification costs, while gaining significant purchasing power from their consolidated suppliers.
Confident decisions: Our client was able to move away from anecdotal decision-making to data-driven supply chain decisions, thereby continuing to reduce risks and allowing our client to confidently grow their business.
Ongoing support: KPMG stands by our client, providing ongoing support, as additional clarity to further contextualize supplier vulnerability data is needed. KPMG is committed to the continued success of our client.
Following an evaluation of our client’s processes, KPMG implemented Viability Risk Monitoring (VRM). This solution provided real-time measurement of the risk that each supplier posed to our client, proactively alerting our client to potential financial and geopolitical issues. As part of mobilization, we assisted our client in the selection of critical key performance indicators and scorecards to customize relevant and actionable vulnerability scores, allowing the client to objectively assess each supplier.
During an initial evaluation, the KPMG restructuring team swiftly discovered a supplier nearing bankruptcy. Armed with this data-driven insight, our client was able to assess the situation and move their business to an alternative, healthy supplier.
To help ensure timely and consistent supplier information, our VRM team provides ongoing support in continuously updating each supplier’s financial data.
Unknown risks can lead to a significant negative impact
Your third-party network is integral to the efficient and profitable running of your organization; however, managing a growing global network of third-party engagements can be a challenge. As organizations evolve, and their supplier networks become more complex, it becomes increasingly difficult to keep track of third parties’ operationalhealth. Any financial difficulties or violations by one of your strategic partners could have devastating consequences for your business.
Insights that drive action
In conjunction with KPMG professionals, KPMG can provide a solution that is continuously listening, alerting you to potential future pitfalls. Companies that make use of risk intelligence capabilities position themselves to not only avoid risk, but also take advantage of opportunities as they arise. The right tools and solutions can improve implementation, visibility, and aid mitigation strategies, delivering a measurable impact to your bottom line.
Key outcomes for this client
- mitigated risk
- improved efficiency
- reduced costs
- increased profits