Be proactive and automate your supply chain systems
According to the Association for Supply Chain Management (ASCM), big data and automation are the number one trend in their 2023 report for offering solutions to supply chain disruption.
Automated tools powered by artificial intelligence can solve many problems associated with supplier financial risk. For example, you can run a credit report on your international suppliers to quickly gather and assess the company’s financial performance and payment behaviors. The information that’s collected in these reports includes:
- County Court Judgements (CCJs)
- Director details and stakeholder names
- Credit scores (a rating of 100 reflects a financially robust and healthy business, while a zero (0) rating indicates a business in severe financial, legal and compliance trouble)
- Number of Days Beyond Terms (DBT) that invoices are paid
- The recommended amount of credit limit that should be extended to an organization
Adding to the point about collecting the right financial data, Leighton had this to say:
“Doing a thorough credit risk analysis is just as important as identifying suppliers and negotiating a good price. A supplier may be able to give you a good price but if they're about to file for bankruptcy next week, they might not be able to deliver on that price forever. And that could leave your business in financial turmoil as well as leave your customers’ orders unfilled. So, you could be left writing business plans based on the potential liquidity and solvency of a supplier that you haven't conducted any form of financial risk analysis on.”
Secondly, integrating different systems improves processes, reduces headaches and provides a full supply chain picture. Procurement software may be useful for onboarding new suppliers and maintaining inventories, but it doesn’t give any insight into credit risk data. When you integrate it with a platform that’s designed for checking this information, you’re better prepared to protect your cash flow.