Not having a proper Supplier Risk Management can cost organizations between $43 million and $47 million every year. If businesses fail to consistently assess their supply chain, they’re at risk of losing money. Risks don’t come with warning labels. They often creep in unexpectedly through rising costs, sudden regulatory shifts, or a disruption from a remote supplier in the network that the company may have never dealt with directly but still relies on.
The definition of resilience and agility has shifted in recent years: quick reactions alone are no longer enough. Today, companies require smarter and proactive supplier risk management to streamline operations. The effort starts with building stronger systems, with solutions that give greater visibility, flexibility, and control before costly issues arise.
Supplier Risk Management: Table of Contents
Looking Back to Move Forward
The COVID-19 pandemic exposed deep vulnerabilities in global supply chains. Shutdowns in manufacturing powerhouses like China and Southeast Asia halted production. Thus, highlighting the danger of relying too heavily on a single region.
The effects were felt across industries. From automotive to electronics, companies that depended on one region for critical components faced bottlenecks that they could not easily work around.
But the challenge hasn’t been merely geographic. Many organizations discovered they had little to no visibility into their extended supplier networks. Without a consolidated, centralized, up-to-date supplier master, many companies couldn’t make informed decisions on how to handle disruptions across their supply chain. Inaccurate and siloed data delays responses to critical supply chain disruptions. In fact, this leads to shortages of essential materials at manufacturing sites, resulting in lost revenue and dissatisfied customers. It is estimated that employees lose 30% of their weekly work hours chasing data.
The Importance of Supply Chain Visibility in Times of Crisis
In a typical environment, these time-consuming steps can result sourcing, production scheduling, and supplier onboarding delays. In a pandemic-riddled one, they escalate into critical bottlenecks that can cripple a business. This includes slow crisis response, increased material shortages, and costly yet unreliable last-minute fixes.
This is not just a pandemic-era story. Today’s supply chains continue to face pressure from rising tariffs, persistent trade tensions, ongoing war, and tougher ESG and compliance expectations. Supply chains will always face new forms of disruption. Indeed, lessons from the pandemic should be used as a foundation for building systems that are capable of handling what’s next. The following sections explore supply chain strategies shaped by these learnings, but adapted to meet the challenges of today and tomorrow.
How Supplier Diversification Strengthens Organizations
A diverse supplier base, both in geography and the number of suppliers providing good service, is one of the best insurance policies. Diversification spreads risk, but also creates options. If a primary supplier can’t deliver, another can step in. This principle applies across the board, whether sourcing raw materials, components, or finished goods.
For instance, when Kellogg’s packaging supplier in Korea experienced a product shortage due to pandemic-related shipping delays, the breakfast foods giant turned to a substitute in New Zealand. Because the company’s manufacturing facilities are based in Australia, the shorter shipping distance helped offset the higher costs of the new supplier’s materials and production processes.
That was a good example of regionalization. A strategy that enables companies to shift production between suppliers in different regions based on economic and logistical factors. Indeed, it is a strategy that remains valuable to this day, and its adoption appears to be rising.
Research
Three years after the pandemic, McKinsey found that the share of supply chain leaders actively regionalizing their supply chains increased from 44% to 64% over the previous year.
While this doesn’t mean global trade is disappearing, it does mean companies need to find the right balance between nearshore suppliers and international sourcing relationships. A good mix of partners can help businesses bypass high-tariff zones and avoid regional disruptions in politically or environmentally volatile areas.
Supplier diversification also leads to innovation. Engaging multiple vendors exposes organizations to new tools, processes, and performance models. Some may offer faster turnaround, others higher quality or more sustainable practices. Thus, the variety fuels better outcomes and allows companies to explore ways to improve their goods and services.
How Better Supplier Master Data Management Can Support Supplier Diversification
During the pandemic, 65% of surveyed supply chain leaders believed that increased visibility should be their top priority for the next three years. But that is easier said than done, especially when a supplier network is expanding rapidly.
As mentioned earlier, risks are not always clear. The broader a company’s supply base, the deeper its insights need to be. In fact, research done by software consultancy group Sphera found the knowledge gap responsible for the failure to detect 85% of potential supply chain risks.
This is where Master Data Management (MDM) becomes a foundation for supply chain diversification. It helps businesses centralize supplier data. Meanwhile, it eliminates data and regional procurement silos and enables the organization to have a single consolidate view of their sourcing network.
MDM supports smarter sourcing and better supplier risk management
Unified Supplier Visibility. MDM harmonizes data across systems, creating a single source of truth, enabling your business to have visibility across your entire enterprise.
Enhanced Strategic Sourcing. MDM equips procurement teams with insights into supplier demographics, overlaps, and spend patterns, justifying increased spending with diverse suppliers and uncovering new sourcing opportunities. Indeed, Mckinsey research showed that increased visibility could lead to up to 15% improvement in negotiation power.
Efficient Onboarding and Discovery. MDM aids in the identification and onboarding of diverse and backup suppliers through enriched data sources and self-service portals. Indeed, this is important in boosting agility and responsiveness to disruptions, as well as accelerating time-to-market for new products.
Risk and Compliance Management. MDM centralizes visibility into supplier performance, risk profiles, and certifications. It helps ensure supply continuity, reduce concentration risk, and meet ESG and regulatory requirements.
Operational Excellence. MDM eliminates data duplication and errors, reduces manual processes, and supports faster, more informed procurement decisions across the supplier lifecycle. Moreover, Gartner research suggested that it could lead to a 10% to 30% reduction in procurement processing costs.
Managing what one cannot see is an impossible feat. In fact, modern supply chains need clarity to succeed. MDM can help companies assess supplier risk to anticipate, identify, and respond faster to political and environmental pressures. Even as they grow their supplier base.
Building a Future-Ready Supply Chain
The experience has demonstrated that resilience should be built into the operations of businesses that rely on efficient supply chains. Dual sourcing and faster logistics can only go so far to build a chain that can handle tomorrow’s disruptions. Thus, having a data-driven approach is also necessary to reveal supply situations, risk exposures, and the most efficient responses.
Supplier Master Data Management (MDM) then becomes a necessity and a strategic advantage. With MDM in place, the supply chain becomes more diverse, efficient, and ready for anything that comes its way. This includes new regulations, regional conflicts, or climate-driven disruptions.
