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Five tips to improve supplier vetting

Five tips to improve supplier vetting

Every day, supply chain management professionals are faced with the task of facilitating a credible and transparent networking business environment, one that is free from corruption, fraud, dishonesty and non-compliance.

“Businesses should never jeopardise the integrity and credibility of their supply chain management processes, even in the early start-up days,” advised Rudi Kruger, general manager at LexisNexis Risk Management.

Suggesting some basic tips, Kruger efficiently sums up how businesses can streamline their supplier vetting and procurement process.

1.     Identify and combat corruption

Every organisation should have a risk assessment plan that guards against fraud and corruption between employees and suppliers, according to Kruger. “It is important to identify warning signs before you find yourself in a compromising situation,” he said.

A Deloitte report published in October 2014, explored some of the common red flags to look out for during supplier vetting which include deviations in communications between procurement staff and suppliers, and personal links between employees and vendors. Thoroughly vetting your suppliers to weed out these and other red flags is a must and can be achieved with online support.

“Our solution, ProcureCheck is designed to help businesses combat corruption by identifying potential connections. It helps you identify possible fraudulent activity within vendors and employees with the help of South African Fraud Prevention Services. It can also help you highlight external business interests of employees within your organisation,” Kruger said.

2.     Monitor the procurement process

Never lose track of the procurement process. This can be achieved by identifying and reviewing internal controls. “Basically put, you need to know who is responsible for what and make sure that their roles are fulfilled effectively,” said Kruger.

Secondly, it is important to have a supplier vetting checklist. “Points to include in the vetting check list are the supplier’s BBEEE status, credibility, reputation, partnerships, past projects and services, ownership structure and history, compliance record,” he added.

3.     Have a preferred list of suppliers

A preferred suppliers list allows businesses to attain the best overall value. “Based on past performance alone, supply chain managers can remain confident in quality and good service and have better overall management control. Having knowledge of cost estimates, delivery capabilities and financial stability means you are able to invest more trust in your suppliers than you would a new supplier,” said Kruger. “The sentiment can be applied to vendors who fail to deliver on their promise and find themselves on a non-preferred or excluded from your list.”

4.     Credit checks

The financial status of major or strategic suppliers must be vetted regularly. “A supplier’s credit history provides you with insight into their spending patterns and financial background. Suppliers who have sound financial backgrounds are more likely to deliver effectively and on time, giving you peace of mind. Their spending patterns help you identify if they are scrupulous in their operations or practice erratic behaviours,” said Kruger.

5.     Make use of technology

Technology solutions are designed to manage the consolidation, auditing and supplier inspection. The comprehensive information from solutions like ProcureCheck means you have access to all the information you need to make informed decisions without laborious background checks.
ProcureCheck is the first of its kind, easy to use web based system designed to help you identify and prevent fraud schemes within procurement processes. The solution is built on a new technology platform allowing flexibility and stability. It provides automated irregularity alert reports as well as reports on vendors and staff. With ProcureCheck, you can create your own vendor list. It has strong financial backing and is managed by a highly experienced team.
“We still own one of the strongest CIPC datasets and our alliance with B1SA gives us access to BEE data our competitors do not yet have access to,” Kruger said, adding that B1SA is also a reseller of ProcureCheck.