Companies with critical reliance on the strength of their key supply chain providers often ignore one crucial key performance indicator - financial standing.
And this is the one weak link in the supply chain which could result in expensive production and distribution delays, according to accountants and business advisors HURST.
HURST has launched a supplier assurance scheme designed to help companies evaluate the financial performance of companies in their supply chain and implement strategies to help guarantee their integrity.
The launch follows a successful supply chain assurance programme HURST has been running for JCB, the worldwide manufacturers of heavy construction and agricultural equipment, for the last four years.
Said Helen Besant-Roberts, who heads up HURST's supplier assurance programme: "When evaluating the key performance indicators of vital supply chain providers, companies look at their quality systems, manufacturing standards, delivery guarantees and logistics capabilities. But rarely do they look at their financial strength.
"Yet it's vital they find out what the risk is of financial failure. They should also examine the challenges faced by the suppliers that could impact on their financial performance. The company investigating its supply chain providers should also determine whether their own pricing demands on the provider, payment terms or other factors they impose could, in themselves, contribute to the business failure of a supplier."
At JCB, HURST implemented a traffic lights scheme where the financial strength of their supply chain providers are rated green, amber or red depending on financial performance and risk. In addition HURST holds regular workshops and seminars for senior JCB management to ensure financial standing is a main key performance indicator when assessing potential supply chain providers.
Neil Francis, JCB's group purchasing manager responsible for strategic suppliers, said: "In our business production down-time is an immense and unwanted cost. HURST have brought to us a clear incisive financial and business analysis based risk review which we apply to our strategic suppliers. This has helped us make decisions on managing our suppliers and avoiding production down-time. In particular, HURST's involvement in developing the supply chain for our new award winning diesel engine has been priceless."
Being fully scaleable, HURST's supplier assurance scheme can be applied to any manufacturing business or to any process reliant on key suppliers.