Wednesday, August 13, 2014


Is your vendor reliable?
Was "due vigilance" done?


The recent or perhaps ongoing Hamas attacks on Israeli civilians and Israel's counter-attacks bring focus on vendors' reliability to produce and deliver.

I lived in Israel and worked for Tadiran which once billed itself as Israel's General Electric. My job in Israel was with the Electronics Division. This division was mostly defense oriented. I later worked for Tadiran's Telecom Division in Florida.

Between the two Tadiran jobs I became well acquainted with the problems a vendor can encounter and, by extension, the problems a vendor's client can encounter.

As with most things "Risk Management," most of the risks can be avoided or at least mitigated.

Some of the more obvious - to this scrivener, anyway - risks and remedies are addressed in this blog entry.

CAVEAT: The following is NOT intended to be all-inclusive - there always is the "ubiquitous other" that you'll only discover by working with other practitioners and process Subject Matter Experts (SMEs).

Evaluating vendor reliability

Vendors should be at least as risk conscious as your organization.

I once contracted with a major T&E company's Vendor Management (VM) Group. My job was not only to assure that my client - the VM group - could weather any storm, but to look at the group's critical vendors' abilities to survive when "things went bump in the night."

All of the vendors had the standard SLAs for their deliverables, but an SLA by itself is a bit like a politician's promise.

With my client's permission, I asked each of the critical vendors for their business continuity plans. Each vendor supplied its plan; I reviewed and critiqued the plans, then provided both my client and the vendors with my critique. (Vendors only saw the critique of their own plan.)

It was a win-win-win situation.

It was a WIN for my client since it now had a level of confidence in the vendor's ability to meet its SLAs "no matter what."

It was a WIN for the vendor since its plan was critiqued, gratis, by an outside professional. A plan created in a vacuum rarely is a viable plan; even mine.

Finally, it was a WIN for me since I learned about risks and remedies I had not previously considered.

A requirement to provide my client with a business continuity plan before any new contracts were let became the Vendor Management Group's policy.

Financial help or alternate vendors

Assume - and I know that is a dangerous thing - for a moment that your organization has a vendor it REALLY wants as a business partner. Maybe the vendor is owned by a board member or the CEO's sister-in-law. The reason is immaterial.

Continuing the assumption, assume that the vendor's business continuity plan is found wanting; there is evidence that "in the event of," the vendor would fail to meet its SLA with your organization.

What to do?

There are two (2) basic options (there may be more, ergo the weasel word "basic").

Option One: Offer financial help to get the vendor to a state that it will be able to meet its SLAs - at least to your organization - "no matter what." Part of this assistance must include protecting your investment and that means independently researching the vendor's financial worthiness.

Option Two: Consider alternate or back-up vendors. The problem with back-up vendors is that your organization always will play second fiddle to the vendor's primary customers . . . unless your organization is willing to pay a super-premium for preferential service.

Vendor's vendors

The specifics may be hard to come buy, but you need to know about the vendor's vendors.

Are the vendors providing hard-to-get resources? Are the vendors prone to work (in)actions? Do the vendor's vendors have delivery problems such as described under the War zones and other "inconveniences" heading below?

If the vendor's vendors don't meet muster for whatever reason, your vendor must, as you did in Financial help or alternate vendors above, show you that it can avoid or mitigate its vendors potential situations.

Getting from Point A to Point B, C, and D

Transportation is a risk that goes away only when the product or service is delivered to the final client/end user.

Your vendors and your vendor's vendors need plans to assure continued delivery of resources - raw materials, products, personnel - despite interruptions such as (an alphabetical sampling)

  • Fire and police lines
  • Parades and other right-of-way blockages
  • Pirates and other highjackers (on land, sea, and in the air)
  • Port strikes
  • Railway strikes
  • Roadway closures
  • Terrorists
  • Trucker strikes
  • War and lesser conflicts

Your organization also has to consider how it gets its product or service to your client. If your client is a middleman, you also need to consider

  • How the middleman markets your product, particularly in light of the competition - both competition within the middleman's business and from the middleman's competitors hawking a competitor to your product
  • How the middleman gets your product to the final client/end user

War zones and other "inconveniences"

Blockades and embargos

Blockades take many forms.

During the War for Southern Independence, a/k/a the American Civil War, the Federal (Union) forces blockaded the coasts along the Southern states, preventing cash crops from going to European clients and preventing war materials from reaching the Confederates. Blockades and blockade runners have been a fact of life It seems forever.

There also are blockades of people - picketers, protestors. In most jurisdictions, interfering with freedom of movement is illegal and the authorities usually will assure people - and resources - can come and go. This is true in the U.S.; it may not be true elsewhere.

An embargo properly belongs under the next heading since it is defined as "an official ban on (trade or a country or commodity)."

Politics and public pressure

When I worked for Tadiran's Electronics Division, Israel's Customs went on strike. (At the time, under the Labor government, Israel probably was more strike-prone than any other country; things changed when the government changed and strikes are much fewer even today.)

Israel is a "revolving door" country: it imports raw materials, manufactures something from them, and exports the finished product.

Customs controls both import and export.

With Customs on strike, Tadiran could neither import raw materials nor export what it made. The company was prepared to lay off 10 percent of its workforce if the strike didn't end y a specific date. Fortunately, the strike was settled and we continued in our jobs. (I was a technical writer.)

Embargos can be put into place by politicians under pressure from trade unions, disgruntled customers, or other unhappy constituents.

Public pressure generally is applied directly to an organization by a group that wants to punish the business for any reason. Boycott, Divestment and Sanctions (BDS) actions are a form of public pressure that can be applied to organizations that deal with products or services from a and organization or country the the BSDers find offensive.

Tariffs are, among other things, taxes placed on imports. If a government wants to reduce imports of a specific product, it levies or increases the import duty/tax. Sometimes this is done at the behest of a trade group that wants to "even the playing field" with a foreign competitor that has substantially lower production costs.

As long as nations have armies there will be call-ups of reservists. Then call-up may be to fight or it may be to provide local governments with emergency support following a catastrophic event (think Hurricane Rita). Regardless of the reason for the call up, it will take personnel from their regular jobs; what will the impact be on your organization? ON your vendor's organization?

Dealing with interruptions

In most cases, the way to deal with "things that go bump in the night" is to have an inventory of product that can outlast the outage. Don't forget to stockpile spare parts for critical products.

Figuring how much to stockpile requires working with sales and marketing people, getting their sales projections over a given period - how long a period is a product of your and the vendors' risk management (business continuity) plans. Figuring out how and where to stockpile the materials is another challenge.

As far as combating politics and public pressure, that has to be a "fight fire with fire" issue. Political whims are subject to change, faster if a good case can be made for change. Popular pressure can either be ignored or can be countered with information, although people who wear their politics on their sleeve frequently are intractable.


If I wrote it, you may quote it.

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