Vetting New Suppliers and Customers When Supply Chains Shift

Written by Nicolaas Beehler 2 minute read

Vetting new suppliers when supply chains shift

In 2020, we’ve seen unprecedented disruption of goods moving from manufacturers to their ultimate destination - a customer’s warehouse or store. The onset of COVID-19 in January led to delays in shipments leaving China. As the virus began moving around the world, we saw additional sourcing constraints. Along with that, many destination markets seized up, as consumers stayed home and altered their buying habits.

Companies navigating this dynamic have had to pivot in several ways. This has often involved looking at different suppliers when the existing one could not fill an order. For companies trading in healthcare and household essentials especially, new companies entered the market that previously had not been doing business in this area (e.g., distilleries making hand sanitizer, selling to drug stores). Also, suppliers have found new customers asking for their goods (the distillery may want aloe vera to add to the hand sanitizer, which they never bought before). The supply map of arrows moving around the world was redrawn in a hurry.

For those in charge of lining up these new business relationships, there is often pressure to move quickly, and for good reasons. However, the risk of moving too quickly without proper vetting of new business partners is that it might entangle one in a precarious business relationship. In other words, the “know your customer” and “know your supplier” principle could fall victim to expediency. Let’s expand.

Screening Supply Chain Relationships

Companies might run a credit check on their supplier or customer, and negotiate terms of sale. However, are they investigating whether that partner has been listed by a government agency as a restricted party? A restricted party is any entity that has been determined to violate laws of a given jurisdiction (national or multi-national) and thereby receives restrictions on trading in goods with others. These restrictions are issued by many countries and agencies around the world. From the United States, to Europe, to Singapore and Australia - these restricted party lists span the globe. In some countries (like the U.S.) there is emerging oversight in areas like the monitoring of forced labor. More and more companies must remain on alert over with whom they enter into business relationships.

Learn more about restricted party screening in this blog post >>

It’s important to take a pause and make sure you vet the suppliers and customers with whom you deal. There are various ways of doing this, from manually searching websites to installing software solutions that can automate a connection into a company’s internal ERP system. Often, there are immediate stop-gap solutions that can be put in place as a as a short-term manual approach, while a more efficient process is setup with software long-term.

If you are not sure where to start, we recommend focusing on your source data first. Seek to obtain clean data for names and addresses by using the full legal name. Avoid acronyms and nicknames for companies. Also, look at whether you are using unique identifiers to identify each party. Without unique identifiers, you may be multiplying your effort many times to scrutinize a single entity. Ultimately, when you start with good data, your vetting process will encounter fewer distractions and inefficiencies along the way.

Expeditors offers software solutions to customers looking to perform restricted party screening. If you would like to learn about this software, check out this page for more information, or reply with a comment  below. In addition, our Supply Chain Solutions group can you help you navigate changing supply chains, so don't hesitate to reach out.

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Blog was originally posted on December 3, 2020 7 AM

Topics: Trade, Tradeflow, Sourcing, Denied Party, Screening, Restricted Party

Nicolaas Beehler

Written by Nicolaas Beehler

2 minute read