Professional Documents
Culture Documents
Balancing
supplier risk
versus reward
kpmg.com
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss
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Example Definition
A significant spend supplier whose products/service are critical to a companys revenues and require:
Complex contracts that drive continuous improvement
Proactive supplier relationship management
Detailed monthly supplier performance reporting
Proactive forecasting
A moderately high spend supplier whose products/service are important to a companys revenue
and require:
Complex contracts
Proactive supplier relationship management
Detailed quarterly supplier performance reporting
A supplier whose products/service are not critical to a companys revenue but requires:
Complex or basic standard contracts
Annual performance reporting
After creating a tiered approach like the above example, companies can then develop targeted and differentiated programs to
adequately identify and manage risks based on the category and supplier.
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
1. Request new
supplier
product/service
2. Complete risk
assessment form
3. Assess if suppliers
risk higher than before
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Audit report
Subcontractors to be utilized (if applicable)
Vendor management policy and program of subcontractors
(if applicable)
Past and current references
Country risk assessment (if supplier is supporting you
outside the United States)
Management turnover
Product or plant closures
Requests for payment term adjustments
Deep discounting, etc.
In addition, when dealing with critical suppliers who have
access to highly sensitive data (e.g., information technology,
financial service operations, etc.), companies should also
consider the following supplier due diligence items:
Physical security policy
Asset management policy
Supplier financials
Insurance certificate
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Access controls
Information security policy
Information security breach history
11%
Spend by Major
Subcategory
13%
41%
IT
Admin
Finance
Legal
Marketing
$40.0
$30.0
$20.0
17%
$0.0
18%
Category
Characteristics
What have been the
internal (the Client) and
external (industry)
events in this category?
Spend by Vendor
How much do we spend
with the key vendors?
$10.0
Vendor 1
Category Characteristics
Vendor 2
Vendor 3
Vendor 4
Vendor 5
Recommendations
and Considerations
What would you
recommend
we do or change?
What else should
we consider
exploring?
Category Summary
Major
Subcategories
What does this
category consist of?
Subcategory
20XX
Spend#
#Suppliers
Amount Total
(million)
80%
Spend
Potential
Savings %
Low
High
Potential
Savings $
Low
Potential Opportunities
(Low, Medium, High)
IT
$XX.X
XX
X%
XX%
$X.X
$YY.Y
High
High
High
Med
Admin
$XX.X
XX
X%
XX%
$X.X
$YY.Y
High
High
High
Med
Finance
$XX.X
XX
X%
XX%
$X.X
$YY.Y
High
High
High
Med
Legal
$XX.X
X%
XX%
$X.X
$Y.Y
Med
High
Med
Low
Marketing $XX.X
X%
XX%
$X.X
$Y.Y
High
High
High
Med
XX
YY
X%
XX%
$X.X
$YY.Y
Totals
$XXX.X
# of Suppliers by
Subcategory
How many suppliers
do we use for this category?
Recommended
Sourcing Strategy
How would you
suggest we go about
obtaining the savings?
Savings Estimates
On a percentage basis
and in $s, how much could
we save on this subcategory?
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Example Frequency
Example Activity
Daily
Supplier daily report is developed and reviewed between supplier first level management and
companys first level management
Majority of key questions and tactical issues are resolved in the daily meetings
Weekly
Supplier weekly report is developed and reviewed between supplier first and second level
management and companys first and second level management, and procurement
Some of the remaining key tactical issues are resolved in the weekly meetings
Monthly
Supplier monthly report is developed and reviewed between supplier first, second, and third level
management and companys first and second level management, and procurement
Any escalated tactical issues are resolved at this level
Majority of strategic related issues are identified and resolved at this level
Quarterly
Quarterly monthly report is developed and reviewed with supplier senior management and
companys senior management
Any escalated strategic issues are resolved at this level
For nonstrategic suppliers and categories, less reporting and governance may be appropriate.
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Category Packs
A Category Pack is a collection of external market research
about a particular industry or sub sector including supply
and pricing trends, competition, risks, and key suppliers.
Developing and regularly updating a Category Pack provides
insight into new information and trends within the marketplace.
This can include emerging products/services, price changes,
Hours Worked
Base Labor Rate
Travel, Per Diem & Incentives
6%
Fringe Benefits
8%
53%
8%
15%
Supplier Market
15.6%
Supplier 1
25.9%
Supplier 2
4.2%
Supplier 3
Supplier 4
7.6%
Supplier 5
8.7%
Supplier 6
Others
25.6%
12.4%
10.00%
80
8.00%
60
6.00%
40
4.00%
20
2.00%
00
0.00%
20
0
20 5
0
20 6
07
20
0
20 8
09
20
1
20 0
11
20
1
20 2
13
% Billion
Market Forecast
100
% Billion
% Growth
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Conclusion
Today, a constantly fluctuating demand
and supply market demands that
companies have an agile and flexible
supply chain, and one that derives more
value from suppliers while allowing
for proactive risk management. Those
companies that unlock the value in their
supply chain can save money, improve
quality, reduce risk, gain revenue,
and gain efficiencies. Companies
that can deliver significant benefits
across the organization can be a critical
competitive advantage.
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All
rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks
or trademarks of KPMG International. 23095NSS
Contact us
For more information, please contact one of
the KPMG LLP professionals listed below:
Samir Khushalani, Principal
Business Effectiveness
T: 713-319-3570
E: skhushalani@kpmg.com
Byron Tatsumi, Director
Business Effectiveness
T: 415-963-7678
E: btatsumi@kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in the U.S.A.
The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 23095NSS