Subcontractors play a vital role in an organization’s supply chain but managing them can come with its own set of challenges. Failing to properly manage subcontractors can be one of the biggest risks an organization can take. A lack of subcontractor visibility and negligible investment in worker safety and safe production practices can lead to disastrous outcomes like major injuries or illnesses.
Sadly, many organizations are yet to take the necessary steps to address this looming risk. As supply chains grow more complex, so do the risks in procurement, especially when visibility is blurred across multiple tiers of a supply chain.
According to the Supply Chain Resilience 2019 report from Business Continuity Institute, organizations today find it difficult to tackle risks arising from tier 2 and tier 3 suppliers who are often inducted by primary suppliers and function at the outer perimeters of the supply chain network. It can be difficult for a company to gauge the potential risks arising from its tier 2 and 3 subcontractors, let alone mitigate them.
Some of the most common risks posed by subcontractors include:
Legal and Regulatory Violations
Workplace Safety Violations
Data and Identity Theft
Reputational Damage from Unethical Practices
Effective subcontractor management can be obtained—the following are some of the best practices for companies that seek to achieve optimum supply chain governance and resilience through subcontractor management:
- Map out your supply chain: mapping suppliers according to their risk profiles involves collating and disseminating critical compliance information from subcontractors. You can learn more about subcontractors by prequalifying and continually monitoring them.
- Assess supplier performance at regular intervals: regular audits can help companies measure supplier performance improvements over time and can help companies closely identify local practices, associated behavioral challenges and improvement opportunities.
- Frame a robust contract: contractual language should be clear and underline the key responsibilities and risks of each subcontractor. This can ensure their ownership of the project to a similar or a clearly drawn-out capacity.
- Develop training programs for effective Worker Management: training subcontractors about the compliance requirements and the importance of being compliant is one of the best ways to reduce risks. Programs on workplace safety, sustainability and quality can go a long way in ensuring that there is awareness among employees when it comes to health & safety and sustainability compliance.
- Join a common supplier network: to ensure you’re working with a qualified pool of subcontractors, you should associate with a common supplier network like Avetta, which can check suppliers and their compliance with health and safety standards before awarding service purchase orders.
The health and safety of workers can start with effective subcontractor management. Although managing subcontractors can be a complex task, it’s a highly important process that can define the success or the failure of a company. Often with millions at stake, it becomes imperative that all workers and stakeholders are performing optimally to ensure the success of the operations.