5.4 Rating of Suppliers' Compliance with Policy
In an ideal world, once an organization has defined a timber sourcing policy, it could present it to suppliers and they would then follow it. The outcome would be the delivery of products that fully comply with the organization's policies and specifications. However, the reality is that suppliers can find it difficult to comply with the most basic requests for proof of policy compliance for a number of reasons. Therefore, suppliers' compliance with the sourcing policy requirements may take considerable time and effort, and non-compliance may be the norm in the early stages of an organization's policy implementation.
Therefore, the first step for any buyer is to identify which suppliers are most likely to be able to comply with the policy, that is, those suppliers who present the lowest risk of supplying non-compliant products, and which suppliers are least likely to comply with the policy and therefore, present the highest risk of supplying non-compliant products.
By using systematic risk-rating methodologies, it is possible to develop future sourcing strategies based on the risk rating of suppliers, highlight actions that would help suppliers reduce their risk rating and monitor suppliers' progress toward being able to supply policy-compliant product.
In an imperfect world, rating suppliers based on risk presents the best way forward and the next step toward achieving full implementation of the sourcing organization's responsible sourcing policy.
More information on a risk-rating methodology, with a particular emphasis on legality, can be found here. Rating of suppliers is done using a range of information, some of it available in the public domain and some of it provided by the suppliers themselves. The rating process is really an assessment of the characteristics of a supplier that can be trusted to do its best to avoid noncompliant trading of products.
The basic system relies on the following actions:
- Sending a standardized questionnaire out to all suppliers
- Making sure the questionnaire is completed by the suppliers and returned
- Making sure that, where possible, suppliers provide appropriate objective evidence to support the questionnaire answers
- Using a straightforward and justifiable means of systematically assessing each returned questionnaire and giving the supplier a risk rating accordingly
- Giving suppliers feedback that lets them know what they need to do to improve their risk rating
- Implementing a means for monitoring continuous improvement, that is, whether or not suppliers are improving their rating over time
- Using a set of procedures that can be independently verified in order to underpin the thoroughness and credibility of the whole approach
This process helps send a clear message to suppliers as to what is important to you as a buyer. It gives them direction when they are probably receiving many mixed signals from the downstream end of the supply chain.
Note for GFTN Participants: GFTN participant companies are required to establish a programme that will ensure traceability over a reasonable period of time. It is a central component of GFTN participation.
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