3 Supplier Risk Management Tips for Groceries and Supermarkets
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Variety is Great for Grocery Shoppers, Risky for Retailers
The sheer size, variety, and complexity of grocery retailers’ third-party networks can be overwhelming. The average American supermarket carries roughly 32,000 products – even more for stores that sell specialty products, local goods, prepared foods, and family meal kits.
With so many different types of suppliers and an even longer list of products and services, grocery store risk managers have a unique problem to solve when developing third-party insurance requirements.
Setting Supplier Insurance Requirements is Half the Battle
Supermarkets that implement a one-size-fits-all approach to third-party insurance requirements are at a major disadvantage, because not all vendors are created equal and shouldn’t be required to carry the same type of coverage.
Conversely, grocery retailers with diverse sets of insurance requirements designed to accommodate an equally diverse set of risk variants are also at a disadvantage, because the process of verifying hundreds of thousands of COIs to ensure they satisfy multiple types of insurance requirements is complex, expensive, and labor-intensive.
Insurance requirements that function more like “hand-to-hand combat” and less like a blanketed “air strike” that doesn’t distinguish between different risk types are a great approach to achieving continuous supplier compliance, but most grocery risk managers don’t know how to do this effectively without spending lots of time, effort, and money.
Here are a few tips to get you started:
Tip 1: Let your vendor intake forms do the heavy lifting
There’s a reason why most supermarket chains rely on supplier intake forms and questionnaires – they help inform risk models and simultaneously weed out suppliers that can’t (or won’t) obtain necessary coverage. They can also effectively digitize third-party data and organize suppliers by category, which may help you identify potential vulnerabilities and implement the right policies for your suppliers.
Tip 2: Get granular with risk profiles and insurance requirements
Developing detailed supplier risk profiles and corresponding insurance requirements helps grocery risk managers avoid liability and increase supplier diversification, participation, and compliance at the same time! By hand-crafting insurance requirements, you’re effectively creating a larger pool of candidates, in which even the smallest suppliers can participate while still mitigating their risk. Lastly, supermarkets that put in a lot of work up front to define their insurance criteria very specifically find that the payoff is less involvement and work required to make exceptions and overrides later on in the engagement.
Tip 3: Confirm coverage compliance with clear, concise, and consistent communication
If you’re going to go through all the trouble of developing hyper-specific sets of insurance criteria for your third-party partners, it’d be a shame if they weren’t adequately conveyed to your third parties. After all, you’ll need to verify that your suppliers have the right coverage so they can continue providing your supermarket with the products and services that your customers keep coming back for. Risk managers that are clearly defining third-party insurance requirements, communicating the intent behind them, and keeping a drumbeat of steady outreach that is both clear and concise so there’s no room for confusion will have more success guiding their suppliers toward compliance – or at least providing a path toward fulfillment. Note: This approach is made easier, more effective, and more valuable when it is automated.