A survey of more than 400 supply chain execs by IBM — resulting in a report called “The Smarter Supply Chain of the Future” — ranked topics in this order. Respondents were asked if the topic impacted them to a significant or very significant extent.

• supply chain visibility — 70%
• risk management — 60%
• cost containment — 55%
• increasing customer demands — 55%, and
• globalization — 45%

Execs who were surveyed also remarked that all five topics are critical areas in successful supply chain management.

The IBM study also offered a few specifics.

On the subject of supply chain visibility, the biggest problem is the lack of information sharing and collaborative decision-making. This is not the fault of technology; it’s the way many companies are organized.

Risk management: Supply chains have been stung with more regularity in recent years, from defective products to bankrupt business customers and vendors, natural disaster, and a host of other causes that can take a toll on your efficiency. To get a step ahead of this, it’s become more critical to build risk management into your basic daily functions.

Cost containment: It used to be that supply chains could take a “tortoise” approach in continually improving costs and cost control. But today’s fast-moving economy demands a “hare-like” strategy, reacting daily to whatever cost issues might arise.

Customer demands: Most companies do a great job now of collaborating with your suppliers. It’s time to take that a step further, the experts recommend, and build the same type of relationship with your customers — deploying joint forecasting, for example.

Globalization: It’s not the cure-all and end-all some said it would be. In fact, one-third of the execs responding to the IBM survey said supply costs have actually increased due to global sourcing.  The main issues are product quality and lead times.

That’s the principle behind invoice factoring for small businesses, a trend that’s on the upswing.

Small business is the heart and soul of our economy. More than 99% of U.S. employers — 25.8 million — are small businesses.

With today’s economy, payments are running later than ever. This can greatly harm a company’s ability to take on new customers, and even to secure the most competitive rates from its own suppliers. It also makes it more difficult for these businesses to pay their suppliers on time.

Accounts receivable factoring attempts to build a bridge over this gap for small business financing. The factoring firm provides what is essentially a short-term loan.

When the company’s billing period ends, it re-pays the factor.

There are three steps most accounts receivable will do before initiating a business relationship with a new customer:

• Accept only one invoice for the first transaction, while the factor does due diligence
• Check the credit of the debtor listed on the invoice, and
• Confirm that the sale actually occurred.

The same supply chain tactics that make your company lean and profitable can become your downfall in just the blink of an eye.

That’s because the benefits of the drive to improve efficiency — running lean, just-in-time production, single-source suppliers — can also leave you more vulnerable than ever before.

Fortunately, the best solution is easily summed up in two words: Be prepared.

The fancy term for it is “risk management.” Either way, we’re talking about shooting for the same goal.

1. What could go wrong?

The first step in managing supply chain risk (or being prepared), is to identify and catalog the “what-if” problems that could possibly disrupt your operations.

A few to consider include:

• Shifting customer demand
• Changing financial factors, such as credit availability
• Other market pressures, such as your competitors or your supplier’s competitors, and
• Weather, natural disasters or similar problems (think Hurricane Katrina or the California wildfires, for instance.)

2. Profiling your suppliers

At the same time, you should gather material about your own company (think of it like you’re writing a book) that is critical to supply chain continuity.

This means your company’s operations, including production and fulfillment; and data about your suppliers and your customers.

Try profiling your top suppliers, by identifying:

• Who are your key suppliers
• Where they are located
• Is there another site that could fill in if the primary supplier or supplier site fell short?
• What’s their production capacity, and
• What’s their production flexibility? Can they turn on a dime to help you if you asked?

Today’s emphasis on lean production has left many companies dealing with single-source suppliers, without much of a safety net.

3. What else could go wrong?

There’s the flip side of this coin, too.

Does your company rely heavily on a small but powerful customer base? What would happen if one of those customers closed up shop or took its business elsewhere?

Another contingency to consider: Does your supply chain focus efforts on one primary “ship-from” location? Would you be prepared if a disruption put that area out of commission?

Of course, you’re not going to come up with all of the answers right away.

Risk management is an ongoing process. You can never be prepared enough.

But taking the time now to anticipate problems and plan contingencies could make the difference between success and failure for your company in the future.

That’s because companies need to take a big picture approach to procurement, focusing on more than just price. What’s more important, experts say, is the lowest cost to the organization.

For example, what’s the use of buying the cheapest widget if it has a higher breakage/fault rate than widgets available from other suppliers?

By the time you factor in how much the breakdowns cost you in production, in paperwork, in deductions — it might be worth paying a little more and get a higher-quality product in return.

Your internal costs could outweigh any advantage you think you’re seeing from making procurement decisions based solely on price.

For many supply chain managers, this can be an uphill battle.

First, there’s the pressure to go with the lowest unit price.

Then, there’s the effort and difficulty involved in demonstrating that the lowest unit price is actually increasing operational costs.

It can take a while to document the additional costs, while the purchase price of the “cheap” unit remains front and center.

Finally, there’s the expectations many companies put on procurement/purchasing people to manage costs, right down to the unit level. This means you’ll need time and evidence to make your case for spending a little more.

Remind other managers that this is a time when many organizations are cutting corners, in addition to trimming prices. Some of these companies are cutting so many corners they’re not likely to be around for much longer — which will leave you in a lurch.

Then, you might want to mention the recent (and costly) peanut product recalls, and the resulting bad publicity. Those companies thought they could buy at the best price … and you see what happened.

While plenty of folks are still relying on other electronic check payment options, online bill-paying is certainly gaining momentum.

This can be valuable information for businesses seeking to widen their ability to accept on-line payments, or for other businesses that want to get on-board and handle more electronic check payments by taking them through the Internet.

Specific stats, according to The Electronic Payments Association (a/k/a NACHA):

• The transaction volume for on-line bill payments and similar actions grew 16.5% — 552.1 million transactions — in the final quarter of 2008 when compared with the final quarter of 2007 (474.1 million transactions).
• Not only is there significant growth over the previous year, it’s also a noticeable change from the previous quarter. The number of 4th quarter transactions in 2008 was up 5.6% over the number of 3rd quarter transactions.

One key factor in this growing trend, no doubt, is the improving nature of transaction security.

The better it gets, the more businesses you’ll see sign on.

When more businesses sign on, that naturally sends a message to other businesses that it’s effective.

Sure, most companies have the usual safety nets in place, such as limiting transaction amounts and requiring that at least two staffers are involved in every transaction.

But the smarter the security, the bigger the challenge for people possessed with rattling your cash cage from the inside.

We all know that the vast majority of people who have access to your company’s financial transactions are honest, decent, hard-working souls. They value their jobs and the stability of their employer.

Still, if the temptation exists and there’s even a hint of vulnerability, you could be in trouble.

These days, some of the kids will bust into something like your company’s financial records just to prove that they can do it.

The stakes and the risks have gotten even higher in this day and age, as economic pressures are forcing companies to cut corners in the name of doing more with less.

Some real-life shortfalls uncovered by security pros:

• Audit groups not trained to deal with fraud
• User passwords (necessary to transfer accounts) taped to a computer monitor
• Polling a number of employees on ways to commit financial fraud — and only one in 30 asked why the pollster would want to defraud the company
• Ease of use emphasized over effective security protocols
• Implementing “blank” passwords for easy access
• “I know my teams is loyal,” and,
• Who gets the audit reports? At one company, they were directed to the one person who was committing the fraud.

But just because electronic transactions are becoming more commonplace, you still can’t afford to let down your guard for even one moment when it comes to protecting a customer’s confidential information.

To help determine if you’re on the right page in keeping data safe, there are five key questions you can ask yourself about transactions that occur with your customers.

These questions are both a diagnostic assessment and a wake-up call. They apply whether you’re simply considering upgrading your transaction capacity, or even if you’ve already made the commitment and you could use a guide to setting it up.

Five questions:

1. How likely is it that one of the parties involved in the transaction would try to use a false identity?
2. What would be the fallout if the transaction data got into the wrong hands?
3. How much pain would a security breach inflict?
4. What type of information could be accessed by unauthorized parties?
5. What would be the impact if information being sent to you by a customer or a vendor was intercepted?

Good news: Security experts recommend four basic guidelines for helping to prevent these security breaches.

• Pay close attention to updates and patches for your computer’s security system, and implement as soon as they become available.
• Ask your own IT expert(s) to check your system security, when it comes to your Web browser and e-mail software.
• Passwords are critical. Choose longer passwords that have nothing to do with your name, your company’s name, etc. And be sure to change passwords often.
• Audit monthly statement — from banks and credit card providers — more closely than ever. This is often the first indication for many Purchasing & Procurement pros that something is amiss.

In a January 2009 poll done by Ernst & Young, 67% of the companies that responded said they’d take a hard hit if one of their three stop suppliers failed.

The risk is the greatest it’s been in decades.

One undermining factor: The companies that the suppliers rely upon. No matter how well stocked you might be today, it’s nearly impossible to prepare for how to handle your supplier’s supplier going under.

In order to get the best possible picture of the risks your suppliers are facing, experts rec0mmend:

• due diligence and predictive modeling of your most-critical suppliers
• building a safety net for critical suppliers who run into rough spots, and
• offer expert advise and guidance as to what alternatives might exist for troubled survivors.

Of course, it’s always best to be proactive when dealing with your suppliers, especially if there’s a whiff of trouble.

That’s why it’s best to open a two-way channel of communication, which is used regularly.

It’s important to stay in touch with suppliers at all times. If you wait until there are obvious signs of trouble, it just might be too late.

But proponents of taking procurement processes on line are quick to point out that in the long run, the savings from this investment can be significant.

As part of building your case to consider e-procurement, start selling its benefits to your suppliers.

There are three big selling points:

• When a supplier receives your purchase order automatically into its order management system, the supplier saves time and trims labor costs. No longer will people be forced to hand-enter information into the supplier’s ordering system, which will greatly reduce the incidence of errors.
• The increased accuracy that comes from no longer hand-keying information into the system will help make sure the suppliers’ customers get their orders more quickly.
• The final benefit is that because there is no longer a delay in getting orders into the supplier’s system, products will be delivered faster and the supplier will develop a reputation as being extremely responsive to customer needs.

Chances are, people at your company will want to know the estimated Return on Investment for automating procurement processes.

The best that experts can speculate is that a good e-procurement system will save 5% to 10% of your annual spend. Your own ROI will depend on your annual budget and the vendor you select for the e-procurement system.

The best way you can stay in the driver’s seat is to make sure you have an organized plan of attack for working with suppliers, one that lays out your expectations and  emphasizes quality.

There are three areas to focus on that’ll help upgrade your relationships with suppliers:

1. Most companies treat poor supplier quality as collateral damage, part of the price of doing business. Here’s a painful stat: The cost of poor supplier quality (COPQ) take take a 10% bite out of an organization’s revenue.

It’s more than just faulty materials or goods. There’s a ripple effect — rework, slowed production, extra freight costs, warranty expenses when customers complain, and recall expenses when you have to ship it back from those customers.

So the first step — which many businesses don’t do now — is to track supplier quality, by logging to the bad (and the good), and what it ends up costing your company.

2. Once you’ve done your homework, you can approach suppliers about recovering the cost of poor quality supplies. In this case, many companies charge back the goods to the supplier. When enough product starts flowing backward, suppliers will take notice.

Experts point out that the bulk of costs stemming from suppliers providing poor goods is NOT the materials. It’s that collateral damage that really rings up the dollars. Finding a way to quantifying these costs will show suppliers just how deep — and costly — the problem is.

3. Finally, the best way to formalize your approach to solving these problems is to design your own supplier scorecard. Not only will you create a running evaluation of each supplier, it’ll also provide a solid framework of your expectations for these suppliers.

It strengthens your hand considerably when you sit down at the table with a supplier if you have a written list of problems and the costs incurred, along with a clear explanation of your expectations.