Find Out How Risky Your Suppliers Are: Introducing The Vendor Viability Index

Today, third-party spend accounts for more than 70% of the total budget — everything except personnel costs. Sourcing and vendor management (SVM) professionals must make sure that they spend this money on vendors their firms can rely on to be viable over time. Why? Over half of the 156 SVM professionals who responded to Forrester's Q3 2011 Global Sourcing And Vendor Management Priorities Online Survey plan to have a special innovation council in place within the next 12 months, and their high dependence on third parties means their suppliers may be the difference between success and failure at innovation. But viability isn't only about performing well against a contract and having a strong financial position. Successful SVM professionals will define vendor viability as the combination of the vendor's inherent riskiness and their firm's tolerance for supplier-related risk. Incorporating vendor viability into sourcing strategies will allow sophisticated SVM execs to finally become more strategic to their senior executives and the firm's overall success. This report is the first in a series in which Forrester will outline the components of a successful vendor viability program.