One of the biggest risks when imposing overly strict standards on your suppliers is that the economic balance for them becomes unsustainable. Suppliers are then faced with a choice: comply with the strict standard and make large investments, or back out and terminate the partnership. This can lead to disruption or even the collapse of your supply chain, with potentially serious consequences for your business operations.
1. Cost-Benefit Analysis for Suppliers
Many suppliers, especially SMEs, have limited resources and margins. Obtaining a demanding certification entails high costs, such as:
- External audits by certified bodies
- Hiring external consultants for implementation
- Adapting processes and systems
- Training personnel
Obtaining such certification often costs tens of thousands of euros, depending on the complexity of the organization. In addition, there are recurring costs for recertification and annual audits. For many suppliers, this cost structure does not outweigh the economic benefit of the partnership, making them more likely to terminate the collaboration.
2. Consequences of Suppliers Backing Out
When a supplier decides to back out, it creates an immediate risk for your supply chain:
- Delivery disruption – Products, services, or components supplied by this supplier may suddenly become unavailable.
- Loss of knowledge and expertise – If a specialized supplier pulls out, valuable knowledge is often lost and difficult to replace.
- Rising costs – Finding new suppliers takes time and often leads to higher costs due to switching costs and the need to rebuild trust.
- Lower quality or longer lead times – Alternative suppliers may be less efficient or offer lower quality at higher costs.
- Disruption in supply chain processes – A shortage of critical components or services can halt production or service delivery to the end customer.
3. Examples of Supply Chain Issues
1. Component Supplier
A company that supplies critical components for your production process is suddenly required to comply with a strict standard. Consider a manufacturer of electronic components or metal parts.
- The company must make significant investments to comply with the standard, such as adapting their production line and setting up a comprehensive quality management system.
- The supplier concludes that the costs are too high and decides to stop supplying.
- As a result, your production processes grind to a halt because you depend on these specific components.
- Finding a new supplier takes time, reducing production capacity and potentially causing delayed orders or longer lead times for customers.
Consequence: Production delays, higher costs, and potential revenue loss.
2. Transport Company
A transport company that moves goods between you and your suppliers is also subject to the same strict standard.
- To comply, the transport company must invest in secure storage, controlled access, and stricter reporting procedures.
- These investments are costly and time-consuming, leading the transport company to conclude that the partnership is no longer financially viable.
- You are now forced to find a new transport provider that meets the requirements.
- This can lead to higher transport costs and longer delivery times, directly affecting your supply chain.
Consequence: Logistical disruptions, higher costs, and longer delivery times.
3. Machine Supplier
A supplier of machines that are essential for your production process is also required to meet the same strict standard.
- The supplier must completely revise their production process and documentation, which involves significant costs.
- Because margins in machine manufacturing are thin, the supplier decides to withdraw from the partnership.
- You now need to find a new supplier that meets the same technical specifications.
- This process not only takes time but may also result in higher machine costs or longer lead times.
Consequence: Production stoppages, reduced product quality, and increased costs.
4. Why a multi-level standard like NIS2 QM solves the problem
The NIS2 Quality Mark (NIS2 QM) provides a solution by working with a multi-level system that considers the supplier’s risk level and impact in the requirements:
For a high-risk supplier (e.g., cloud providers or IT service providers), stricter requirements are imposed.
For a low-risk supplier (e.g., cleaning companies or maintenance firms), lighter requirements apply, aligned with their role.
The benefits of this approach include:
- Suppliers are not overqualified, keeping costs manageable.
- The number of suppliers withdrawing from the supply chain decreases significantly.
- Suppliers are more likely to comply because the standard is tailored to the type of risk they represent.
- The supply chain remains stable because suppliers are not driven away by excessive demands.
5. Conclusion: Do not blow up your supply chain
An overly strict standard places a disproportionate burden on smaller suppliers and causes a chain reaction of withdrawal and disruption within the supply chain. A multi-level standard like NIS2 QM ensures that suppliers can certify themselves at a level appropriate to their risk and role within the chain. This prevents the risk of suppliers walking away and protects the stability of your supply chain.
“Don’t blow up your supply chain” – Working with a multi-level standard like NIS2 QM ensures a balance between security, feasibility, and economic stability in your supply chain.
