Know Your Supplier (KYS) in '25: Key Components & Checklist

Supplier-related disruptions may affect supply chain stability and resilience immensely. So, a supplier network should be trustable both ethically and financially.

For example, vendor fraud is one of the most disruptive vendor-related problems in supply chain. According to PwC, 19% of economic crimes and frauds are committed by vendors/suppliers.¹ Other than such illegal actions, unvetted suppliers can cause various other disruptions.

To avoid supplier-related disruptions, it is important that you know your suppliers well enough by implementing supplier risk assessments. Know Your Supplier (KYS) programs aim to ease this necessary step for supply chain executives. In this article, we will focus on the main components of a KYS program and provide a checklist for its implementation.

What is a KYS Program?

KYS is a procedure in B2B businesses, the equivalent of Know Your Customer (KYC) used in B2C businesses. Both KYS and KYC are programs implemented to prevent any third-party risks. The aim of KYS is to minimize the possible risks that your vendors can impose on your business, by making you more familiar with them. So, it offers supplier risk management which is a must of a successful supply chain.

A KYS program may ensure that suppliers supply products that meet the requirements of your company. Therefore, businesses can increase productivity and lower costs through the KYS program.

4 “Know”s of a KYS Program

For implementing a competent KYS program, you should follow these 4 “know” rules:

1. Know your supply chain partners 

You should know who your suppliers are, and what their business values and models are, to decrease any supplier risk that can potentially harm your business. For a more detailed account of how to recognize and minimize supplier risk, you can take a look at our article on the topic.

2. Know what you buy 

You should be certain that you are familiar with the products in your supply chain, where they come from, under what conditions they are produced, etc.

Also, you should be aware of the impacts of these products on society and the environment. ESG risks caused by your suppliers can be more harmful to the reputation of your business than you think. To improve ESG standards sustainability of your work, check our article on ESG reporting best practices.

3. Know what’s happening in your supply chain 

As a business leader, you should be monitoring all the transactions happening between you and your suppliers.

Moreover, you should control whether there are any problems or risks in any process within the supply chain, to preclude any snowball effect in the long run. S

upply chains are increasingly switching to new technologies like blockchain to facilitate the monitoring of these supplier transactions. You can benefit from the latest technological solutions like the implementation of blockchain in the supply chain for achieving this end.

4. Know how others can assist 

Businesses cannot handle all the monitoring work by themselves. Noticing when and where you need assistance from experts is also part of a successful business. For a successful KYS optimization, investigate and reach out to expert ideas.

A Checklist You May Consider

These constitute the outlines of a KYS program. However, you should also check whether more detailed steps are under control. Here is a checklist of concrete steps you can take to better know your vendors:

• Conduct due diligence during the onboarding of your suppliers. This is especially crucial for preventing any vendor fraud and also avoiding doing business with firms that can be on the sanctions list or doing business with sanctioned companies and countries.
• Implement automated know-your-vendor technology to get control of the vendors by automatically checking revised sanction lists. Vendor management software (VMS) is helpful for this, especially if it is AI/ML driven. For selecting the best vendor in the VMS market, check our article on VMS’s key features and top vendors.
• Assess risks that can be caused by your current suppliers. You should monitor their transactions, financial, compliance, and ESG risks on a regular basis. 
• Check the performance of your current and potential suppliers. It is important that the quality of their work meets your business expectations.

If you have other questions about the KYS program, feel free to reach out:

External Links

• 1. Global Economic Crime Survey 2024 | PwC .