Author: Phil White, Managing Partner

Tactics for tackling supply chain crisis management

Many businesses will have spent the weekend in full crisis management mode in response to the Global IT Outage on Friday 19th July. Attempts will have been made to ensure continuity of supply with critical suppliers and senior management engagement will be taking place with those suppliers. Where appropriate, business continuity plans will have been deployed and disaster recovery plans initiated.

Given the ongoing technology and cyber security risks posed by threat actors both criminal and governmental, the ever-deepening economic impacts being experienced by many millions across the globe, and the very recent impacts of global pandemic, it is worthwhile considering what actions or tactics you could deploy to improve the chances of your supply chains surviving a crisis.

Offer Help

You want to avoid suppliers being forced to claim contractual relief. It will waste valuable resources and goodwill in both organisations. Consider deprioritising non-critical supply or offering targeted service level abatements, either through reducing the service level, foregoing service credits or by providing service level holidays. This will allow your suppliers to focus on the material activities required for maintaining supply.
Liquidity will be essential, especially for your smaller suppliers or for those who are more dependent on your revenue. If sustainable, there could be important cashflow benefits for your suppliers in offering shortened payment terms or waiving early payment discounts.

Be Flexible

In immediate response to a crisis, many businesses pause or postpone competitive sourcing exercises, change programmes and capital investment. This could very well leave usually very busy, highly skilled, commercially focused supply chain professionals with capacity. An experienced supply chain professional will be part commercial manager, part project manager and part risk manager. This provides a pool of potentially valuable resources that your business can deploy to focus on supply chain protection and business continuity.

Be Vigilant

You’ve made every effort to collaborate with your critical suppliers. You’ve provided service level relief. You deployed resources to help sustain and strengthen your supplier relationships. When crisis strikes, suppliers are still going to fail and, unfortunately, some of these could be crucial to your business and its ability to meet its obligations and regulatory commitments. In this case you may have a right of step-in, which will permit your business to enter, take control of and run certain operations to ensure supply continues. For this to be effective your response will need to be rapid to avoid employees, sub-contractors and intellectual property from being lost. Therefore, you need to be vigilant for the precursors to administration.

Reflect

When managing a crisis, it is easy to get sucked into the pressure and rapidity of the actions required. It is essential however that you take time to reflect; alone, with your senior management but critically with your suppliers. Reflect on whether the actions you have jointly taken are effective and aligned with your shared goals. Set-up end-of-day calls with counterparts within your most critical suppliers. If they aren’t competitors, consider making them joint supplier calls. Its an opportunity to communicate, learn and digest.

Ask For Help

You are not alone. You will almost certainly have a network of like-minded supply chain professionals experiencing similar uncertainty and challenges. This network will value sharing their experiences and understanding yours. Reach out to your critical suppliers, some will value being given the opportunity to help solve your business problems and might consider doing so as a great long-term investment in the relationship.

Finally

Consider reaching out to professional advisors. As an example, we (or another procurement consultancy) would invest time understanding the risks, issues and opportunities confronting your supply chain and providing our thoughts and guidance as to how you might address these. Colleagues, suppliers and advisors are often more willing to help than you might expect.

In the outsourced world we live in, where businesses are more dependent on their supply chains than ever before, critical suppliers should be considered an integral and valuable part of your business. If that is the case, it is important to work closely with your suppliers to protect those supply chains.

About Hanya Partners

From running cost transformation programmes, transforming operating models, to building procurement and supply chain capability, Hanya Partners has extensive procurement and organisational transformation expertise. Therefore, please do not hesitate to reach out if you think we can be of assistance.
Part of the Taranata Group, Hanya Partners has offices in Edinburgh and London and operates across the UK and internationally, we are a team of experts, each with over 20 years’ professional experience working in both corporate and consulting roles. We bring fresh insights, thought leadership and best practices in Sourcing and Supplier Management, Talent and Organisation Health and IT & Digital Transformation.

This article has been updated following the Global IT Outage on 19th July 2024. It was originally published in 2020 during the Covid pandemic: https://hanyapartners.com/tactics-for-tackling-supply-chain-crisis-management/

Phil White | 22nd July 2024