Like the rest of the country, most businesses will be in full crisis management mode. Critical suppliers will have been identified and senior management engagement will be taking place with those suppliers.
Where appropriate business continuity plans will have been deployed and preparation for supplier failure will be underway. It is fair to say we are now living through an economic and business crisis, the like of which the working population has not seen before and which will have a profound impact on all our supply chains.
Though we should continue to plan, it is worthwhile considering what immediate actions or tactics you could deploy to improve the chances of your supply chains surviving.
You want to avoid your suppliers having to claim force majeure. 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 will be significant value for your suppliers in offering shortened payment terms or waiving early payment discounts.
Many businesses will have paused or postponed 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.
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. Suppliers are still going to go bust and unfortunately some of those will 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.
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.
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 supply 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 in the current circumstances might consider doing so as
a great long-term investment in the relationship.
Finally consider reaching out to professional advisors. As an example, Hanya Partners are happy to 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.
Friends, colleagues, suppliers and advisors are often more willing to help than you might expect.
This is a challenging time for everybody, both personally and professionally. 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 we work closely with our suppliers to protect those supply chains.
20th March 2020