How to protect your supply chain during the COVID 19 Crisis: What does this practically mean?
With the Covid19 protecting your supply chain during the COVID 19 crisis is headline news. Supply chains have been hit in every direction with a reduction in workforce and capacity. There has been an extraordinary surge in demand or sales which have dropped off a cliff, creating uncertainty and financial pressures as well as not having enough information to make business decisions. But business survival and managing the bounce back is one of the most pressing topics on the agenda.
Some steps to consider to get you through this crisis and stabilise your future…
1. Identify your critical products and suppliers - now
- You probably already have a great idea of this, but do you know why they are important to your business?
- You need to know this as these suppliers and products are the levers to change the direction of your business and could make or break your future.
- As an example: If you measure and track your key suppliers based on your spend with them, this will giving you some buying power with them, but it might not reflect exactly the most important part that your business could not survive without.
- List all your components, Suppliers and Customers by transactional volumes. If you use Bills of Materials, consider which component shows up the most and map out its supply route. Do you understand and know how much you have in the pipeline and your supplier has in buffer stock?
- The power behind the supply chain is its people, and with this crisis, it's important to understand not only what is important to you, but how important you are to your suppliers. Good relationships will support you in the crisis. Remember – they will be undergoing the same exercise.
- By focusing on the most critical products, tier 1 and 2 suppliers should help to prioritise and expose key vulnerabilities. Then you can make a plan to deal with these potential issues.
2. Diversify your Supply Chain
- What does this mean? Whatever type of business you are in, this could be an opportunity to seek alternative sources for your products. We have all worked hard in recent years to reduce the number of suppliers we have while keeping a tight control on costs and Inventory days. As the Covid19 crisis may bring with it the potential of tighter regulatory controls and longer lead times, it could mean that it is now to time to seek alternative sources.
- If you are a business which must qualify different suppliers into your processes – do it now.
- It would be prudent to avoid just onboarding a lot of additional suppliers without thinking strategically about it. Think about a mix of larger and smaller operations, and those coming from different geographies.
- Evaluating these suppliers against each other also gives you the benefit of the best value, not just in cost, but taking into account lead times and regulatory compliance. When the COVID 19 crisis is over, it will be beneficial to have a sustainability focus on your supply chain. Use this exercise to also consider the Sustainability and Environmental impact of each supplier which you onboard.
- Diversifying could also mean your route to market. If you were not focussed on your on-line operations, can you look at this as an option? What about your Logistic providers? Is this something you can look at for the future? Either consider outsourcing your Warehousing or Delivery options, or bringing them in house? Or a mix?
- Any diversification will reduce your risks for the future but must be managed well to stay on top of costs and complexity.
3. Proactively manage customer expectations
- This is the time to be close to your customers. If you manufacture component parts for a customer, get in touch to understand if they directly support front line services. This might change your key product list, but perfectly support the direction for your business.
- You need to keep them informed of the status of their order. Be clear and be honest. At this time, they will understand if you have a reduction in your workforce, logistic or production capacity, but they too, have a business to run. Honesty and proactive communication will be appreciated.
- Perhaps you could develop your business further and share capacities in Warehousing or Logistics? How can you get your systems to integrate and get real-time information along your Supply Chain? This will benefit your flexibility, not only now, but for the future.
- Do your customers have an innovation which you could support? They may not volunteer this information unless you ask the right questions and both parties can benefit.
4. Plan for the future
The next few months will critical for your business. If you are working with Traded goods, or you are a Manufacturer, you will need to look carefully at the following things to ensure stability in the future:
- Where do these products come from and how important are, they in your product portfolio?
- Can you add different ranges to your portfolio which might reflect the new world after the crisis has stabilised? For example, I bet, we are going to a lot more shelf space devoted to hand sanitiser!
- What do you expect your demand to be? You will be faced with the situation where you have to go back to basics for planning and forecasting as your current tools could incorrectly estimate demand. The short-term patterns may not be representative of the long-term demand…. Just think about what has happened with Toilet paper around the world.
- Consider improvements you can make to your business now. Did you always intend to reorganise the Warehouse? Did you need to consider new technology but have been too busy? Take the time now, to invest some time thinking about efficiencies you can gain when the business bounces back.
- Is your product seasonal, have a shelf life or is Batch Managed? Consider the implications of any delays in deliveries will have to you. Will you be left with a Product with a limited window to sell? Where can you find a market for this, or what promotions do you need to have organised to move this stock?
One thing is for sure that Businesses and Supply Chains will emerge out of this crisis having a greater understanding of the vulnerabilities they face, and this will make them more robust for the future. Use this time to secure your business for the bounce back.
At ibd, we have numerous advisers with Supply Chain, warehouse optimisation and logistics expertise, from those with experience of business-to-business markets to consumer and not-for-profit. We can cover any sector specialism a company might require and can pool teams of advisers where a client might require a breadth of marketing support
This page is kindly written by ibd member and Supply Chain specialist Rondi Allan Click here to view her profile