New Reality in Supply Chain Strategy – Where are the Weakest Links?
A crisis will shine a light on the weakest links in your supply chain.
Wouldn’t we all like to have a supply chain built to withstand a ramming like the cruise ship RCGS Resolute? It was built to sail through icy waters including trips to Antarctica.
Not only did the cruise ship escape with minimal damage but the Venezuelan navy patrol boat that attacked it suffered damage that caused it to sink.
- The current Corona virus pandemic will impact the supply chain of virtually every company.
- Expect shortages.
- Plan for supplier failures. The $350 Billion emergency loan program may not be enough based on filed applications.
- Unanticipated consequences will threaten the weakest regardless of size.
- Fluid plans are essential.
Everything I will share may seem like common sense but having the courage and determination to act will pay dividends sooner.
Segregating suppliers by risk would seem to be a smart place to start. This short list is not in order since the risk will be different for each company regardless of the type of supplier. See additional perspective specific for SUPPLIER RISK MANAGEMENT PROGRAMS here.
The initial list is just that. A high-level roadmap.
- Single source suppliers
- Newer ones without a credible track record with your organization
- Suppliers in early hot-spot countries and those that may be impacted later in the cycle
- Service providers that employ less-skilled workers
- Companies that have had issues meeting delivery and/or quality requirements
- Highly specialized materials or services
Next you will need to quickly gather all available internal information. The information you need may be scattered across different platforms so expect to spend time digging for data. If you utilize a risk management service that will help add to your database.
Here are some basic data points to consider:
- How many years have they been a supplier?
- How long has your key contact been in their role?
- How many facilities do they supply or service?
- What percentage of the category do they provide at each facility?
- How many documented issues related to quality, delivery, on-time performance or billing exist?
- Has an unexpected interruption in service or supply occurred during the relationship?
- If there have been issues, how many segments of the business were impacted?
- Is their industry dealing with labor shortages, or could they?
- What percentage of their total sales are our purchases?
- Do they also supply our competitors?
- What is the most current financial information we have?
Contacting each supplier will take time so prioritize your list.
I like to speak to people but as a practical matter you may need to email or survey the lowest risk ones.
Your goal is to protect the short-term supply and maintain the relationship going forward.
I would be firm in the discussions. Be supportive not threatening. Let them know you value the relationship.
Assume that they will experience issues and frame your questions that way.
Ask and then be quiet, let them share.
- What plans have you made to ensure your supply chain functions as required?
- What steps have you taken to do that?
- How have your sales been impacted so far? What is your forecast for the next 6 months?
- How will you let us know about expected material shortage or interruption in service?
- Have you applied for a loan or do you anticipate doing that?
- Have you experienced a slowdown in payments from your customers?
- How many of your suppliers have required to halt operations because of a government decree?
- What could we do to support you?
Use the information to update your list of the most vulnerable suppliers and service providers
Take action to identify alternate providers.
This may not be pleasant, but it is essential.
The lessons learned will make your organization much stronger going forward.
As the late Jim Valvano, who was the former North Carolina State basketball coach, was fond of saying about the NCAA tournament “survive and advance.”
We have a long way to run and we may need to sprint.
Action Step: Finding the right tools for your needs can be a challenging process but it doesn’t have to be. If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want. If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success©
Commit to taking the next step.
Until Next Time, I Wish You Great Success in Your Business and in Your Life