Three weeks on since we first wrote about the novel coronavirus. Back then, the number of global cases was nearly 200,000. That has now jumped to more than 1.7 million.
The third instalment will see procurement and supply chain professionals step up to the challenge. But first, let’s review what they have had to deal with.
From the top down, they have the CEO, General Manager, the COO, and maybe even the board questioning whether the company will have enough supply to maintain its operations. Top management doesn’t want to upset the company’s big clients, so they want to know how procurement can help mitigate supply chain risk. This would help them determine contingency plans and re-prioritise projects.
On the finance side, the CFO would want to quickly run forecast for revenue and expense, ideally in a range of scenarios. He or she might want to tighten budgets, roll out a stricter approval process, and look for savings opportunities in both existing and new supplier relationships. A focus on speed and liquidity would help finance “keep the lights on.”
From the outside, suppliers want to know where the organisation stands, with existing contracts, projects and terms. They want to know how their business and cash flow will be impacted. They are as interested in their own business continuity as anyone else.
Last but not least, the company’s customers will want to know whether contractual obligations can be met. On the flipside, some may wind down temporarily, meaning a delay or shortfall in revenue.
So with all the pressure in the world, what are some strategies to help with business continuity?
One might ask: “Who has the time to do a full-scale risk assessment now?”
Considering COVID-19 as a “black swan” event, coming up with reactive mitigation strategies is the least one can do. In an ideal world, organisations would already have mitigation plans for each quadrant of risk as follows.
Supply chain risk quadrants. Source: McKinsey
However, the reality is that risk management has been on the back burner in many organisations. And this is a dangerous proposition for many boards. Specifically, “about 80% of Australia’s listed companies have never done scenario-planning” (Australian Financial Review).
So the focus now should be on how to accelerate the interim risk assessment exercise and gain the much-needed visibility to make the right decisions.
Some key things to remember:
We’ve recently hosted a webinar with Peter Deans - the risk management authority mentioned in the Australian Financial Review article above. Check it out here.
Once you have captured the helicopter view, focus on the suppliers that are key to your business continuity. In other words, segment suppliers and corresponding supply chain by level of COVID-19 risk.
Gather continuous supply chain intelligence:
Looking for a benchmark? Here are the responses from a recent survey by the Business Continuity Institute.
Supply chain measures taken by surveyed organisations. Source: The BCI
Depending on the above analysis and arrangements you have with your suppliers, there are a few things to consider on the customer’s side:
Borrowing from the manufacturing world, increasing buffers in times like this will ensure a better chance of business continuity.
It might lead to higher costs at first glance but the cost of doing nothing (leading to an actual halt) is much higher.
As we have mentioned previously, paper-based or manual procurement processes will hinder more than help. The following mitigation strategies all require speed and agility:
Whilst there is a need to act fast, it doesn’t mean rushing. Organisations still need to practice supplier due diligence, if not more so, in the current climate.
The current pandemic has exposed both the bright and dark side of humanity. Indeed, organisations don’t want to be on the wrong side of history if they are to continue into the recovery phase.
Depending on each business’ financial capability, here are some actions to consider:
“If you want to be prepared for the occurrence of a random risk, then you have to make investments and decisions upfront, before the event.”
As businesses get through the near term, there are already calls for some old supply chain lessons to be re-learned. Namely:
That means, to prepare for a similar crisis in the future, now is the time to start applying the learnings from COVID-19, not afterwards.
Organisations can even start a “plan-ahead” team working alongside the crisis response team. Broadly speaking, there are 5 elements to consider when redesigning the supply chain for resilience:
Based on an understanding of these elements, organisations can:
Revisit the category strategy
Accelerate technology adoption
This is the end of our three-week series around business continuity planning. Let’s keep the conversation going by commenting below, following us on social or reaching out directly to our team. We are all in this together.
Whilst many countries and organisations are edging towards the next phase with recovery in mind, it might be a useful exercise to re-visit some questions that should have been asked a few weeks ago. And if they were asked, were there sufficient answers or solutions provided by technology?
This highlights how important it is for organisations to measure supplier performance and ensure they are getting a return on investment.
Knowing your third-party suppliers and contractors is no longer a nice-to-have. It’s a prerequisite for supply chain risk management. With supply chains becoming increasingly complex and volatile post-COVID, organisations should re-examine the very processes that underpin how they deliver goods/services.
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