This global pandemic we are experiencing is the most significant economic disruption since the 1930s. Apart from the human tragedies every day, we have to consider the global disruption to business in general, and in the supply chain in particular.
In response to that the team at IDDEA are helping companies ensure they have what they need to keep delivering and keep their promises to their customers.
- Helping a construction company source the materials it needs to build much needed homes.
- Guiding a transport company to ensure that it can procure what it needs to keep trains on the track.
- Partnering with a major grocery retailer to keep bread, flour and canned products on the shelves.
Supply chains are under pressure; but the winning companies have developed a Five Point Procurement Plan to increase the resilience of supply and build better relationships with key suppliers. (In many cases they have also achieved significant cost savings, by focusing on the problem.)
Step one: Where do you start? Identify your top suppliers
To assist with strengthening your supply chain, start with the information you have at hand. Look at the data which can be used within your business. Your financial data provides visibility and a window into your supply base; it is the first step in identifying your critical suppliers. This spend information will tell you the story of where you are spending most of your money. It is important to measure these suppliers by spend but also by the risk they pose to your business.
To help identify top suppliers ask yourself:
- What would happen to my business if this supplier stopped trading?
- Would there be an immediate impact?
- Would you experience a supply interruption or how many weeks would it take to impact your business?
- What are the attributes of your current critical suppliers?
- How quickly can you change to an alternative?
Any single source supply channel, regardless of spend, may be a potential issue to your ongoing operation.
What supply criteria is key for your business? – it may be cost, quality, delivery or lead-time, service or brand reputation. Make a list of your essential requirements and reference it with your supplier base. Identify your critical suppliers and make a finalised list of who they are.
Step two: Reach out and communicate – suppliers
Once identified, it’s important to stay connected with these top suppliers even if you don’t need to buy currently.
Key questions to ask them:
- Are they still operating? (and in what capacity?)
- Have they new ways of working? If so, what are they?
- Are their strategies changing? (responses to difficult times tells a lot – flexibility, determination to get ahead of competition, etc.)
- What are they doing to minimise your risk as their customer?
- How can they support you? (renegotiate credit terms, redistribution of stock, buy back etc.)
- Can you work together to resolve any issues or think of better ways of working going forward?
Brainstorm to find opportunities within the conversation and ensure you continue to check in with them regularly.
Step 3: Establishing new suppliers – what’s involved?
If you feel you need to explore potential new suppliers, conducting market research will better inform you. Tools like Porter’s 5 forces, SWOT analysis and PESTLE analysis are very useful in conducting market analysis.
Think about the key questions you need to ask potential suppliers. Condition them effectively by developing an RFI (request for information) template.
This should include your important considerations and criteria such as:
- Do you require quality standards or certifications (e.g. ISO, QS)?
- Is the supplier financially viable?
- Will they extend you credit terms and establish a line of credit?
- What are the costs associated with shipping goods?
- Is location something you need to consider?
- What are the tiers of their raw materials?
- What are their product specifications or technical information?
Also think about the key questions you need to ask yourself:
- Should you change your sourcing strategies to include a more local approach?
- How will establishing new suppliers impact your costs?
- What is your breakeven figure?
- Can you absorb cost increases, or will you have to increase prices?
- Will new suppliers impact your brand?
- What are your competitors doing? Market research into your competitors response can provide interesting insights.
- Are there government funding schemes available to help with your capital and cash flow?
When you have answered the relevant questions above, finally ask yourself: How can you use this information to bring value to your organisation?
Step four: Reach out and communicate – key clients
Reach out to your key clients and share how you are building supply resilience with them; they will appreciate being informed and knowing that their demands can be met.
Points to discuss with clients:
- Advise clients on the work you are doing to minimise risk.
- Listen to their concerns and enquire as to how you can help.
- Ask can you work collaboratively to joint measure risk and plan for future growth.
- Inform your clients of the inventory you are holding and ask would they be interested in forward paying for this stock at a reduced cost?
- Find out if their strategy is changing and find an opportunity for you to be involved, this will help to strengthen your relationship.
Remember, you are the vital link between your suppliers and your clients, and you must endeavour to tighten that chain of supply.
Step five: Use this time wisely
Finally, look at your existing business operations holistically. Companies rarely have time for reflection and observation, now is the perfect time!
To identify what you can improve on ask yourself:
- What were those initiatives you felt were interesting but never had time to focus on?
- Do you need to enhance your marketing capabilities?
- Is there an opportunity for online trading?
- If you’re already online, is your eCommerce platform fit for purpose?
- Is it time to enhance your online presence?
- Can you build specifications to future proof your business?
- Can you avail of government grants and support to enhance your online platform?
Use this time to improve your business and plan for the near future. We will shortly see the return of employees to work and the reopening of non-essential retail outlets. You will need to develop new and innovative ways of working, both in your company and with your suppliers, that are compatible with social distancing.
- Analyse your data and making note of your key suppliers and materials.
- Collaborate with your suppliers
- Communicate with your customers – remember you are their supplier.
- Identify risks and opportunities in your supply chain and broaden your supply base. (Look for local opportunities; we all need to help each other and the answer to your supply chain might be closer than you think.)
- Use this time wisely.
Finally, remember that we will emerge from this period of uncertainty. What is important now is to take the lessons we have learned to build a stronger foundation from which we will rise and rebuild our businesses. We can be changed by what happens to us, but we will refuse to be reduced by it.
Stay safe and stay strong.
At IDDEA, we are committed to empowering professional buyers to positively impact their businesses through strategic sourcing. Changing buying behaviours can prove challenging, however our strategic procurement framework is proven in bringing success and improving results for businesses. Get more info here: https://iddea.ie/