Supplier Relationships during difficult times
By Jim Goodhead CEng, FCIPS
Early in 2020 there were two major issues facing the UK Global Supply Chains, the uncertainty of the US- China Trade wars and the resulting implementation of trade barriers, and the final agreement exit of the UK from the EU on the planned date of 31st January 2021. If these challenges did not bring enough uncertainty, then COVID 19 hit. This worldwide pandemic has brought greater uncertainty to Supply Chains than any single other event since World War 2. There are many resulting stories in the press of supply chains suffering liquidity problems caused by COVID19, whether its INTU and its tenants refusing to pay their quarterly rent, or the Construction Industry. We are indeed navigating through unchartered waters, this is despite the government paying up to 80% of the workforce costs, in the attempt to maintain economic capacity ready for the upturn.
How we will recover, whether it’s a bounce or a slow recovery, only history knows or economists can try to predict. What is certain there will be a new normal – which still must be established. Some firms which have been on the brink for many years, Laura Ashley being a prime example, have now folded, unfortunately there could be more.
As with all major events there are some winners as well, Pharma and on-line retailers are examples of two sectors doing well. Believe it or not, their supply chains are under pressure as well, to produce more and now.
Badly hit and doing well supply chains need to have one common denominator to succeed, both must have resilient supply chains.
A resilient supply chain is one that can react to changes in demand. Whether its demand going up or contracting. COVID 19 and the other two challenges, will lead to a re-optimisation of these supply chains around resilience and its flexibility, moving away from the traditional cost optimisation.
How do we achieve this?
Having closer relationships with all your key suppliers currently is more important than ever, understanding their weak points. Whether its manufacturing with a single source supplier, a software house providing you with its IP, failure to understand and act to prevent a supply chain partner going wrong, is key to your future ability to fulfil customers demand.
The keyways to prevent this are:
1. Fully understand all your supply chains, not just Tiers 1 and 2
2. Process map the associated value chain
3. Manage and work with the whole supply chain on long term capacity capabilities and any short term ramp ups.
4. Do your supply chains have enough cash? Whether its to survive or enough to ramp up quickly to meet increased demand
5. Communicate regularly – understand the supply base and what you can do. Feel their pulse!
6. Act quickly if you have a problem, understand and manage your risks
7. Sharing information, especially demand information. Avoid the Forrester Effect of unbalanced capacity
8. Always have a Plan B
Acting aggressively or not caring about suppliers at this time is old school thinking, supply chains are often measured by the weakest link. The trouble in these times we do not know what this link is, so we must understand all the supply chain and manage it accordingly.
This brings me onto my final point, do we as a profession have the skills or resources to invest in making supply chains resilient and moving away from cost optimised ones?
Having extra interim, consultants or investing in your own teams’ skills to change this supply chain emphasis, is the only way we can move to sustainable resilient supply chains. Whether is mapping factory capacities, managing risk or having balanced inventories – new skills are needed, in the move away from traditional cost optimisation models.
Jim started his working career as a Production Engineer, after graduating moved into Procurement and Supply Chain. Over the last 25 years Jim has worked in many industries including automotive sector, Construction , ICT infrastructure, FM , transportation and the wider manufacturing sector. Four years ago Jim set up his own Procurement and Supply Chain consultancy business, Stour Procurement Ltd. Customers include FT 250 companies, SMEs , Government departments , international industries etc and as well providing mentoring and coaching services.