In this five-part series, PASA explores different aspects of supplier management and how to navigate them during the ongoing coronavirus pandemic. Who is being impacted the most, how do you protect your supply chains, what are the best ways to manage your suppliers and what precautions should you be taking?
In part one of this series, PASA outlined the key issues at play when it comes to keeping on top of your supply chain.
In part two, PASA explored how supplier contracts are affected by coronavirus.
In part three PASA looked at the ways procurement might support their diverse suppliers and SMEs during the coronavirus crisis.
In part four PASA advised how to create a risk assessment of your suppliers during the coronavirus crisis.
In this fifth and final part, PASA looks at the best ways to work alongside suppliers to develop a business continuity plan.
A business continuity plan (BCP) is a must, but how do you collaborate and engage with your suppliers at a time when stress levels and confusion are already exceedingly high? How do you approach your suppliers and what questions should you be asking?
Here are four steps you should take when developing a BCP with your suppliers.
1. Understand your organisation’s exposure to each supplier
When developing a BCP, it’s important to take a holistic approach. Simply assessing how your function or team interacts with a particular supplier isn’t an efficient way to mitigate potential risks. Instead, establish how extensively your company is exposed, including how many teams work with that supplier, what is the total spend, and how many of your supplier’s employees work with, or contribute to, your organisation. Ultimately, you need to identify dependencies across the entire business.
2. Determine the business impact
Once you’ve conducted the necessary research to understand your organisation’s exposure, it’s time to assess the business impact. Let’s say you’re developing a BCP for a construction company. Your research reveals this supplier is currently in the process of building five new offices. If anything were to happen to this supplier, the impact on your organisation would be huge.
To prepare contingency strategies and create a realistic BCP you’ll need to understand how much of your business would be disrupted in the short and long-term. How would your employees, the services you offer and your customers be affected?
3. Create your BCP
Once you’ve gathered all the information you need and determined how and where your business is most at risk it’s time to get to work (alongside your supplier) to create the BCP. This needs to be detailed and thorough, addressing everything both your organisation and your supplier need to do in order to protect against the risks you’ve identified whilst allowing your organisation to continue with operations as normal. Consider the following:
- What is the short-term mitigation plan? Try to meet with your suppliers in person to acquire all the information you need. This is an opportunity to closely review your contracts (identifying any loopholes or areas for concern) and analyse financial details. It’s also a chance for your suppliers to raise their own concerns. Remember, they are going through an equally uncertain and stressful time. Try to be reassuring, establish a collaborative and open environment, and aim to reach decisions that benefit both parties.
- What is the long-term mitigation plan? In the coming months, regular site visits are advisable, during which you’ll be able to conduct further financial risk assessments. Ideally, these visits would include one-to-one meetings with the CFO. This will ensure your team completely understands the supplier’s financial situation and all the potential risks. You’ll also need to consider your long-term business strategy. Do you wish to continue working with this supplier in the future or should you begin looking for an alternate now in order to begin the onboarding process as soon as possible? If you can find a way to make things work with your existing suppliers, that is by far the best outcome during these difficult times.
4. Create a disaster recovery plan
The worst-case scenario is that your supplier is no longer able to meet contractual obligations. You’ll need to be fully prepared for this possibility by producing a disaster recovery plan as part of your BCP. What are your immediate steps and how will you protect yourself against the risk?
At present, many procurement teams are scrambling to develop BCPs in response to the threats posed by the coronavirus pandemic. In an ideal world, this is something professionals would be across at all times – as you might currently be discovering, it will save the headache in the long run.
On 6th May 2020 PASA will host a virtual roundtable titled How should procurement be ensuring business continuity in future? Facilitated by Sarah Blackie, Independent Management Consultant & Commercial Ninja specialising in procurement. Learn more: https://www.pasaconnect.com/
