In this five-part series, PASA will explore different aspects of supplier management and how to navigate them during the ongoing coronavirus pandemic. Who is being impacted the hardest, 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, we outline the key issues at play when it comes to keeping on top of your supply chain.
Procurement and supply chain professionals are adept at risk management. They’ve learned to respond efficiently to all kinds of disruption including natural disasters, political tensions, economic uncertainty, trade disputes, changing customer demands and black swan events.
But the spread of coronavirus around the world is perhaps the largest-scale disruption procurement and supply chain professionals have ever had to contend with. To date, over one million people have been infected and the virus has spread to 205 countries.
In early March, the Institute of Supply Management (ISM) released a report detailing how the outbreak has impacted supply chains. Almost 75% of respondents revealed their organisation had been disrupted by coronavirus, and there’s no doubt that percentage has risen since the survey was conducted. More than 90% of Fortune 1000 companies have experienced disruption and 55% of companies are planning to downgrade their growth outlooks.
Procurement professionals have been grappling with the fallout from factory shutdowns, shipping delays, border closures, bottlenecking at ports, consumer panic buying and operating with a reduced workforce.
The uncertainty and disruption caused by coronavirus could continue for many months more. As such, professionals must adapt to this new normal and manage their suppliers accordingly, to avoid disastrous repercussions for their supply chain. To establish which parts of your supply chain are the hardest hit, and understand what your organisation should be doing in response, the following four areas must be evaluated.
1. How are your supplier contracts affected by coronavirus?
It’s fundamental that procurement and supply chain professionals evaluate their contracts, and fast. In which cases will your organisation be liable for damages? Does a global pandemic trigger force majeure clauses in any of your contracts? Could there be room for any contract re-negotiation with suppliers? You’ll also need to weigh up the option of adjusting contracts to benefit your suppliers.
2. How should you be managing your diverse suppliers and SMEs during this time?
During this crisis, diverse suppliers and SMEs will be disproportionately affected. They’re more likely to struggle with increased demand for their services and more likely to struggle financially. What are other companies doing to support these suppliers and what can you learn from them?
3. How do you conduct a thorough risk assessment of your suppliers during this time?
The rapid spread of coronavirus and its ever-growing impact on the world demands that procurement and supply chain professionals conduct ongoing risk assessments. For example, if a critical supplier is likely to go bankrupt or be mandated to temporarily cease operations, you need to know about it before it happens so you can establish a robust contingency plan.
4. How do you work alongside your 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?
In part two of this series, published next week, PASA will explore in more detail how supplier contracts are being affected by coronavirus, and what you can do about it.