Roughly a year ago, we published a blog post outlining the ways in which businesses needed to pivot in order to succeed amidst early–COVID supply chain shortages. Little did we know that one year later, the world would continue to be impacted by pandemic-associated delays.
Partial and full lockdowns across Canada (and the world), border restrictions, and ongoing supply chain shortages present a serious challenge to business. Thankfully, there are several short and long term strategies that can support Canadian businesses in mitigating supply chain and procurement risk in 2021 and beyond. Let’s take a closer look.
Recent research shows that 93% of companies have concerns about their supply chain, and 28% of respondents reported that they were diversifying. Delays and diversification were consistent across all industries, but most pronounced in the automotive and manufacturing sector (particularly computer and electronics). 40% of firms report that their plan is to focus on suppliers within their home region, and 32% are choosing suppliers based on the country’s level of COVID-19 control.
These disruptions present a number of challenges, spread across 3 main areas of potential risk:
Fraudulent activity and non-compliance
Advanced analytics are now necessary to ensure compliance and reduce the risk of fraud. Cases of procurement fraud and non-compliance are more likely during the pandemic, particularly as regulations continue to change and organizations need to adapt behaviour to comply on an ongoing basis.
Diminished workforces obviously face challenges to meet capacity. Define your organization’s critical functions and establish thresholds for minimum service expectations ahead of time, so that if a crisis strikes, you’re aware of how to respond.
As lockdowns, outbreaks, and border closures continue to create trouble, cost and scheduling problems can arise. Diversifying supply chains will enable organizations to pivot between the best options available at any given time.
How to increase resilience
So much of navigating the challenges inherent in COVID-era supply chain issues involves quickly pivoting based on changing information. Not only does your organization need to remain up-to-date on information across the globe, but you also need to be able to make decisions quickly. Thus, crisis related plans need to be easily accessible, multifaceted, and crafted with your specific needs in mind.
Response strategies should:
– Include a plan to modernize procurement and address resilience
– Identify alternate sourcing options for essential services and products
– Mitigate disruptions by prioritizing strategic procurement and sourcing
– Improve efficiency and productivity by assessing supplier relationships
– Accommodate process changes by adapting internal control system
–Consider “localizing “sourcing to reduce supply times and distances
-Review EOQ modelling to determine whether parameters are still relevant or need to change to ensure supply security
Planning for liquidity
It’s critical to monitor expenditures and prioritize cash flow right now. Liquidity is one of the main components that will enable resilience. When evaluating expenses, be detailed. Break them down into type and vendor, and consider the following:
– Can you obtain a better price through a new vendor or procurement process?
– Is the expenditure necessary right now, or could it be delayed or dropped entirely?
– Have an ongoing dialogue with vendors and be willing to negotiate payment terms
Strategy = success
In a time such as this where everything is constantly changing, strategy equals success. Having a detailed understanding about how to pivot, where to cut expenditures, and what to do in the event that a severe delay arises will determine which organizations weather this storm.
If your organization would like assistance developing strategy around supply chain and procurement efficiencies, reach out to the team at Zeifmans today to start a conversation.