For coronavirus crisis, SourceDay customers share a consistent lesson: Prioritize supplier collaboration today

As manufacturers weather the uncertainty wrought by the coronavirus pandemic, they’re learning that effectively managing the information supply chain with a distributed workforce requires adjustments from the traditional approach.

Supply chain managers are now cut off from their office’s communications that they’ve grown dependent on to collaborate with suppliers — things like spreadsheets saved to desktops, office phones set up to make international calls on behalf of the company. The supply chain managers are either feeling the pain of relying on manual processes or adapting to a new world where critical supply chain information is intermediated by SaaS solutions.

The latter approach is how customers of SourceDay, a provider of supplier collaboration solutions for manufacturers, are handling the COVID-19 outbreak. In a briefing with Spend Matters on Thursday, the Austin, Texas-based provider shared data it has been tracking across its user base on how the outbreak is affecting manufacturer behavior, along with case studies of how the SourceDay users have applied the tool to combat this crisis.

The lessons from SourceDay customers outline a clear trend: Pursue mass segmentation and communication of priorities with suppliers rapidly, or risk being overwhelmed by the deluge of change orders, delays and cancellations created by the pandemic.

The Run-Up: How Activity on SourceDay Changed in Q1 2020

While the most severe effects of the coronavirus outbreak began to be felt by Americans generally in mid-March, many manufacturers have already been feeling the effects in their supply chains since January. Data from across the SourceDay user base illustrate this starkly.

Before COVID-19 emerged in China and began a spread that locked down the bulk of its manufacturing sector, SourceDay said it saw an average of 36% of POs in its system that required line changes. Of those changes, the vast majority (about 90%) were changes related to timing like data changes for deliveries. Cancellations also were relatively rare, with roughly 1% of PO lines seeing order reversals.

Starting in January, however, SourceDay began to notice significant deviations from normal user behavior. The rate amount of PO lines requiring changes spiked to 61% in March 2020. Similarly, PO cancellations doubled, to 3.6% from 0.9% in January, as buyers responded to changing demand from the outbreak.

Josh Tong, vice president of product at SourceDay, told Spend Matters that the changes in activity indicate manufacturers are proactively responding to fluctuations in demand and parts availability.

Meanwhile the increase in cancellations indicates that manufacturers are trying to prevent themselves from acquiring inventory they know they can’t move. Generally customers appear to be figuring out how to handle near-term logistics first, he said, to minimize business impact in the short term. While cancellations have not risen a lot, the impact of such decisions could be considerable, as some changes in PO lines could cost a supplier hundreds of thousands of dollars.

Proactive Response: A Customer Case Study

Since many manufacturers have been feeling the effects of shutdowns in China since January, SourceDay customers have been, to varying degrees, mitigating the current crisis for almost three months. One such client, Global Interconnect, a cable assembly manufacturer that, among many other products, manufactures parts for medical devices, felt the effects acutely, as 100% of its suppliers reside in China.

Once Troy Mauk, director of global procurement at Global Interconnect, realized the extent of COVID-19 on his supply base, he immediately used SourceDay to reconfirm all of the company’s open orders. He learned the virus was far from an isolated incident: Everything was going to be late.

As the outbreak spread beyond China, Mauk convened a cross-functional team to manage a response. Key to Global Interconnect’s risk mitigation was getting sales and procurement to collaborate and determine which customer orders needed to be expedited to hit targets, and which could handle slipping into late delivery (or at least adjust customer expectations ahead of time).

Global Interconnect’s “war room” then directed all of its suppliers to SourceDay’s “Hot List” feature, giving them a concrete list of what the highest priority orders were and any other push-outs and pull-ins they needed to know about. With orders and deliveries clearly segmented, the procurement team was able to better prioritize its expediting strategy — for example, by moving lighter parts to air delivery where cost allowed.

And while the COVID-19 crisis is far from over, the initial outbreak was manageable for Global Interconnect. The manufacturer experienced no factory downtime.

Looking to the next phase of its strategy, Global Interconnect is working to get its suppliers to think proactively about new issues. Now that it has conditioned everyone to use SourceDay’s Hot List segmentation for top priority orders, Mauk said he’s trying to push awareness of the “Radar” list — which presents upcoming orders for early collaboration/changes — to help avoid a “wait and see” mentality.

Global Interconnect’s story feels optimistic in this time of disruption. But the benefits of a proactive approach can only go so far in some cases. Another SourceDay customer, a transportation vehicle manufacturer in California, was forced to cease manufacturing operations in March, disrupting its inbound supply chain in the process. While no software tool can fully mitigate such a blow, SourceDay did accelerate the communication process for suppliers, allowing the manufacturer to mass update suppliers that they needed to reschedule inbound orders.

Preparing for a Rebound

Beyond the immediate crisis response, SourceDay customers also told the provider the tool is spurring a conversation about how technology is needed to enable a remote, distributed supply chain workforce. With non-essential manufacturing employees now working from home, businesses are learning they need dedicated tools for collaboration that live in the cloud and can be accessed from anywhere.

What’s more, after the crisis has eased and the manufacturing economy begins its rebound, manufacturers could even witness an unprecedented increase in demand as supply chains try to make up for lost months.

SourceDay CEO Tom Kieley expressed this sentiment in a blog post earlier in March, predicting companies that adopt cloud solutions for their supply chain will ride out the storm better and take advantage of the rebound when it comes.

“Over the last century, manufacturers weathered world wars, global recessions and natural disasters. The most successful ones got through those crises by using new technology to solve unprecedented challenges,” Kieley wrote. “The innovations that were born of necessity made their businesses stronger. The same will happen this time.”

To that end, SourceDay has created an introductory offer for manufacturers looking to modernize their supplier collaboration processes. New customers are now able to sign up with SourceDay and use the solution for free the first 90 days. The offer includes SourceDay’s PO and RFQ collaboration tools, as well as managed services related to support and enablement for buyers and suppliers. The free 90 days applies to a term agreement.

In the coming days, look for more details on SourceDay's solution in Spend Matters' "Coronavirus Response" series, our ongoing PRO coverage about dealing with the COVID-19 disruption. 

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