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Supply chain health check: 10 things you should be doing in the COVID-19 era

06/30/2020 By

With the COVID-19 crisis affecting millions of people around the world, supply chains continue to face unprecedented disruption. Some companies have seen demand for their goods and services plummet, while others have experienced a sudden spike in sales or encountered difficulties in sourcing materials from suppliers. Compounding the challenges, not all countries have been affected by the crisis at the same time. While lockdown conditions may be easing in some locations, others continue to face major constraints, or even the prospect of a second wave of the virus.

As companies emerge from the storm, it will be more important than ever to test the resilience of their supply chains in the current environment — and strengthen them in preparation for any future crises. From stress-testing the financial health of the supply chain to becoming more agile when onboarding new suppliers, companies should consider the following 10 actions:

  1. Gain visibility over your supply chain. First and foremost, companies need to have a clear understanding of how many suppliers they use, where those suppliers are located geographically and how much business they are doing with those suppliers. This process should also include identifying any suppliers that are particularly crucial to the business.
  2. Stress test your supply chain’s financial health. It’s essential to assess how the impact of the crisis may have affected suppliers’ working capital requirements, longer term viability and future plans. In the current market, suppliers are generally open to having candid conversations with customers about their current challenges and requirements — so buyers should take the opportunity to review how their critical suppliers are faring.
  3. Review supplier risk. Companies should also have mechanisms in place to assess and monitor supplier risk on an ongoing basis. This should include assessing financial risk, but also understanding key suppliers’ future plans in areas such as M&A, capital investment and diversification. Other factors to consider include supplier-related risks, such as data security issues, cybersecurity events, compliance breaches and reputational damage.
  4. Monitor supplier performance. Looking forward, companies should measure the performance of their suppliers so that any shortcomings or disruptions can quickly be identified and addressed. This may mean using supplier performance scorecards and using key performance indicators (KPIs) to evaluate factors such as the quality of the goods and services provided, as well as other factors, such as price and delivery dates.
  5. Increase the agility of your supply chain. For many companies, the crisis has underlined the importance of having alternative sourcing arrangements in place. In the coming months, some countries will be open for business, whereas others will continue to operate under lockdown conditions. As a result, companies may need to be more agile when it comes to sourcing goods or services from suppliers in different geographical locations. At the same time, companies should also make sure that any efforts to diversify their supplier bases do not introduce unnecessary complexity.
  6. Speed up supplier onboarding. On a related note, companies that are able to onboard new suppliers rapidly and seamlessly will be better placed to switch between suppliers when the need arises. Suppliers in countries that are no longer in lockdown may find themselves inundated by business from new customers — and having a painless onboarding process is one thing companies can do to present themselves as an appealing business partner.
  7. Get rid of paper. Having streamlined electronic processes in place is more important than ever during challenging times, as many have discovered during the rapid transition to working from home models. Where invoice processing is concerned, businesses that currently rely on paper-based processes should consider adopting an automated invoice processing solution so they can receive and process supplier invoices without any disruption.
  8. Strengthen supplier relationships. During times of difficulty, strong supplier relationships are more valuable than ever. Companies should aim to be the customer of choice for their key suppliers — and this means maintaining good levels of communication. Relationships can also be strengthened by offering suppliers the opportunity to take early payment on their invoices, or by adopting a user-friendly supplier portal to facilitate the exchange of information.
  9. Offer early payments. Any cash flow pressures faced by suppliers can have a ripple effect for the companies purchasing goods from those suppliers. By offering suppliers early payment on their invoices through programs such as third-party-funded supply chain finance or self-funded dynamic discounting, companies can build a more stable and resilient supply chain. This not only strengthens essential supplier relationships but also means suppliers are better placed to continue operating without disruption during any future crisis.
  10. Improve cash forecasting. Getting a view of future cash flows can be challenging in the best of times, and even more so when market conditions are highly volatile. An accurate forecasting solution will enable companies to identify any upcoming cash gaps and plan accordingly — and it will make it easier to identify any cash surpluses that could be deployed to suppliers through a solution like dynamic discounting.

Nodreen Kiwanuka is Taulia’s Digital Content Manager.