The importance of contingency planning to protect resilience is key in today's hyperconnected global supply chains. Maine Pointe's Bill Forster offers his advice on how to weather the storm when the unexpected happens and how to be better prepared when the next one hits.
I think it is safe to say that a lot of us are currently housebound and our new office is the dining room table. I can't say I've ever experienced anything quite like this in my 30 years of supply chain experience. However, I have weathered a number of storms and what I can be sure of is that this too shall pass.
Building supply chain resilience
The trade war between the US and China has caused many companies to start looking at their supply chain and cost structures and begin rethinking their long-term strategies. However, there was no real sense of emergency around this in the short term. The coronavirus has changed that and, for many businesses, it's the straw that broke the camel's back. In the weeks and months ahead, supply chain resilience and risk management processes will be stress-tested, and weaknesses exposed. As a result, we will see more concerted efforts to decouple the US and Chinese economies as businesses actively seek to build resilience into their supply chain through diversification. One example of this is electronics retailer Best Buy, which says it will reduce products made in China to 40% of the cost of goods it sells, down from 60%. CEO Corie Barry said the virus “was one more piece of evidence that will continue to put pressure on diversifying supply lines.“[1]
As business leaders, we like to think we can solve everything, but with no clear end to the situation in sight many of us are struggling to know how to respond in a pragmatic way. We will get through this and, eventually, we will be better for it. It will take grit, innovation, teamwork, and empathy, coupled with a rigorous approach, process and methodology to move forward, but companies can and will survive and position themselves for success again.
I have to assume you are getting a lot of advice from a lot of different people with many different perspectives. So, let me add my two cents worth:
- Your Team -- Corral the best members of your team, the brightest, the most innovative, the most diverse. Bring them together (virtually), give them some structure, align them with tools and techniques, give them authority, and reduce their daily workload to focus on right-sizing the organization, driving out costs, evaluating all roles and responsibilities, driving customer communication, and develop a plan going forward that is adaptable, flexible, and lives and breathes within this new structure.
- Get Close to Your Customer -- We are creatures who yearn for community, conversation, and attention. We trust people who have our best interests at heart to solve our problems. Do whatever it takes, even if doesn't help the bottom line. Communicate often to solve issues. This will help you stay close to the market, whether you are in a B2B or B2C environment.
- Demand Flexibility -- Look for alternative channels to support your customer base. Go direct if needed, expand your offering through omni-channels, develop robust deliveries and innovative solutions that involve low touch. Through customer engagement, keep a close eye on trends, market changes, and government regulations.
- Supply Flexibility -- Evaluate all suppliers. Create a robust optionality, strategy, approach, and methodology to gain flexibility in your supplier base. All costs, fixed and variable, are in play for cost reduction, including contract manufacturers, logistics providers, real estate, and operations. Also, in these times of unpredictable demand, it is paramount to increase the frequency and the accuracy of communication, forecasting, and market information with suppliers so they can adjust their production schedules, inventory levels, methods of transportation, etc. to optimize the lowest cost service in this unstable environment.
- Stabilization and Drive -- This will be defined by the new normal and by how long this current environment lasts. It will depend on your perspective on what “stable“ means. I would argue you have reached stabilization when you start seeing more positive opportunities than negative situations, when demand is more predictable as you capitalize on new-found customer insights and enhanced customer relationships, and when the bonds with suppliers become stronger because you have weathered the storm together.
Don't go it alone
This sounds self-serving, but you should not go it alone. Outside expertise, outside points of view, innovation, formalized processes, methodology, and accelerated approaches are needed in these times.
Optimizing your supply chain from a risk, cost, cash, quality and growth perspective will help secure supplier relationships, prevent supply bottlenecks and ensure your company is operating both legally and ethically. Taking a Total Value Optimization (TVO)™ approach to risk management and integrated supply chain optimization helps business leaders increase visibility and implement accelerated measurable improvements across the global supply chain. It enables executives to quantify EBITDA improvements, together with operational and working capital risks and opportunities, then develop a documented implementation road map for improvement.
Even with your focused team, you need an outside perspective to make sure biases are checked at the door. Don't wait for the next storm to hit. We're here to help. Contact us today.
[1] Fortune Magazine April 2020 Edition
About Us
Maine Pointe, a member of the SGS Group, is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics, operations and data analytics. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill digital supply chain to deliver the greatest value to customers and stakeholders at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe's engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.co