Managing Suppliers, Business & Money
Published on : Tuesday 02-06-2020
Manage your suppliers, manage your business, and manage your money; and always rely on your business instincts and on your hard data, says N P Rao.
Coronavirus or not, your business has to run. There is no other option since as a business owner, you need to support your employees, your vendors, your customers and yourself too. Large global enterprises with complex provider ecosystems are also struggling with their supply chain systems in the presence of this dangerous, unseen enemy who is stalking up everywhere. As it did in China, where over 460,000 firms have gone bankrupt in the first quarter of 2020, half of them in distribution and retail. The threat is real – it is actually no longer a threat. According to recent data from Dun & Bradstreet, services, wholesale, manufacturing and retail account for more than 75 per cent of businesses in the impacted region of China. On a global level, 51,000 companies have “one or more direct or Tier 1 supplier,” from the impacted region and an additional five million companies have Tier 2 suppliers there, with 938 of those being Fortune 1000 companies.
China was India’s top-most import source in 2018-19 with total imports at $70.39 billion. The country was also India’s third largest export destination with outbound shipments valued at $16.5 billion. With these statistics, it is clear that over 80% of MSMEs in India are likely to be impacted directly or indirectly. Businesses that rely on Chinese components in the electronics sector would have already exhausted their 20-30-day inventory by now.
Hence the question to now ask yourself is: How resilient and self-sustaining are your third-party suppliers and their suppliers? And how many of these are from impacted regions such as China?
Review your supply-chain
While there are innumerable theories, articles, blogs, ideas, free and paid advice, the steps are simple, and combined with a few simple automation techniques done in-house, these steps will go a long way in building a great deal of resiliency into your supply chain. Analyse your critical suppliers first. While you may have many suppliers, create a tier system of analysing your Tier 1 or critical suppliers first. Document the impact they have to your business and analyse their delivery locations and the delivery schedules. Remember that this can be a floating list – suppliers once rated lower may float to the top of the list if they are in a “coldspot” or they have enough inventory and delivery mechanisms. Review this list weekly and make adjustments, based on your own needs and the changing pandemic information. Negotiate good rates with these suppliers while the going is good.
Constantly Monitor: Monitor your suppliers constantly and see what is going on with their suppliers. Early warnings are good to mitigate risks. Stay up-to-date on legal changes and rules coming in each day.
Validate your information: Ask your suppliers to provide evidence that they are adhering to their business continuity plans. If they don’t have one, they need to build one. While trust is good, in such a volatile environment, verification is imperative.
Monitor delivery performance: Update your own supply chain documentation to reflect past, present and expected performance and constantly monitor the present. Review all your existing contracts, if necessary, with your legal person, to read the fine print of what is binding in a pandemic and what is not.
Seek alternates: Create a list of alternate suppliers and document the impact to your business in terms of delivery schedules, quality and cost.
Use a simple home-grown automation across all the above in order to ensure that you are on top of your business and your supply chain. These should typically cover the key aspects of a supply chain ecosystem – listed below are a few standard supply chain definitions, which should now become more than just text-book terms.
Supply Risk Management: This is the process of identifying, monitoring, detecting and mitigating threats to supply chain continuity
1- Sourcing and Commodity Management: Commodity Management is the process of developing a systematic approach to the entire usage cycle for a group of items
2- Procurement Analytics: This involves the capture and use of data to support factual decision making and gaining competitive advantage
3- Spend Management is the process of collecting, cleansing, classifying and analysing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring controls and compliance
4- Contract and legal safety, and
5- Contingent workforce and services: The policies and processes associated with managing contract labour and defining their services.
The threat is also an opportunity
As a business owner, there is a temptation to say, “I know my business best”. However, this is the time when the best of us can get blind-sided into either a false sense of security or the grip of irrational fear. Data is critical at such times. And always rely on your business instincts and on your hard data. Create simple customised systems that work for you – this is not the time to invest in fancy automation software which will do elaborate business strategies for you. Use the above parameters and seek expert advice on managing your supply chain, make your decisions data driven and constantly reviewed. There are many ways that expert advice will work in helping you with an outside-in view of your business and how it can survive and thrive. Pegasus Consulting brings in over 100-man years of hands-on expertise to work with you on providing custom solutions to manage your supply chain risk and even grow your business in times when your competitors may be struggling to survive.
N P Rao is the Managing Director of Pegasus Consulting and brings with him 35 years of multinational steel industry experience in India and New Zealand. He is a results-oriented leader, skilled at organizing and directing teams, an adept strategist experienced at providing value added propositions to enhance market share and cut into competition, as well as a technologist well known in the stainless-steel industry.
