How can we support our supply chains? (in 8 steps)
Updated: 3 days ago
Everybody has become acutely aware of what happens when supply chains are disrupted because of a major event or crisis. Unfortunately, this is now being felt at the sharp end across the globe, with empty shelves and not enough equipment in our hospitals.
For certain, this is a worrying state of affairs, but we are a nation built on manufacturing and well- run logistics, albeit that Just In Time is not totally working for us right now. But it will only be a matter of time before our supply chains across all sectors get a handle on things and adjust to the new realities.
The reason we can say this so positively, is that we work with manufacturers and their suppliers and customers day in, day out, and we’ve been highly encouraged by the levels of collaboration, co-operation and teamwork we’ve already seen.
Supermarket chains are working together to make sure shelves are stocked, community pharmacies are keeping our vulnerable citizens supplied with the food and medicines they need and manufacturers up and down the country are stepping in to help produce vital hospital equipment. Even different countries are supporting each other with staffing and medical equipment, which is unprecedented at the levels that are being experienced.
There’s no doubt many businesses are having to deal with rapidly-changing supply chains and many other operational challenges they’ve never faced before.
We’re keen to see that our supply chains operate as efficiently and effectively as they can. We’ll be sharing our expertise in a series of free articles and webinars that will help companies to avoid the pitfalls in order to remain operationally effective.
In the meantime, we’ve highlighted 8 steps that are designed to help manufacturers source their suppliers now, and for the foreseeable future:
1. SET CLEAR OBJECTIVES AND MAKE YOURSELF ATTRACTIVE TO LONG-TERM SUPPLIERS
How long would you like to establish a supplier relationship for? What type of relationship would you like? What service and support do you expect? Which business stakeholders need to be involved?
If you engage with suppliers on a longer-term basis, you’ll achieve consistency and on-going efficiencies with lead times, quality and cost benefits. What’s even better is if your long-term suppliers have the same values as you, and you can both use them, not only for mutual benefit, but for the benefit of customers and other stakeholders.
2. WHICH SUPPLIERS COULD SUPPLY YOU RIGHT NOW?
Research the market – use your networks/membership organisations, the internet, trade associations and talk to others, including your current suppliers.
Supply chains that seemed solid just a month ago, are now no longer available to us. But this doesn’t have to be a catastrophe. There’s a lot you can do to access new supply chains and if you do your due diligence, as we’re proposing in this article, then you may have more robust supply chains for your future competitive advantage.
3. WHAT ARE YOUR SUPPLIERS’ CURRENT CAPABILITIES?
In terms of your delivery performance, quality performance, accreditations, financial strength, technical capabilities and relationship management.
This is where your due diligence really comes into play. Get this right, and you won’t back, but get it wrong and it could be costly, not just for your business, but for customers and end users. Right now the quality of equipment, such as ventilators, is quite literally life or death. You need to get this right, and there’s help available to make sure you do.
4. WHAT ARE YOUR TERMS OF BUSINESS?
Work on your terms and not your supplier’s terms. Which elements are most important to you and your company right now?
In these uncertain times, like many thousands of others, you’re probably looking to secure the survival of your business. And manufacturing in the UK has never been more important than it is right now. In any Corporate Social Responsibility policy, financial sustainability is one of the foundations for any business. Pay attention to your terms of business and make sure that they safeguard your company’s sustainable future.
5. ASSESS EACH SUPPLIER AND MEASURE/SCORE PERFORMANCE
Identify any gaps within your current requirements and make sure you have credible evidence to support your scoring!
This is a way of benchmarking, so that you can make sure you have the right supply chains in place, especially if you’re a larger company with multiple products and multiple supply chains. Work out which KPIs and benchmarks are important to your business, customers and suppliers. This is all about supplier relationship management, where cost pricing is not always the key driver.
6. NEGOTIATE WITH SUPPLIERS AROUND THE INFO GAPS YOU’VE IDENTIFIED
Make sure you give every supplier a chance to meet the success criteria you’ve set. Be prepared to negotiate on capabilities and terms of business.
We are in difficult times, when all around us has descended into chaos, but there are lots of things you can do to mitigate risks, both now and in the future. Understanding your supplier markets in as much detail as you understand your customer markets will mean that you can negotiate effectively in ways that are mutually beneficial.
7. BE CLEAR ON COSTS
Never has this point been so crucial as it is now. Once you’re clear on your supplier’s capabilities, then discuss costs.
What is your cost strategy? Are there any hidden costs? What is your Most Desirable Outcome (MDO)? What is the Least Acceptable Agreement (LAA)? What is the Best Alternative to a Negotiated Agreement (BATNA)?
And remember that effective supply chains aren’t always built on the cheapest cost, you need to factor in value-driven supply chains, as well cost-driven supply chains. It’s all about having that fine balance. The key message is be clear on costs and understand what this means. Does a supplier with higher costs give you the higher quality that you need? Does that higher cost have added value in terms of reliability? It’s no good having a cheaper component if you’re going to have to wait 6 months for it when you need it now. The ventilator shortage situation at the moment is a prime example of this.
8. SELECT THE BEST OVERALL SUPPLIER
Once you’ve gone through the process of doing your due diligence on what the business needs are, what the supplier market place looks like and offers, and you’ve considered all of the elements, then you’ll be in a position to select the best overall supplier.
Overlook one or more of these steps and the cost could end up being a lot higher than you anticipated on numerous levels. The best overall supplier is the one that provides you with the right levels of quality and service at a value-for-money price (note we didn’t say ‘cheapest price’ here).
A final note…
In times of crisis, we can sometimes opt too quickly for the easiest option, which will be more costly in the long run. Instead, all you need to do is pay attention to the detail, do your due diligence and keep an eye on the bigger picture.
We hope you’ve found this information useful, if you have any questions or would like further help or advice, please contact us on 0330 311 2601 or firstname.lastname@example.org.