How do you create a resilient supply chain and protect your business in uncertain times?
Before the current Covid-19 crisis, for most businesses, sourcing supplies was all about pricing, timing and making savings where possible. Now that supply chains have become disrupted, the priority is to keep operations online by making sure those supply chains keep flowing.
Volatility wreaks havoc on traditional supply chain planning. Production levels, raw material purchases, logistics and order fulfilment become almost impossible to forecast.
In the current environment, orders of raw materials and supplies are more likely to be delayed. You should build in some extra time in order to ensure you don’t run out of stock before your next order is delivered.
Having a safety stock is a common approach to managing supplies during times of uncertainty. You don’t want to have too much cash tied up in extra stock but having a sensible buffer can be helpful in smoothing out procurement issues.
Working with a single supplier is risky. If you are dependent on one single supplier, it makes sense to do some research and identify a second supplier that you can use if your supply chain is cut off due to delivery issues, disruption, etc.
On the sales side, it may be necessary to manage your customer’s expectations regarding delivery timelines. For example, if you are an online retailer, it may take longer for goods to be delivered to customers through the mail. Up front communication with your customers is always best. If they know that there is a chance of a delivery being delayed, they are less likely to complain if it actually happens.
Managing cashflow is particularly important in uncertain times, that’s why cash is one of the three key element of our Xero trifecta. You may find that your suppliers are less willing to give your firm 30 days credit. If possible, you could try to negotiate a discount for settling invoices within 14 days. After all, cash is king.
If you’d like to talk more about protecting your business please get in touch.