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The pandemic has created upheaval in supply chains. How do we address the problems that may still arise?
Businesses everywhere are currently facing an unprecedented situation and they need to learn to adapt to this new normal and shift to dynamic planning mode.
As the situation evolves, so will the restrictions and you’ll have to reassess your plan in order to remain aligned with your priorities. Organizations must be agile and speed up their planning and execution cycles, especially when it comes to managing their supply chains.
Uncertainty will linger due to constraints in the international markets and concerns surrounding health and health measures. So, you’ll need to ask yourself a number of questions in order to rebuild a strong supply chain and reduce all potential risks of supply chain disruption.
1. Who are your suppliers and what are your critical products?
It’s imperative that you analyze and map your supply chain to identify your strengths and weaknesses. Create a profile of your suppliers:
- Who are they?
- Where are they located?
- Who supplies what?
Whether you source your products internationally or locally—from Quebec and elsewhere in Canada—the value chain with certain countries or supplies may be broken. They might not yet be authorized to resume their activities either because of laws in effect or they did not survive the crisis.
It’s also important to identify your critical products and look for alternative solutions in case your supply chain is disrupted.
2. Are your supply levels and stockpiles sufficient?
We’re already seeing a shortage of certain products and consumer insecurity can be misleading and give off the impression that there’s a shortage on the market. The current context is creating a disequilibrium with major demand-supply fluctuations in all markets. Your supply level may therefore not be balanced along your supply chain.
You must review your stockpiles. Be alert and anticipate the needs and requirements of your clients and suppliers in an effort to synchronize all stages of your supply chain. This will help you take quick action if there’s a problem.
3. How can you ensure that health measures are observed throughout the supply chain?
Health security measures vary from one country to another. Before offering a product or service to a client, make sure that public health recommendations are observed at all levels. Mandatory quarantines may trigger delays along your supply and production chain, in turn resulting in cost overruns and impacting your profit margins.
4. Should you repatriate your production to Canada?
In addition to the recent issues that have surfaced and to ensure supply chain continuity, you might have to consider new routes or methods of transportation to source from certain impacted markets, or even find new suppliers. It’s a great opportunity to consider relocating your production to Canada, or Quebec, in order to lower your costs and support the local economy.
For example, a business that normally sources from China because of low production costs but is experiencing a delay in production due to logistical or health constraints may be better off switching to a local supplier. Even if the local manufacturer has a higher production cost, the cost difference may be offset by a productivity gain.
The current pandemic is showing us not only how fragile our ecosystem is, but also how important it is for us to invest in our local economy.
5. Do you have enough liquidity to meet demand and do you have adequate financing?
Current constraints have a direct impact on the financial return of organizations and moving forward, everyone will need liquidity.
For example, as a business, you’ll need liquidity and want to make payments within 60 days. Your supplier will also need liquidity and want you to settle your payments as soon as possible. So, you’ll need to reconsider your payment mechanisms and assess your financing needs.
What type of payment terms should you negotiate with your suppliers? That will likely have an impact on the line of credit you’ll need to take out—speak with your banker.
6. Ultimately, how will all of these constraints affect your customer service?
The decisions you’ll end up making after answering these questions may result in delays in your supply chain, in turn affecting your manufacturing and distribution timelines and, ultimately, your customer service.
Some businesses have integrated new technologies to their manufacturing and distribution processes that may no longer be reliable because the entire chain is now disrupted. Delays will fluctuate and you may change suppliers—and it will all affect your processes.
It’s more important than ever that you communicate with your clients and set clear priorities regarding your products and services. It may not be necessary to offer all of your usual products. You could prioritize certain products or formats that will allow you to meet your clients’ urgent needs. Gradually as you build your supply chain back up, you can begin to reintroduce other products.
Developing a stronger supply chain for the future
The decisions you make today will be the key to success. As the situation becomes more stable, you can review the options that will allow you to consolidate your supply chain. If you tread with caution over the next few months, you will pull your business out of this crisis and come out stronger and better prepared to face the next waves.