Recovery Planning – Step 3
Establish key supply management tools and strategies for the recovery and beyond
In the ForeOptics blog “Recipe for Business Resilience” we explain that the first step of business resilience is to quickly identify risk areas within your value chain – knowing your weakness is the key to getting stronger. In step 2 we describe the actions needed to determine likely future scenarios and to understand their implications from a supply, delivery, and financial perspective so you can make smart decisions in navigating your company over the coming weeks and months.
Now, in step 3, it is time to put this analysis to work by implementing risk mitigation strategies and plans. Research has shown that businesses that proactively work to mitigate the key risk areas are shown to suffer less stock value declines versus those who simply attempt to weather the storm. Under pressure to act quickly, business leaders are looking for guidance on where to deploy limited resources for maximum effect. Regardless of the shape of the recovery, whether it is a sharp V, W or even a protracted U, a key to success will be a well-prepared and nimble supply chain.
It’s never been more important to be able to look to your supply chain performance analytics to give you fast, reliable information on the health of your delivery system. The approach below outlines how supply chain leaders can survey the supply base, see areas requiring focus and action, and set the stage for future maturity and strategic improvement.
Establish Supplier Disruption Analytics: Create focus on high-risk suppliers and prevent future supply disruption
Identifying risk is critical. For a supply chain manager this should be an on-going and standard process. Too often, supply chain managers focus their attention on suppliers that have high COGS content in the end item or constitute a large portion of total spend. The risk is that organizations miss the supplier of the one late component causing a delay to your end customer.
A data-oriented approach to regularly assess and rank the supply chain based on agility, reliability, and responsiveness enables focus on suppliers and parts that can create risk regardless of spend and volume of content, and helps the supply chain team put energy where it is needed most.
Create A Focus On Delivery Assurance: Take supplier delivery from descriptive to predictive to prescriptive
Savvy supply chain leaders can take supplier disruption analytics to the next level, further reinforcing a strong, transparent supply chain, but also making it more predictable. Increasing the maturity of these analytics and how they are applied will lead to predictive, and then prescriptive, levels of utility – they can support sophisticated preventative planning by predicting what suppliers and parts may be late, and when. This helps strategic sourcing teams to create very targeted strategies. Key supply partnerships, “Supplier S&OP” processes, dual-sourcing, “high-touch” assistance, and even financial support are just a few strategies that can be focused on those weak points to improve the supply base overall.
Establishing A More Robust Supply Base Can Happen Quickly
Most companies have some supply chain performance data and scorecards. Research has shown that establishing standardization and stability around even just the definitions and use of this data in and of itself provides great insight. This means that even if you consider your organization low on the maturity curve for supplier management, its likely you have the data available to you now to create very useful information. Taking advantage of this during the critical recovery period should be a key activity of your supply chain team, and it can usually be done remotely as easily as at the office or plant. Maturing to the full potential of these tools and processes may take time, however getting started and making a difference can happen very quickly.
The challenges facing businesses will continue to evolve over time. Where your supply chain team focuses now may shift over the coming weeks and months. However, the processes and tools its uses do not have to change. Even as you concentrate your attention on the near term, prepare your supply chain for long term success by emphasizing robust analyses and processes now. Companies who have followed this path have reported significant improvements over time: increased on time delivery, reduced inventory investment, and decreased operating costs contributing to stronger predictive financial performance even through a difficult economic environment.
Stay tuned into ForeOptics for more information on how to proactively prepare your business for success through the recovery and into the future.
