The common thought is that COVID-19 has exposed weaknesses in our supply chains. The reality, however, is that most organisations have been dealing with significant unforeseen vulnerabilities and disruptions for at least the past decade. The word to focus on in that sentence is ‘unforeseen’. Admittedly, there are some disruptions difficult to anticipate. But the vast bulk of what threatens supply chains is predictable and manageable – if you have sound supplier risk and performance management.
Unfortunately, many organisations have battened down the hatches, believing that the time to address these issues is once the world grows more stable. Which will be… when, exactly? There will always be global crises to contend with, so waiting will only lead to missed opportunities.
Here are six tips for supplier risk and performance management that you can implement right now.
Where are your suppliers? What is their location in the world? Here are two reasons for supply chain disruption that are entirely predictable and, therefore, manageable.
Certain parts of the world are prone to annual weather events, some of which are being exacerbated by climate change. Californian bushfires are growing in frequency and intensity, and severe cyclones affecting the east and west coasts of India are projected to become more common. You must take factors like these into account when assessing your supply chain risk. There are multiple ways to act on this. You might work with suppliers in these vulnerable regions to strengthen their infrastructure or even relocate. You might even switch to an alternate supplier located in a more stable environment.
This one may seem a no-brainer, but it’s always surprising how many organisations fail to take this into account. Many countries have holidays or celebrations unique to them. In Christian countries, everything shuts down over Christmas. In China, the entire workforce packs up and goes home for four weeks over Chinese New Year. These are utterly predictable events that don’t have to be a disruption if managed well.
Current AI and machine learning can predict the future. Yep, you read that right. It’s possible right now to employ software that continuously scans news sites, targeting words and phrases determined by you. For instance, if you have a supplier that uses a particular port, you might set the AI to search for news articles containing the phrases ‘union’, ‘strike’ and ‘name of port’. There are always murmurings of these types of industrial disputes in the media before they eventuate. Modern AI can make you aware of them in time to change from a supplier whose operational risk has suddenly spiked.
Supply chain visibility is traditionally poor. Like looking into a murky pond, you can see the first few inches clearly but have no idea what lurks in the depths. Familiarity with our suppliers has to move beyond the first tier.
Granted, this isn’t easy. A single product might involve thousands of suppliers, from raw material through to final assembly. Some vendors might be unwilling to provide full transparency of their supply chains, which is a telling sign of risk in itself. Only once you have fully mapped your supply chain can you assess the true risks, their likelihood, and the possible contingencies that your organisation might be willing to adopt.
One of the best methods of supplier risk and performance management is regular meetings. Not only does this allow for consistent monitoring and the efficient address of minor hiccoughs, it also builds, develops and maintains an effective and productive relationship. Trust between procurer and supplier is vital. If the supplier believes a long term relationship is on the cards, they’re more likely to invest in technology and equipment necessary to the product they provide you.
These meetings are also the best way to address minor concerns, such as small lag times in deliveries, before they snowball into costly issues. You might even be able to bring issues to the supplier’s attention they weren’t aware of.
Social enterprises are an important aspect of many supply chains. They greatly benefit the social and physical environments they operate in and they make your product more attractive to the modern customer. But they can come with risks.
Social enterprises are typically small businesses which often don’t have the resources to adequately monitor their own supply chain. They also might feel the need to promise more than they can reliably deliver simply to compete with larger competitors. It’s incumbent upon those organisations working with social enterprises to ensure that the contract is fair to both parties and sits well within the capabilities of the social enterprise so a long and sustainable relationship can develop.
The global pandemic caused nearly all organisations to retreat into their shells. Right now, most executives are focused on business continuity. A McKinsey survey found that these executives are waiting for the world to stabilise before returning to innovation-related initiatives. Only a quarter have capturing new growth as their top priority.
This is a short-sighted strategy. Businesses that maintained their innovative focus throughout the 2009 financial crisis emerged stronger and outperformed the market average. Right now, executives need to be promoting innovation and proactivity when it comes to supplier risk and performance management. The weaknesses in supply chains exposed by COVID-19 are opportunities to introduce agility and resilience.
As you can see, anticipating supply chain disruptions relies upon good visibility of your supply network. This is the stumbling block for most organisations. If you want detailed and relevant knowledge of your vendors, you have to make use of cutting edge AI and machine learning. At Purchasing Index, we’ve been helping businesses get better visibility of their supply network for years. Not only can we uncover crucial information within your business, we can also make it easily understood.
Get in touch with Purchasing Index today and start anticipating those ‘unforeseen’ disruptions.