Let's Get Real - facing up to current supply chain and distribution challenges

Brexit was a localised 6; Covid was a 9; Inflation is a deep ocean 7 with waves to come; energy changes are continuous shallow 5's already ricocheting off different countries in many different ways. War, sanctions and rebuilding create quakes of different amplitudes, depths and consequences. 

Supply chain challenges are not over. Like the earth's mantle, supply chains continue to experience seismic events. We should anticipate that the resulting shocks and shifts will keep battering existing and evolving supply chains for some time. 

What can you do to be prepared so your organisation can stand whilst the seismic shifts happen in the supply and distribution networks that we stand on? Procure4's Supply Chain Rachael Lear gives her opinion.

First: Manage your people's capacities in crucial areas of your businesses that will become constrained. At a minimum, explore – your existing sourcing capacity and preparedness for rapid, short cycle time reactive capacity. 

Explore the capacity of the critical functions that will support the onboarding of new suppliers – Quality, Data, Finance, Legal.

For organisations with more significant concerns, consider M&A capacity, as vertical integration of SMEs may be strategic and necessary to ensure a continuous supply as energy price impacts high energy producers and receivers of high energy cost-affected goods. 

Second, explore new or revisit previously discarded business cases that focus on increasing capacity in the above areas with technology solutions, e.g. RPA can ease back to the business's significant hands-on reactive capacity. The cost of Inflation is driving up people and parts prices, but not the underlying technology; so when you couple decreasing costs of more modular technology and the impacts of Inflation on people and parts, a more attractive ROI can result. 

Third, reconsider the cost of defective parts or the end-to-end of your organisation and its partners where you share transactional costs. Inflation is not only making those defective parts more expensive right now, but their negative value inside your overall supply chain will continue to grow as Inflation continues to bite. Now is a great time to look upstream to Suppliers for shared quality improvement programs with shared gains. Where significant reverse logistics is a natural part of your supply chain fabric, look downstream for efficiency and explore new circular economy options to convert more waste/cost streams into value streams. 

Fourth, be prepared with great information. Have a clear shared organisation-wide view of your critical parts. Ensure essential commodity type SKUs are accurately located and counted and rotated. Inventory accuracy is an Achilles heel organisation cannot afford to expose in the year head. In inflationary times, capital trapped in SLOBs may be a final nail between service and cessation of supply. 

Finally, consider the cost of failing to act. Be prepared to explain that resilience has a price, but it is less than the expense of not being prepared. Calculate the cost of expediting a critical category when your essential supplier files for bankruptcy. Consider the likely expedite plus new pricing in a market where energy offsets have eroded profit and recovery will be critical for survival for suppliers you are approaching.

How quickly will you experience erosion in your organisation's value position? For how long can you sustain it?

We are still in interesting times in Supply Chains for a couple of years. Acting now to establish your longer-term people solutions will help you prevent much shorter-term supply chain issues and make for organisational advantage in standing strong during another period of extraordinary supply chain network changes.

You will be surprised at how quickly we can create real value for your organisation through People Powered Procurement. Click here to contact us today.