There are many possible scenarios that may emerge over the coming months that could disrupt your supply chain, and it is important to have a plan in place for each possible scenario. Here we look at some of the practical steps at your disposal to help you prepare your supply chain risk management strategy.
Continued access to key components and materials
This will be the top priority for many businesses over the coming months. Once you identify exactly what these key components are, you can begin putting in place strategies to combat any future disruption. Strategies could include:
- Implementing an inventory strategy to ensure having ‘buffer stock’ of key materials and components. Intelligent buffer stock policies will not only minimise the risk of operational disruption but also ensure that any cash commitments are manageable.
- Multi-sourcing key commodities or strategic components will help to reduce reliance on any one supplier.
- Positioning inventory inside markets on the other side of a trade frontier will help to determine quantities and locations whilst also optimising warehouse and logistic solutions.
Don’t forget the indirect tax implications
There may be a temptation to make quick decisions on supply chain changes to mitigate risks or in response to disruption. However, it is vital businesses consider the indirect tax implications of those changes before a final decision is made.
In order to remain competitive in a post-coronavirus and Brexit world businesses must avoid unexpected costs due to supply shifts. Being aware of charges, such as overseas import VAT and customs duties, as a result of new arrangements or changes made to existing arrangements or new agreements made with suppliers and customers will be hugely helpful in staying ahead.
Ensure both supply chain resilience and commercial viability
Generally cost has been the primary criteria for choosing a supplier. In the ‘new normal’ there will need to be a more sophisticated cost / risk analysis in order to achieve strong supply chain resilience which may include paying more for local suppliers. However, maximising value from commercial arrangements should not be overlooked.
Many businesses are now developing new strategic relationships, but it is vital that contract and procurement specialists are used to negotiate terms across your supply chain whether that be with new or existing suppliers.
Cope with critical supplier failure
Unfortunately, the combination of the global pandemic and Brexit may result in some parts of your supply chain becoming insolvent. It is imperative that your business is fully prepared for this eventuality by employing the right short-term tactics and long-term strategies. Businesses should be:
- Working towards having alternative suppliers lined up should worse come to worst.
- Developing understanding as to whether any incremental business could be passed to an alternative existing supplier on improved terms.
- Establishing an approach to works in process and unfulfilled orders sitting in supplier premises should the scenario occur.
- Building a plan to manage recovery action from any Insolvency Practitioners appointed.
If you would like a strategic review of your current supply chain risk management, please contact