Healthcheck
Reconnecting Your Supply Chain
Posted By: Marc Holland March 1, 2021
As the Covid-19 pandemic subsides, the economy is expected to roar back to life. Supply Chain Managers need to prepare for the better times ahead.
Nothing quite compares to that first day each year when the sun finally peeks through the clouds, the temperatures start to climb, and the birds start chirping again. Spring has finally sprung!
You dig into the dark corners of your wardrobe for those long-forsaken shorts, you lace up your sneakers, and you trot out to the garage to jump on your bicycle. What a great day for a delightful cruise around the old neighborhood! Maybe you'll even stop for some ice cream while you're out.
Oh no! Bummer!
Your old dependable ride is covered with dust, has one flat tire, and the chain is so dry that it's doubtful it'll squeak its way once around the gears before grinding to a halt!
Now, instead of enjoying the day, you're shifting old paint cans around and fumbling through creaky shelves to find your air pump and hopefully that half tube of grease you remember sticking somewhere. (Now where was that spot?)
As your neighbors pedal by, smiling and waving to you… you mutter to yourself:
"Why didn't I fix this @#?!& thing before the good weather arrived?".
Missing that first bike ride of the season is disappointing - but it's not nearly as bad as what Supply Chain Managers can face if they put off a supplier health check until after the economy starts to rebound.
Better times are ahead, and many economists believe the business environment will come back ferociously as markets emerge from the bitter winter of Covid 19 - fueled by pent-up demand and trillions of dollars of government support.
Are you ready?
Now is the time to make sure your Supply Chain is ready to roll on day one.
Here are a few tips for making sure your company can spring back into action as orders start to flow again:
1. "Nose Count" your suppliers
Business has been terrible for many market segments. Some of your suppliers, sadly, may not have not survived, and if you have not ordered in a while… and you might not even know it.
A simple phone call or email to those long idled suppliers is an important "life check" for your supply chain. Especially for those smaller suppliers that might not have "made the news" with their traumatic downturn.
2. "Alive" might not mean "Well"
Many suppliers that have survived have done so only by reducing manpower, materials, supplies, and in some cases hard production assets. They're running "day to day" and have little cash to operate the business.
For critical and chronically low-performing suppliers, in addition to a "life check", it is necessary to do a "wellness check".
a. Run a credit report to see if they are still viable and whether their payments to suppliers are lagging. This is a quick indicator of whether your supplier is as strong and viable as they were when you last interacted with them.
b. Make sure key personnel are still there.
There have been many layoffs and retirements during the pandemic.
If key personnel are no longer available… make sure their expertise was accounted for and replaced so that your orders don't suffer. If new people have been assigned to your account, speak to them to assess their knowledge and competency to fulfill your orders as well as they did pre-pandemic.
c. Confirm lead times.
Don't assume lead times in your system, nor those that are based upon historical performance, are still valid.
Less working capital, less manpower, less materials, less manufacturing resources means longer lead times.
d. Visit suspicious/critical suppliers.
After determining which critical suppliers have most likely been affected during the pandemic, the best way to affirm their health is with an on-site visit. As discussed in previous articles, visiting a supplier is only way you can witness the activity level on the shop floor, the people available to manage/work your orders, the materials in inventory, and the work in process level. In short, the overall health of the supplier.
Spend time with suppliers that you've determined to have weakened during the pandemic and re-affirm your requirements and expectations. If their ability to meet those hurdles has diminished… it's best to absorb that knowledge now so you can adjust your ordering parameters -- and put boots on the ground to help if necessary.
e. Be especially cognizant of suppliers who enjoyed improved lead times at the beginning of the pandemic.
Some suppliers performed well early in the crisis only because they were experiencing excess machine capacity during that period and/or they had artificially supported staffing levels (due to PPP funding).
Recently, as support programs have ended, reality has "hit" hard, and many such companies and have reduced capabilities for servicing their customers.
3. Find alternative suppliers if necessary.
It's a hard truth that the Covid pandemic likely changed some of your most reliable suppliers into your riskiest suppliers.
If your due diligence has determined the unhealthiness of a supplier - or worse yet, their disappearance -- now is the time to find replacements.
4. Update your demand planning system.
It might seem like months since you've placed any significant orders for materials and components - because it has been!
Don't rely upon the old parameters that are driving your internal planning system. If you have missing or weakened suppliers, reflect the risk in your demand planning system by intelligently altering lead times and safety stock levels.
5. Stress test your system.
The whole point of all this work is to update your model to reflect the new post-Covid world before the economy starts heating up again. Once all the analysis is done and your planning parameters are revised to reflect your new supply chain environment, stress test your system.
Load optimistic top level "what-if" demand into your system - and see where your supply chain needs serious attention.
You now have a road map to where your attention should be focused in the coming weeks and months to ensure that YOUR organization is fully capable of benefiting from the coming upswing.
Now… back to fixing that old bike!