6 Keys to Pandemic Preparedness
Companies that have handled supply chain disruption the best to date did the following 6 things well in advance of the pandemic.
Each day purchasing teams across the world work to stay abreast of developments with the COVID-19 pandemic while attempting to secure the raw materials and component parts for their companies’ respective contributions to industry supply chains.
A Dun & Bradstreet report in mid-February identified more than 50,000 companies with Tier 1 suppliers located in some of the areas in China hardest hit by the novel coronavirus. The same report identified an additional 5 million Tier 2 suppliers in those same areas. Meanwhile more than 3,000 of those Chinese suppliers issued force majeure declarations during the first months of the pandemic.
Some procurement teams are looking at what they could have done differently to be better prepared for the disruptions that all supply chains are currently experiencing. In my practice, I have found the companies that have fared the best to date did the following well in advance of the pandemic.
- They invested significant resources in mapping their supply network for all key products. Some of these teams spent hundreds of hours mapping their company’s supply networks into the lower tiers after prior disruptions from natural disasters or epidemics related to other viruses. They are reaping the benefit of that work today.
- They required their suppliers to participate in supply chain mapping studies as part of their contracting process. There is no better time to gain the cooperation of the supplier than at the beginning of the relationship and in the absence of exigent circumstances.
- They insisted on their supply contracts identifying projected recovery times and strategies in case of supply chain disruption. They were brave enough to ask what is a right without a remedy.
- They applied key performance indicators to their procurement function based not only on cost savings but also on revenue certainty.
- They diversified their supply chains even at the risk of reduced cost savings and ensured that tooling for key components or products existed in diverse geographic locations. Having tooling in Asia and North America does not mean both sets need to be utilized at the same time. But having the tooling in at least one area that is not subject to lockdown orders will no longer be viewed as a luxury.
- They viewed the above body of work as an investment in the potential ability to capture new business from competitors who failed to make similar investments.