How to ensure supply chains don’t turn into a showstopper

As Australia’s economy starts to reopen, and with consumers set to “revenge spend” more than $11 billion on Christmas presents alone, businesses should be planning for another V-shaped recovery. For companies of all sizes, this means that they should give sufficient attention to their supply chain, writes Paul Moreton from Proactis.

However, the “Lucky Country” may not be as lucky a second time round. International trade and production continues to be disrupted as emerging variants of the virus crop up in export markets. In fact, the World Trade Organisation’s latest Goods Barometer suggests that world trade might start to lag again as a result of Covid-related delays and restrictions. 

Shipping is also suffering a major Covid-19 hangover. While it has always been seen as a commodity, those at the top of the food chain are now paying over the odds to secure shipping container space in a desperate bid to get ahead of the curve. In fact, container shipping prices reached an ‘exorbitant’ level last month, enough to warrant the Australian Competition and Consumer Commission stepping in to investigate. 

A prepared supply chain

So how should businesses prepare for continued uncertainty, even as things at home start to look more positive? This question is particularly pertinent for those with international supply chains. Can international suppliers be relied upon to get the goods you require in the lead up to what is predicted to be one of the largest holiday seasons on record?

The first step is to take a detailed look at the companies already in your supply chain. Unfortunately, not all businesses have weathered the coronavirus storm, and some of these businesses may be located within your supply chain. If you need to replace a supplier, consider whether pre-coronavirus strategies are still fit for purpose.

When sourcing a new supplier, consider how to reduce risk and mitigate against potential future disruption. For example, could you work with a higher volume of suppliers to spread the demand across multiple companies? Or is it worth re-thinking supply chains: where the suppliers are located and building relationships with Australia-based ones instead? 

A second step for procurement teams is to look again at supplier contracts and consider whether now is the right opportunity to re-negotiate, especially if the arrival of goods is disrupted. Pre-pandemic contracts have often proved insufficient when tested by the challenges posed by Covid-19. It is important to remember that not only has your business changed in some way due to the pandemic, but your suppliers’ businesses have changed, too.

Depending on how fit for purpose the contract is, it might be necessary to re-negotiate a contract in its entirety. This will not only protect your business but lead to stronger commercial relationships that support companies in your supply chain. 

Leverage technology

Business managers will rightly be concerned about the amount of work this could require in the run up to a busy holiday season. Thankfully, technology exists to automate the evaluation and onboarding process for new suppliers, enabling companies to focus on getting their customer strategies in place instead.

Supplier qualification and selection tools should also be integrated into the central supplier directory. These processes increase the level of visibility a business has into the issues affecting individual suppliers, increasing transparency and making it easier to identify (and remedy) weaknesses before they cause an issue.

Further reading: Tech trends in procurement and the source-to-contract process.

After almost two years of lockdown uncertainty, trading restrictions and isolation from the rest of the world, optimism is in the air. But the opportunity for Australian businesses to capitalise on “revenge spending” and a post-lockdown bounce is not guaranteed for those reliant on weakened supply chains or international production. Taking steps to minimise risks in the supply chain now will help prepare businesses for what’s likely to be a bumper Christmas but an even rockier road ahead. 

About the author: Paul Moreton is Client Executive & Supplier Enablement Specialist at Proactis, a provider of supply chain and procurement software that integrates with all major ERP systems.