Your inventory is dwindling. Some of your core suppliers are in vulnerable zones. You’re paying twice as much to procure the required materials. Your cash reserves are low.

As the COVID-19 pandemic continues to impact business activities across the world, procurement and supply chain leaders are looking for cost-effective ways to prevent further disruptions. The latest bulletin from GEP, Securing Supplies: A Rapid Action Plan to Maintain Supply Continuity, recommends a four-step plan that companies can execute immediately to manage their supply chains.

What’s Inside:

  • Identifying and assessing your supply chain risks
  • Sourcing, contracting and cost-optimization solutions
  • The best way to implement the plan: a focused team and external experts

A must-read for supply chain leaders who need quick solutions to the supply chain risks their companies are facing.

 

SECURING SUPPLIES: A RAPID ACTION PLAN TO MAINTAIN SUPPLY CONTINUITY

The real impact of the COVID-19 crisis and its resultant lockdowns on supply chains is only about to be felt.

While there have been supply chain disruptions as a result of the shutdown in China since the beginning of 2020, many organizations have had inventory to see them through, and as demand tapered, their stocks have lasted longer. Others have taken tactical decisions to ensure supply continuity that have led to much higher costs — as much as two to three times because of air imports, despite the drop in commodity prices.

However, the coronavirus outbreak has not yet been contained, and the crisis has acquired global proportions — country lockdowns, quarantine and movement restrictions mean that the situation is not going to get back to normal anytime soon.

Meanwhile, the inventory is dwindling.

Given the situation, business leaders will be grappling with the following questions:

  • How do we minimize supply chain disruptions in today’s context?
  • What should be our approach in relation to strategic, preferred and tactical suppliers to ensure supply chain continuity?
  • What should our contracting strategy be in the near term? How should we realign existing contracts?
  • How can we accelerate cost optimization in the near term to offset losses on account of the disruption?

To address these concerns, GEP proposes a four-step rapid action plan founded on our assessment of supply chain vulnerabilities.

RAPID SUPPLY CHAIN ASSESSMENT

The purpose of rapid supply chain risk assessment is to assess the impact on the operational supply chain of clients focused on preventing further supply chain disruptions.

THE APPROACH
IDENTIFICATION ASSESSMENT ACTIONS
  • Team mobilization
  • Data collection and analysis
  • Identification of suppliers in coronavirus-affected territories
  • Identification of category / itemsupply chains impacted
  • Map inventories of impacted value chain
  • Analyze supply linkages of impacted supply chains
  • Assess stocks across value chain from raw materials to finished goods
  • Assess possibility of broken linkages in supply chain up to Tier 2 of critical suppliers
  • Assess suppliers’ preparedness at critical linkages
  • Identify alternative suppliers and validate their ability to execute across the value chain
  • Prepare differentiated contingency action plan based on supplier vulnerability
  • Initiate risk tracking for all supply chains
  • Execute actions through integrated project management office (PMO)
EXPECTED OUTCOMES
  • Raw materials/component supply chains that can be managed by suppliers and addressed through contracts are identified
  • Vulnerable supply chains that need client attention for financial support as well as those that need close monitoring are identified
  • Supply chains that are broken and may need alternative suppliers are ascertained
  • Integrated PMO set up to provide differentiated attention
  • Process and mitigation plan drawn up to deal with any such future crisis

RAPID SOURCING

The aim here is to discover alternative suppliers, get a fresh perspective on rates and urgently onboard vendors for categories that can compromise supply chain continuity.

THE APPROACH
IDENTIFICATION ASSESSMENT ACTIONS
  • Team mobilization
  • Data collection and analysis of categories
  • Mapping of categories across strategic, preferred and operational suppliers
  • Identification of categories that have both limited and multiple suppliers
  • Assess both limited and multiple suppliers per item or category
  • Multi-supplier scenario: Re-scope supplies among existing suppliers
  • Limited supplier scenario: Build a plan to sustain deliveries over immediate term through alternative sources: initiate supplier and price discovery activities
  • Drive the supplier approval process through rapid evaluation/testing
  • Onboard suppliers for the new scope: Explore the possibility of sub-tierization with existing suppliers to maintain quality and quantity, and conduct detailed supplier assessments in the initial period
  • Report to integrated PMO to drive sourcing and implementation efforts
EXPECTED OUTCOMES
  • Redefined supply scope across strategic, preferred and operational suppliers
  • New suppliers onboarded for categories/items at risk
  • Established process and teams to ensure supply continuity

RAPID CONTRACT REDEFINITION

The objective is to assess the contracts at risk and work on re-scoping supplies of lower-tier suppliers (of Tier 1 suppliers) to mitigate the challenges they face in ensuring supply chain continuity.

THE APPROACH
IDENTIFICATION ASSESSMENT ACTIONS
  • Team mobilization
  • Data collection on contracts that constitute 80% by value or volume
  • Data analysis of contracts based on A, B, C and X, Y, Z classifications from value and volume/demand variability perspectives
  • Identification of contracts that are at risk: Identify re-scoping opportunities and new contracts to be created
  • Study impact on contracts because of the COVID-19 pandemic
  • Assess levers that drive supply continuity and cost efficiency
  • Evaluate trends that positively or adversely impact client situation
  • Exploit market conditions, wherever possible, to ensure supply continuity and cost efficiency
  • Drive sourcing and implementation efforts: Execute new contracts and track contract performance
  • Report to integrated PMO on contracting actions and challenges
EXPECTED OUTCOMES
  • Mitigation actions taken for contracts that would be impacted by the disruption
  • Contracts with existing suppliers re-negotiated with supply re-scoping
  • Contracts negotiated with new suppliers to support supply continuity
  • PMO established to track contract performance triggers rapid sourcing process in case of risk escalation

RAPID COST OPTIMIZATION

This exercise is directed toward finding cost-takeout opportunities in the near term, where execution is not bogged down by long, elaborate approval processes.

THE APPROACH
IDENTIFICATION ASSESSMENT ACTIONS
  • Data collection and analysis
  • Identification of spends impacted by disruption
  • Identification of category / item supply chains that are not affected
  • For spends impacted by disruption: Consider re-sourcing,supply re-scoping possibilities, or alternative options
  • For spends not impacted by disruption: Collaboratively identify opportunities with stakeholders; assess and accelerate approval process; evaluate category with modified approval process to facilitate quick implementation
  • Drive agile processes by:
    - Acting as a single window to manage all stakeholder queries
    - Ensuring approvals are as per modified approval process
    - Resolving issues and conflicts among stakeholders in the value chain
  • Report to the integrated PMO on cost-optimization actions, results and challenges
EXPECTED OUTCOMES
  • Assessment of all spend that would be impacted by the disruption and potential mitigation actions
  • Identification of near-term opportunities to ensure supply continuity and competitiveness
    • Multiple, small quick-win opportunities driven by the “Just Do It” principle for immediate cost take-outs
    • Parallel source identification and onboarding for high-risk categories
    • Better understanding of commodity cycle for leveraging and de-risking its impact
  • PMO set up to drive agile processes

FORM A RAPID TEAM

To implement the four-step plan, companies must form a rapid action team represented by relevant internal stakeholders and focused on managing the supply chain. This team would work collaboratively and continuously — with each other and with external experts — thus providing feedback to all sections involved in making this initiative a success.

RAPID RESPONSE SOLUTIONS FROM GEP

As the coronavirus crisis intensifies, managing your supply chain is going to get even more challenging. It may be worth finding a partner with deep experience in procurement and supply chain management to reinforce your capabilities and help you stay on course.

If you would like to have a conversation about how we can help, please reach out to our supply chain leadership.

LET'S TALK

Ajay Tiwari

Senior Director

GEP

Ajay brings over 17 years of consulting experience focused on procurement and supply chain transformation, including strategic sourcing, supply chain risk assessment, network structure, planning, organization design and technology assessment. He has rich experience in automotive, CPG and process industries.