Four Critical Steps That Will Separate Supply Chain Leaders as Recession Looms
In Part One of this blog post, we discussed in some detail how uncertainty connected to the global pandemic rippled outward to become an enduring threat to supply chain operations — and consequently, to the economy as a whole. We also looked critically at the idea that the recession that is now expected will give supply chains a chance to recover. In that regard, we pointed out that recession does not necessarily mean demand reduction — certainly not across all industries — so, as always, supply chains must remain on high alert.
Here in Part Two, we’re going to talk about some specific steps supply chain leaders can take to respond to these continuing challenges. We think those who take this moment in the spotlight to craft a truly strategic response, have the opportunity to emerge as leaders, not only for their supply chain operations, but for their companies as a whole.
A Proactive Response to Uncertainty
The silver lining in the midst of all the uncertainty outlined in Part One is the opportunity supply chain leaders can create for themselves to meet these challenges with a heightened sense of purpose and resolution. Now is the time, if ever, for supply chain leaders to become more vocal — they’re already more visible! — and decisively pivot to a proactive stance for their own cause. Now’s the time to show how and why supply chain can offer competitive differentiation for your company.
There are, after all, aspects of the current supply chain disruption that are completely beyond our control — but the good news is, those are going to be beyond everyone’s control. But when you excel at strategic planning and responsive communication, you have the opportunity to differentiate yourself more powerfully than you do when everything and everybody is paddling along smoothly.
So as you make your plans A, B, (and C…) to counter the headwinds of a potential recession, here are several recommendations to consider, that could help you emerge from the storm with new strengths:
Align At The Top. No one has a crystal ball to predict the future. Supply chain shouldn’t get blamed for making the wrong decision simply because all the decisions are left to them! However, it is supply chain’s responsibility to be intentional about strategy, and that includes getting everyone from the CFO to the CEO understanding the latest facts and potential-futures, so they can participate and help guide decisions. Holding inventory or selling inventory will depend on the industry and the products being sold. There’s no one-size-fits-all path. Instead: get full agreement on what the plan is today; select the data points and thresholds that would constitute a revision of the strategy; and meet as often as needed to stay ahead of the curve.
Focus, Inward. Accomplishing the steps outlined above requires focus and follow-through. So right now, don’t worry about your competitors: remember, their decisions are based on their unique situations. In general, any time expended attending to the strategies and pronouncements of competitors will be better spent looking within: communicating with your own team, suppliers, and partners. As we’ll see immediately below, there’s plenty of work to do on these fronts.
Go Real Time With Collaboration. If you don’t already have a capability for real-time collaboration, by all means, start building a consensus to get one. If you’re basing decisions on spreadsheets that take days or even weeks to update — your chances for navigating safely through uncertainty are significantly hampered. Upgrade your supply chain with a single source of truth that’s updated in real-time and can be accessed from anywhere. In the same sweep, make sure your supply chain communications aren’t dependent on email. Email was never really designed to store information, let alone structure it! You’ll want to combine the definitive, latest information and communications into one authoritative, always up-to-the-second source. Modern tools not only make this possible — they make it easy.
Communicate More…Better…Faster. With a solid communication and data foundation established, the next space for improvement is increasing the pace of communication cycles with your suppliers. This can help keep you from getting out of synch and moving forward with plans that are disconnected from your supply base. Of course suppliers have different incentives that you‘ll want to bear in mind. Typically, they have lower gross margins, which encourages them to operate with more caution. (They have less upside from sales, and more downside from inventory.) Have the heart-to-heart conversation with them about your mutual goals; build your working agreements; then set up a regular cadence of communication. Bring your suppliers on board with the same real-time collaboration platform you’re using internally. These simple steps can make a world of difference — especially when the waters get rough.
Supply Chain, Recession: The View Ahead
The none-too-shocking summary we can derive from Parts One and Two of this blog series is that recession throws us all back on the innate quality of our supply chain operations, communications, and relationships.
After all, supply chains are supposed to be resilient, and our ability to interpret data, anticipate, communicate, and respond with clarity have always been the principle measures of quality for supply chain operations. Recession simply creates an environment that tests the mettle of our supply chains more often, and more keenly.
With the awakening of the consumer public and the everyday news cycle to the world’s dependence on supply chain operations, we expect that the next several years will continue to be characterized by a high degree of urgency. The stakes for supply chain issues will escalate, and the separation between top-tier and struggling providers will widen.
For those operating at the top of their game, we fully expect that the proactive approaches outlined above will become the new standard. The next two years will likely be a decisive era for many supply chain leaders: make sure you have the tools and guidance you need to make the most of it!