Imagine that your most important supplier has unexpectedly announced they have ceased trading. What would you do? Desperately Google for other suppliers? See prices soar as scarcity drives up the pricing power of remaining suppliers?
That may all sound overly dramatic, but these are unique times and nothing can be left to chance in 2021. Throughout 2020, many businesses have had to face this supplier nightmare head on. Without a plan to counter this disruption, many companies have found themselves plunged into financial difficulty as their supply chain disappeared or became remarkably more expensive overnight.
In other scenarios, companies have found themselves competing for stock that has become something of a “hot ticket”. In the summer, care homes suddenly found PPE had ballooned in price as governments hoovered up stock. Rumours already abound about how many syringes and other dosing kits are available for a vaccine roll out in 2021.
Elsewhere, Brexit looms large on the horizon. Should negotiations fail to preserve the frictionless trade we have enjoyed with our European partners for decades, supply chains will be further stretched and weakened, some to the point of breaking.
Most businesses rely on stability and certainty. If your supply chain has a few weak links in it, the time to act is now. Monitoring your supply chain must become an ongoing task to prevent major surprises in the future and to build contingency now. There are some initial steps that all companies should take to ensure your critical supplies keep flowing:
Assess the financial health of all your key trading partners
You wouldn’t sign up a new customer without running them through a credit check because you don’t want to be left with an unpaid bill. However, how many times have you thoroughly assessed the financial health of the companies you rely on for mission critical ingredients and resources? Many businesses choose their suppliers based on costs or delivery times. That may need to change in 2021.
We are amid a global pandemic that could see more companies fail than at any other time since the 1920’s. Having an instant, near term health assessment will allow you to spot weaknesses in your supply chain. Is the company that supplies you with critical parts heading for difficulty? More importantly, is their financial position a short term COVID-19 bump in the road or is it a sign of more serious peril?
Plimsoll can provide you with a unique level of insight into your supply chain that will be vital in 2021. Our proven business stability measures will alert you to financial problems at your suppliers. You are then free to seek assurances about their long-term stability and move on to contingency planning if required.
Look for alternative options
Once you have identified a weak link within your supply chain, it is advisable to talk to the suppliers in question and find out the extent of the issue. However, regardless of the past relationship with your supplier, your business must go on and your responsibility to stakeholders means you must build contingencies urgently.
For every company that supplies your business, there are many alternative options. Would you be better sourcing overseas to slash your costs? With a potentially expensive Brexit, might you need to source some parts from the UK to avoid the customs malaise seemingly heading our way? All these questions, and more, need informed answers. Having a list of potential alternatives, understanding the pros and cons of each and being able to move quickly in the event of a failure in your supply chain will be critical in 2021.
Plimsoll provides intelligence on companies around the world. We can assist you in building a financial assessment of your own supply chain and help you to build an alternative suppliers list both in the UK and abroad.
Get your own house in order now
Assessing your supply chain health and planning for potential disruption from vendor failure is imperative. However, with 2021 on the horizon, why not start the new year doing something even more proactive?
Examining your current financial health could show a path to greater profitability. Unless you are in the enviable position of having pricing power to raise your prices in these increasingly austere times, finding costs savings within your business is the best alternative.
Building a list of potential suppliers, both domestic and overseas, enhances your negotiating power significantly and should allow you to drive a much harder bargain in 2021. Plimsoll can help you to assess your own performance and show how small savings would improve your overall Plimsoll rating. What’s more, we can help you to identify a list of alternative suppliers so that you have your options laid out for you.
Your supply chain is a critical part of your business and can disproportionately affect your financial and commercial success. While you cannot control what happens at the companies that serve you, you can shield your business from much of the downside. It just requires a proactive outlook and strong analysis.
To find out more about Plimsoll, how we analyse businesses and how we can help you to manage your supply chain more effectively, visit www.plimsoll.co.uk