Proactively monitor and manage supplier risk
It’s more important than ever to proactively monitor which suppliers are at risk, and have contingency plans and/or alternate suppliers in place. There are tools available
to provide early warning of suppliers who might be in trouble. It is also useful to monitor potential trouble indicators yourself - e.g., a supplier desperate for shorter payment terms or delivery or quality performance issues. Contingency plans are essential, especially when there are few or no alternate suppliers.
Collaborate with Suppliers on new cost reduction innovations
Work together with suppliers on how to reduce costs and understand cost structures. Look at options with suppliers, such as different ways of payment and different ways of managing inventory. Don't just keep doing the same thing, just because that's the way you've always done it. These times call for innovative approaches.
Expand success measures, beyond cost-reduction
Cost savings are still a key metric for procurement, however, there are additional areas, including quality, availability, sustainability, even safety. For these times, you must pick the right metrics for your organization.
Help key suppliers with "financing" for your orders
Procurement professionals need to get much more hands-on about helping to alleviate some of the cash flow issues of critical suppliers. For example, you may agree to shorter payment terms in exchange for discounts, to help suppliers' cash flow.
Prepare for the recovery
It may not currently seem like it, and will take time, but as we emerge from the current situation, we will eventually get back to normal, most probably with shortages once again. This potentially means that suppliers will select who gets limited supply. It is good practice to remember that, and to build good relationships when things are slow. We know that differentiation of the companies' products and services in the marketplace is a desired goal, but now companies should also try to differentiate themselves on the supply side - become a "preferred customer." Make your company easy to do business with.
Proactis can help you keep on top of these considerations, and even raise standards.