One of the lessons that the Covid-19 pandemic leaves us is that many companies worldwide are not prepared to face an economic crisis, which is why it is essential to start structuring a plan that can mitigate this impact.
The failure of organizations is not to think about a crisis in advance, but rather to establish a reactive strategy when the situation is latent or the market shows a trend. A comprehensive company plan includes an exhaustive analysis and possible early strategic responses that, when applied, will help overcome adverse economic conditions.
In this new scenario, Supply areas become strategic players for the planning of organizations. In this article we give you 3 keys to face the crisis during this situation.
Some strategies from Supply
1.Contract negotiation
It is essential for organizations to manage relationships with suppliers to maintain the agility of their Supply Chain. One step to adapt to changing economic conditions is to prioritize negotiating strategic contracts.
When a crisis hits, demand for goods and services stagnates, which affects the supply chain and, to a greater extent, organizations that need long delivery times or maintain the availability of large inventories.
Supply can avoid this inconvenience by prioritizing flexible contracts that include, for example, favorable cancellation clauses or better delivery times for supplies. In this way, it helps mitigate the risks of losses that affect companies.
2. Expand the Supplier network
When you depend exclusively on a supplier and it, for various reasons, cannot deliver the promised goods or services, a risk is generated for companies. Disruptions in the Supply Chain are costly , to avoid them some preventive actions can be taken such as increasing suppliers for critical goods and services of the company.
No one is immune to crises, they can affect both buyers and suppliers. Therefore, it is necessary to start building relationships with suppliers that represent an alternative to those that normally win contracts with the organization. In this way, there will always be backup in the event of supplier crises.
3. Ensure Cash Flow
It is essential for organizations to take actions that guarantee Cash Flow. One way to support these efforts is to apply a payment terms policy to suppliers; By extending the payment term to suppliers, companies can obtain a rebate that goes directly to EBITDA.
Another way is to reduce purchasing costs to generate savings that lead to quick profits for the company. This is linked to the search for new suppliers and purchasing strategies such as the implementation of reverse auctions that can generate up to 20% savings vs. . Assigned budget.
Living in the “New Normal” also implies taking measures against economic risk and seeing this situation as an incentive for strategic planning on different fronts of companies.
Source: GEP Publications.
