The OESA released results of its Q2 Supplier Barometer yesterday. What did I learn about the pressing supply chain challenges/business risk and opportunities emerging during the restart, and how could businesses use this information to move forward positively?
Biggest Business Opportunity: New and Conquest Business Awards
Biggest Supply Chain Challenges: Input Good Shortages and Supplier Financial Distress
A few supply chain financial risks we are watching for the next 60 days…
- Debt covenant reviews by lenders in July
- Cash flow timing disconnects between customer payments and production ramp-up costs especially throughout the Tiers
- Higher manufacturing costs due to safety initiatives
- Reduction in capacity and efficiency to accommodate mfg safety modifications
- OE production plans for full operating schedules in late June/early July
Some thoughts on mitigating the risk of challenges and capitalizing on the biggest opportunities…
- Supply Chain Risk | Input Good Shortages (Fix or Leave?)
- Proactively: Monitor and work with Watch List suppliers to identify underlying operational issues/weaknesses and develop and execute corrective action plans. Cost $
- Reactively: Work with suppliers to manage constraints by developing and executing corrective action plans that resolve constraints and developing contingency plans in parallel. Cost $$
- Understand critical risk components in supply chains (i.e., key commodity or limited supply alternatives)
- Supply Chain Risk | Financial Distress (Fix or Leave?)
- Proactively: Monitor Watch List suppliers and mitigate and fix underlying factors driving financial distress (such as poor OEE, Operating Leverage, Payment terms). Cost $
- Reactively: Manage and fix suppliers in financial distress and develop and execute contingency plans as required. Cost $$
- Understand critical risk components of supply chains (i.e., key commodity or limited supply)
- Opportunity for New Business Awards and Conquest Business
- Offer to backstop key customer production risks
- Navigate options to prioritize higher potential value wins
- Update differential sell points of the business’ value proposition
- Add a buyer perspective to increase your odds of building and negotiating winning proposals
The transformation of industries and companies is inevitable due to Covid-19. Those that continue to execute both short-term requirements and strategic initiatives will come out the other side of the Pandemic stronger.
Be proactive. Form Crisis Teams. Develop and execute playbooks of lessons learned. Balance tomorrow and today!
#CreateValueThatMatters
