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Supply chain management: prepare for disruption to stay on track
13 July 2023 | Minutes to read: 2

Supply chain management: prepare for disruption to stay on track

By Chris Bergin

Geopolitical tensions, shipping delays and rising freight costs are compounding the bleak global supply chain situation – which remains marred by issues that emerged during the pandemic, including labor shortages and shifts in demand.

As a business owner, you might feel that there is little you can do to mitigate the impacts of supply chain disruption, besides looking into other suppliers. Luckily, that’s not the case, and here we explore some strategies you can implement to stay on track and even reposition your business for growth.

Issues with suppliers

Unreliable suppliers can be a major cause of contention for your business. They might be chronically late with deliveries, providing incorrect paperwork or simply not providing the stock you require. To help ensure your business is not dealing with risky suppliers and that you can continue to source resourced and meet customer needs into the future, you should include a thorough review of your existing suppliers. In fact, you should review your business-critical suppliers regularly – perhaps yearly to begin with.

You should also conduct a review as required if you are having issues with your supplier.

Some common red flags that could trigger a review of your supplier are:

  • Late deliveries or under supply
  • A reduction in the quality of goods and/or services
  • Material changes in terms and conditions
  • High staff turnover
  • Your supplier changing its own suppliers such as transport company.

Strategies to help alleviate issues

A contract: to alleviate issues and misunderstanding of terms and obligations, it’s imperative you have a formalised contract with your suppliers that stipulates the terms under which you will trade and obligations of both parties. Such stipulations could include: time to provision of supply from order, standard and quality of the goods and services and minimum stock on hand that they need to hold for you.

Alternate supplier/suppliers: have an alternate supplier as backup. This supplier should have enough capacity to maintain the needs of your business in the short term and even in the long term – should you need to replace a current supplier.

Extra stock: ensure you always have sufficient extra stock on hand, buying you time to find an alternate provider should you need to.

Digitising supply chain management: Implementing IT programs with end-to-end supply chain transparency and real time order monitoring will ensure you can track inventory and spending, and whether your suppliers are delivering on time and meeting their obligations. This extra visibility can uncover problem areas for you to address and help you to redirect your investments where needed.

Evaluate worst case scenarios: Run simulations that will enable you to predict how your business will react to and overcome certain disruptions.

Issues with customers

When your customers aren’t paying you, this can cause an impact on your supply chain, particularly if you’re then unable to pay your suppliers. Strategies that provide varying levels of protection include:

  • Having a rigorous accounts receivable function
  • Seeking personal guarantees from a director or directors of a business customer
  • Placing a Personal Properties Security Act charge over your customer for goods and services provided
  • Understanding the ability to exercise a lien if applicable, and
  • Taking out debtor insurance.

While we can’t control supply chain disruptions, we can certainly prepare for them by maximising visibility over your supply chain, having strategies in place to mitigate risks with and addressing warning signs as and when they occur.

Contact your local William Buck advisor in Australia or New Zealand if you’d like assistance with reviewing your supply chain and / or developing risk mitigation strategies that align with your business plan.

Supply chain management: prepare for disruption to stay on track

Chris Bergin

Chris is a Principal in our Restructuring & Insolvency division and he specialises in corporate restructuring, litigation support, insolvency and corporate streamlining. A registered liquidator, Chris has a record for achieving results for key stakeholders on insolvency and restructure projects involving SMEs to ASX listed entities.

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