A Pandemic Response Checklist for Distributors and Suppliers
Distributors and suppliers need to prepare for the post-crisis future by adapting to the changes sparked by the pandemic. Such planning includes identifying your business’s new strengths and weaknesses. In times of crisis, our core capabilities are what separate us from the competition. Highlight those strengths. The document, anchor, and market your value proposition internally and externally.
Pandemic setbacks can also provide valuable lessons. Generally, COVID-19 revealed inherent weaknesses that can be analyzed as opportunities for improvement. As well as strengthening your business, you will also be able to boost your post-crisis recovery during unexpected shifts in supply and demand.
We list common difficulties businesses face during a crisis. We’ll ask you questions related to these areas to help you identify your strengths and weaknesses. Also, we’ll teach you how to make changes.
What have you learned from this crisis? Best practices across people, processes, and technology are what drive a company’s peak performance. These weaknesses can make it difficult for a company to recover and grow.
Challenges in the Process
To act quickly, documentation of processes and adherence to core criteria are essential. Businesses with contingency plans and problem-solving architecture can manage one-off issues effectively, such as managing a shortage of one item, securing a low-performing supplier, or minimizing customer liquidity risks.
You can identify where deficiencies in the process have affected your performance by asking the following questions:
Manage Suppliers: Could you call in substitute suppliers quickly when faced with critical shortages? How have you reviewed your vendor mix in light of more uncertain or volatile demand? Have you
reviewed your processes and criteria for onboarding new vendors?
Allocate Product: During the disruption, did you formalize the allocation criteria? Did you use tiering or grouping of customers to coordinate and justify such allocations? Did your sales and delivery force adhere to these policies?
Price Pressure: According to established rules/procedures dictated by sales management, did you maintain pricing discipline? How did you balance centralized pricing decisions with sales and delivery force pricing autonomy? Is it beneficial to review the pricing policy and rule updates that may need to be implemented to establish greater consistency, rigor, and responsiveness to customers?
Stock management: How did you manage your inventory in the face of volatile demand? Are you seeing any changes in the way you view inventory turns by supplier and product? Do you need to develop a more rigorous process to manage slow-moving inventory? Should your stock/non-stock decision processes and criteria be updated in light of future inventory imbalances?
Credit Risk: Are you following adequate credit policies (including appropriate metrics) to identify customers with higher credit risks, especially when coupled with changing order patterns (unexpected increases in order size that might increase credit risk)?
The Tech Challenges
As a result of this crisis, we have also seen the importance of accurate, real-time data and forecasting capabilities. In the wake of the demise of year-over-year and quarterly trends, small businesses that couldn’t analyze weekly trends outside their standard software packages were left in the dark.
Further, many companies who hadn’t previously used analytics to monitor and evaluate vendor, customer, product, and market performance were struggling to prioritize and address multiple, concurrent supply chain challenges. Deficits such as these caused headaches, including price discrepancies, stock-outs, credit risks, and misuse of resources among key vendors and customers. Diagnosing and resolving technological shortcomings involves considering:
A Supply Forecast: Were reports produced that enabled you to override incorrect forecast assumptions generated by your ERP system when demand swings occurred? Throughout all levels of detail (customer segment, customer, product category, vendor, item), were you able to quickly adjust to demand patterns? Would you be able to identify hoarding customers based on their normal ordering patterns? Will you be able to forecast quickly (and frequently) in the future?
Distributors and Wholesalers Performance: Were your systems able to track vendor performance throughout the pandemic, ideally through some form of supplier segmentation/grouping? Were you more reliant on the verbal assurances of vendors or could your systems identify and anticipate shortage/fill-rate risk against baseline patterns? Did you use data to adjust purchase orders or seek alternative sources?
Inventory Management: Did your inventory management system struggle to keep up with demand fluctuations? Did the pandemic uncover weak links in your predetermined reorder points or safety stock levels? Do they need proper readjustment? Were you able to use revised forecasts to get emergency purchase orders out to vendors and replenish inventory before competitors did?
Logistical Analysis: Have you evaluated the capacity and efficiency of your shipping routes according to projections of changes in demand? Did you have access to the information you needed to optimize your routes on a timely basis given the rapid change in demand? You may be able to consolidate routes and/or outsource certain routes altogether (especially when comparing with truck lease expiration dates).
Supply Chain Management: If you have multiple warehouses, do you have the information to digest relative performance across locations, particularly in light of changes in demand? Have you been able to digest the insights you need about which demand patterns may persist and which are reverting?
Credit Risk: How reliant were you on the verbal assurances of customers as far as credit risk? Did you have the data/analytics at your fingertips to confirm/refute those assurances? Was it available early enough to avoid mistakes associated with extending credit terms (or providing more credit)?
Communication and HR Systems: How quickly were you able to adopt new and existing technology platforms for managing and communicating with a virtual team? Do you have a central database of updated rules, policies, and standards that can be quickly accessed by your team? Are they located somewhere other than email (a place where they can be easily accessed at any time, from anywhere)?
Analytics and Reporting Tools: Did the crisis expose a need for more robust analytics and reporting (data visualization/business intelligence tools like Tableau or PowerBI)? During the crisis, how successful were you able to gather and map data from multiple locations and subsidiaries to make coordinated decisions? How successfully were you able to monitor relative performance by location/subsidiary?
Human Resources Issues
Even the best processes and the most sophisticated systems mean little if a company is not trained in handling stressful situations and bridging gaps when those processes or systems fail. When people are not trained to pivot or improvise, the slightest hiccup in processes or rules can lead to indecision.
Additionally, technology systems with sophisticated pricing or forecasting algorithms can only be useful if they are placed in the hands of teams that know how to leverage them and communicate their results.
Whenever systems fail, as they did in the pandemic, it’s up to people to pick up the slack. It comes down to a balance between science (processes and technologies) and art (people) to achieve performance.
When facing a crisis, you should consider the following questions to determine where people are weak:
Response to Customers: How proactive were you during the crisis or how reactive? By leveraging customer segmentation and grouping, how did you prioritize proactive outreach? Did you work creatively with the customer to come up with discounts or payment terms? Were core customers your priority? Would you recommend a discount or payment terms that were logically justified?
The Virtual Selling Model: How has your salesforce adapted to it? Do you fully understand and address their key concerns, and how have they been hampered? Has there been a successful blend of using virtual tools with maintaining an emotional connection with customers?
Customer Service: What proactive measures did you take to maintain morale among your sales force when the variable comp plan was disrupted? Have you been able to adjust certain compensation components creatively in response to changing projections to maintain motivation?
Communicating Supply Disruption: Did your sales team proactively seek out or substitute strategically aligned vendors or products (e.g. those with higher margins or different levels of exclusiveness)? To make that conscious push (and were they provided with the information necessary to do so), where were the front lines encouraged/trained?
Communicating with Vendors: Where did you fall on the scale between being proactive or reactive? To prioritize outreach to the most important vendors and mitigate risk, did you formally stratify them? Did you have data at your fingertips when you did?
Refinement of Value Proposition: Did you have the chance to identify and document areas where you excelled in your pandemic management? Has this influenced the way you approach your value proposition? How has your team responded to this? In your marketing outreach to clients and prospects, do you incorporate any related messaging?
Strategic and Tactical Review: Have you documented any of your key learnings around breakdowns in performance during the crisis? Have you strategically shared them with your team to identify root causes and create a game plan to address them? Have you identified employee training in any key areas where the pandemic may have exposed shortcomings?
Strengthening Public Health
We must address shortcomings proactively as the market continues to change. As before and during the pandemic, supply and demand will remain unexpected. Every vendor and every customer will act differently.
We may see a regional slowdown in the coming months. COVID-19 outbreaks will vary in length and shape.
Are you prepared? Answer the above questions about people, processes, and technology to improve and adjust your strategy.
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