VP, Head of New York Life Business Solutions
As the virus shut down important manufacturing centers in China, business owners had to scramble to determine whether their suppliers would be affected and where they could find alternative supplies.
But supply chain challenges didn't stop with China. As the virus has spread throughout the world, businesses that rely on suppliers in various global locations have experienced difficulty accessing products and materials they need to operate. Following prolonged shutdowns, some suppliers may not be prepared to fill orders or even to reopen their businesses to full capacity.
Consider a business that runs several restaurants in a particular region. Business leaders may be gearing up for a grand reopening and want to place a large order with their craft beer distributor. But if the distributor has laid off or furloughed staff during the shutdown, or shifted to producing hand sanitizer instead of craft beer, the order may go unfulfilled.
Small and medium businesses preparing to thrive beyond the pandemic can improve their chances of success by taking steps to bolster their supply chains and protect their ability to get the raw materials and other supplies they need now and in the event of a future crisis. For instance:
Source local or regional suppliers:
In a recent survey of more than 300 U.S.-based CFOs, 56 percent said they plan to develop alternate options for sourcing goods and supplies in an effort to recover from the pandemic.1 For most businesses, seeking new suppliers may be a valuable exercise, even if it's only to have those new suppliers as backup options in case primary suppliers falter. Consider securing suppliers in various geographic regions to mitigate risk from future potential crises.
According to new research from the Boston Consulting Group, a strategic regional approach to building supply chains is more likely to provide flexibility in the event of trade disruptions.2
Prioritize resilience over costs:
Companies that have traditionally selected suppliers based on the lowest cost may need to rethink their strategy. If a supplier buckles under the first sign of economic pressure, the bottom-rate gadgets they were hoping to supply are useless.
The PwC survey also showed that 54 percent of companies plan to work toward better understanding of the financial and operational health of their suppliers.1 Most savvy companies should consider following their lead, checking in with suppliers to find out about their stability and reliability for the foreseeable future.
Take advantage of new supply chain technologies:
Many companies suffered during the pandemic because they couldn't readily access information about their supply chains and were forced to respond in reactive, uncoordinated ways.3 However, by implementing supply chain technologies, such as tools that allow mapping of supply networks, organizations could have weathered the storm more easily and effectively.
A small minority of companies that invested in mapping their supply networks before the pandemic had real-time visibility into the structure of their supply chains. "Instead of scrambling at the last minute, [these companies] have a lot of information at their fingertips within minutes of a potential disruption," writes Thomas Choi in the Harvard Business Review. “They know exactly which suppliers, sites, parts, and products are at risk, which allows them to put themselves first in line to secure constrained inventory and capacity at alternate sites."3
About the author
Bob Patience is Vice President of Business Solutions at New York Life. Bob oversees our employee benefits business, including our payroll deducted individual life products and our group life and disability offerings. In Bob’s four years with New York Life, we launched our group offerings, re-priced and redesigned our individual products and re-positioned the business to support our agents by focusing on the financial needs of small businesses, their owners and their employees. In addition to his oversight of Business Solutions, Bob is also leading a number of work streams related to NYL’s pending acquisition of Cigna Group Insurance. Before coming to New York Life, Bob spent 30 years with Prudential, where he held a variety of product, underwriting, segment head, and technology leadership positions. Immediately before coming to NY Life, he was the P&L owner of Prudential’s $3 billion block of group life and voluntary benefits business. Bob has a BA from Colby College in Maine and a Masters in Business Administration from New Jersey’s Montclair State University.
This article is provided only for general informational purposes and is not directed toward any particular business or location. Business owners should consult with legal counsel or other knowledgeable advisors on governmental requirements and best practices before reopening.
1 PwC, How finance leaders see a return to work," PwC's COVID-19 CFO Pulse Survey, April 27, 2020. https://www.pwc.com/us/en/library/covid-19/pwc-covid-19-cfo-pulse-survey.html
2 Justin Rose, Ian Colotla, Michael McAdoo and Will Kletter. A manufacturing strategy built for trade instability," Boston Consulting Group, Feb. 13, 2020. https://www.bcg.com/publications/2020/manufacturing-strategy-built-trade-instability.aspx
3 Thomas Choi, Dale Rogers and Bindiya Vakil. Coronavirus is a wake-up call for supply chain management," Harvard Business Review, March 27, 2020. https://hbr.org/2020/03/coronavirus-is-a-wake-up-call-for-supply-chain-management
This material is provided for informational purposes only. New York Life Insurance Company, its agents and employees may not provide legal, tax or accounting advice. Individuals should consult their own professional advisors before implementing any planning strategies. © 2020 New York Life Insurance Company. All rights reserved.