B2B Supply Chain Management During A Crisis: 5 Ways to Keep It Healthy
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In the past, the strength of your B2B supply chain was determined solely by the level of contingency suppliers your business had at its disposal and the degree of cost management you achieved. In today’s global marketplace, however, supply chains are subject to endless types of risk, including changes in industry regulations, economic uncertainty and geopolitical instability.
"A great supply chain moves like a prima ballerina on opening night – precise technique, relentless professionalism, and endless hours of preparation all come together seamlessly to make it look effortless."
-Chloe Demrovsky, Executive Director, Disaster Recovery Institute (DRI) International
To maintain the health of your company’s B2B supply chain in good times and in bad, you need to work with your suppliers, limit cost cutting, and stick to fundamental supply chain management strategies that consider three key priority areas:
1. Taking care of internal concerns.
2. Taking care of customers.
3. Taking care of suppliers.
Why the Success of Your B2B eCommerce Business Depends on Maintaining a Healthy Supply Chain
The supply chain is vital to the success of your B2B business because the positive or negative effects of supply chain management literally resound throughout every corner of your company – customer service, operating costs and the all-important bottom line.
According to a survey by Deloitte, 79% of companies with high-performing supply chains achieve revenue growth superior to the average within their industries, and according to the Logistics Bureau, only 8% of businesses with less capable supply chains report above-average growth.
Despite being critical to business success, companies still underestimate the importance of the supply chain, often giving it less leadership attention than other operational areas of the business. That’s because the supply chain is typically the least understood area of strategic business management.
5 Ways to Keep Your B2B eCommerce Supply Chain Healthy During A Crisis
1. Maintain your value proposition.
Your company’s primary value proposition is a key factor in attracting and retaining customers. Compromising that value for the sake of cutting costs puts you at risk of alienating them. Having said that, a crisis can be a good time to re-evaluate your value proposition to determine how effectively your company is achieving it.
2. Segment your supply chain partners.
Not all customers are alike when it comes to the value they bring to your business, so they shouldn’t be treated equally either. In considering how to work with your supply chain partners during a crisis, consider viewing them in terms of the profitability and value they bring to your company as well as how well they align with your future business goals. Ask yourself: Who are the key suppliers that are critical to your survival? Who can help your company succeed as the current crisis ends?
3. Cut back without cutting corners.
When companies cut costs so much that they compromise customer service and product quality, they risk doing themselves permanent harm. Smart B2B companies seize the opportunity presented by a crisis to make investments that will pay off when business recovers and see them profit over the long term. And refusing to compromise service quality may give your company an edge when it comes to acquiring new business. Don’t focus so much on the threat that you miss potential opportunities that may be in front of you. A crisis can be an opportunity to make difficult decisions for the long-term health of your company, such as shedding marginal business, suppliers, customers and even employees.
4. Manage your inventory smartly.
Build flexibility and resilience into your B2B supply chain by creating redundancy. You can do this by increasing your inventory, contracting with multiple suppliers, or hiring backup staff to cover off during unpredictable circumstances. Redundancy is costly, however, so create just enough of an inventory cushion to ride out temporary bumps and delays, but don’t go overboard.
5. Create “what-if” scenarios and contingency plans.
During a crisis, the situation can change rapidly, leaving the future unclear. You can navigate your B2B supply chain through this uncertainty by developing a set of “what if” scenarios and then mapping out the necessary actions you’ll need to take to address each scenario. Start by imagining the best and worst-case scenarios that could happen and then establish a contingency plan for each. Remember to communicate with your current suppliers to ensure you are building contingency plans that work for both sides. Some of the ways you can address this are by suspending promotions, limiting the number of items, and pacing the availability of products in-store.
Prepare Now to Grow Your B2B Business for the Long Term
A strong, healthy supply chain is one that is sustainable, resilient and flexible, and understands the impact of its actions as well as the strength of the supplier-customer relationship. Preparing your company now by addressing these issues will help you forecast the next crisis. Take time to discover and develop alternative supply sources as well as diversify your value chains. Remember, being better prepared than your competition might present you with new business opportunities when the next crisis does come around.