Cultivating Supply Chain Resilience in Volatile Industries
In the trenches, procurement professionals face the worrisome task of ensuring their company runs smoothly no matter what's going on around them. One misstep could mean catastrophic loss. Building a supply chain that will withstand a volatile market is no easy task, but focusing on resilience is key according to Nicholas Ammaturo, Director of Global Procurement at Coach.
Ammaturo is a well-known name in the procurement profession. He was among the first recipients of the “Top 30 Under 30 Award,” given by the Institute for Supply Chain Management and THOMASNET.com. And he knows a thing or two about resilience, having worked in the volatile retail industry for nearly a decade. His methodology for creating and maintaining a resilient supply chain includes ensuring minimal disruption through supplier diversification, checking references, performing site visits and the constant monitoring of supplier financials.
Distributing your operation across multiple suppliers to mitigate disruption
When five suppliers are each responsible for only one fifth of a specific facet of your business, mitigating disruption becomes less of a hassle. “It is so important to have a playbook in place so you don’t end up with a single source supplier,” Ammaturo states. “You want to spread the distribution out.”
For starters, giving a supplier only a certain percentage of your business -- say 20% or 30% -- ensures they are not overloaded. But the bigger benefit of this method is that finding a replacement supplier for a small fraction of the work is much easier than finding one to take over 100% of your supply needs. Ammaturo has his suppliers distributed in a way that his entire operation, if necessary, can be transferred in 15 to 30 days.
References and site visits give insight into how suppliers operate
Understanding precisely how a supplier maintains a warehouse or whether or not they’re prone to late shipments is invaluable information when vetting potential vendors.
You don’t want to go into a relationship with a supplier without a working knowledge of how they operate their business. “It’s like giving a contractor the keys to your house and not knowing what kind of work they do,” Ammaturo says. Though checking references and performing site visits might seem obvious, these simple steps are regularly overlooked in today’s fast paced business world.
Site visits mean face-to-face interaction with the supplier and its employees, as well as a first-hand look into how they run current operations. “If I need someone to run my warehouse, I absolutely want to see one they run today so I know what to expect.” Likewise, references give you valuable insight into how the supplier works with others, which will help you make informed decisions. These can be time consuming steps, but skipping either could have significant costs down the road.
Monitoring financials on a consistent basis provides an upper hand
The importance of collecting financial data is not to be overlooked, either. The key is not only collecting and assessing financial data before you sign a deal, but also consistently monitoring the data for important changes like acquisitions and working capital after a supplier is onboard. “Having a subscription to financial reporting, as well as monitoring company news is key to a healthy supply chain,” says Ammaturo.
Constant monitoring affords valuable insight into the long term health of a company. Without this ongoing effort you won't be able to spot a questionable downward trend in key financial metrics or be tipped off to trouble because of a sudden drop in stock prices. Missing these important cues could leave you playing catch up instead of being able to make proactive moves before the trouble starts.
As a procurement professional you’re responsible for ensuring that your company gets everything it needs when it needs it, which is enough in itself to lose sleep at night. Having a resilient supply chain in place, with the proper tools for ongoing monitoring, could mean the difference between running a smooth operation or dealing with detrimental disruption.