As the industry moves towards the recovery phase, business continuity is more reliant than ever on supply chain resilience. Supply chains are under threat and their vulnerability poses a major risk to ongoing and future projects and programmes. Stabilising the supply chain must be a priority, in collaboration with all stakeholders, and this means increasing visibility into supplier capabilities and behaviours. Let’s take a brief look at how to do this.
Put your eggs in more than one basket…have a plan B
In this testing time, no matter how resilient the onboarding due diligence, or the attunement to early indicators, some supplier businesses will fail. What precisely will you do in the eventuality of failure for each supplier in the chain? This should be researched, with alternatives recorded and the results kept up to date. Consider extending existing contracts, before going to the market and put in place a mitigation strategy. In local government procurement, we’re seeing increased engagement with local suppliers and SMEs. Evidence suggests this provides a more flexible and balanced apportionment of risk.
Supply chain intelligence, informing change management
Our industry deals with varied and disparate supply chains, often with fragmented or absent performance data. We need good up-to-date data in order to maintain useable insight into the supplier base. Robust performance methodologies should be used, as part of strategic supplier management. Pay close attention to the results—a supplier performing badly may signal a supplier in trouble, with a business that’s about to fail.
Robust supplier assessment to manage the risk
New considerations in pre-qualification/onboarding means that all stakeholders have a responsibility to support other businesses and individual well-being as the industry looks towards recovery. Critical decisions need to be made, as well as financial due diligence and past performance, clients need to consider suppliers’ response to:
- Covid-19 health & safety risks, including Covid-secure sites and offices
- Internal resource levels (see below)
- Cybersecurity during home-working (see our article on post-Covid workspace technology)
- Potential further disruption should lockdown recur
- Materials shortages
- Economic uncertainty
- Post-Brexit forecast for changing levels of demand
- Local delivery and social value
Suppliers’ internal resource levels
Furloughed and redundant staff, together with working from home, means a reduced workforce for the supplier. Suppliers will need to be lean in order to survive and they have a responsibility to protect their employees by facilitating work from home. This may contribute to a lack of skillsets and an imbalance of experience/expertise at the right level. Clients should expect to see evidence that these challenges are being managed as well as possible in the circumstances.
Pay suppliers on time
This is vital for the maintenance of a healthy supply chain—improving suppliers’ cashflow, will help them survive. The recent emphasises this, in accordance with the UK Prompt Payment Code. Lead consultants and contractors should be able to demonstrate that they are paying novated and sub-contractors on time. See our discussion of PPN 01 and 02/20. Faithful+Gould’s own record for prompt payment of over 99 per cent of supplier invoices is an important commitment.
Consider the options for mitigation of contractual risk, should supplier businesses fail.
Explore procurement options…frameworks are the fastest route
If replacement suppliers are needed for an existing project, or if a new project is to move forward as swiftly and straightforwardly as possible, framework agreements are likely to be the easiest route. For clients the due diligence is already completed and the framework is already market tested, reducing procurement costs. Suppliers are pre-approved reducing risk and costly bidding processes are minimised.
Public sector clients can also consider DPS Frameworks. This procurement tool has its own specific set of requirements—some aspects are similar to a closed framework agreement, but an unlimited number of new suppliers can join at any time. This can be a flexible means for ad hoc procurement of SMEs, microbusinesses and local suppliers.
Supplier onboarding, monitoring and management
The best way to ensure minimal risk is to complete supplier onboarding prior to project appointment. At Faithful+Gould, we use our integrated supply chain management system, which is based on the collaborative IAND digital platform. This allows robust assessment, approval and onboarding of suppliers. The system incorporates subsequent monitoring and management of their performance plus a level of detail that clients find very helpful during the selection process. It is configured to cover suppliers from every tier, including SMEs and microbusinesses. We can also capture information on social value, allowing suppliers to highlight their strengths in this area.
This process benefits both clients and suppliers. As well as managing risk for clients, there’s an emphasis on adding value and identifying genuine opportunities for suppliers.
If you are a client, we can help ensure robust supply chain management. As a supplier, if you are interested in joining our approved list, please click here.