UK businesses are facing a wide range of challenges at the moment, but one of the leading issues is disruption to supply chains. Whether this is caused by the ongoing effects of the Covid 19 pandemic, the problems arising from Brexit or the war in Ukraine, either you or one of your suppliers might be running into serious difficulties.
So how can you balance the need to nurture your business partners with the importance of ensuring that vital supplies are coming through?
Check Out Your Supply Chain
Before you can decide what to do about your supply chain, you need to know exactly how it’s currently working. This means not only checking out your immediate suppliers, but also everyone along the chain. That can sometimes be a complex process, so you may need management software to map out the whole thing.
The first thing is to request up-to-date financial information and forecasts from each company. You also need to keep track of what’s happening to them, so you can set up a news alert (e.g. through Google) on each one.
Once you have this information, you can review it through the management software, to identify suppliers who are still reliable and those who might become a problem.
What Alternatives Do You Have?
If you do identify any weaknesses in your supply chain, what can you do about it? Well, the most extreme step would be to terminate the contract, but it may not be easy to do so without being hit by penalty clauses.
On the other hand, if the supplier becomes insolvent or fails to deliver your supplies, you can look elsewhere — and you can prepare for that where at-risk suppliers are concerned. For each supplier you identify as being a weak link, draw up a short-list of viable alternatives, doing due diligence on their reliability and establishing personal links.
If you are going to switch suppliers, even in the case of insolvency, it’s essential to get good legal advice. You should also make sure that you have insurance in place that covers the effects of a supplier’s insolvency.
Working with Your Suppliers — Not Against Them
While you need to have alternatives in case of your suppliers failing you, it’s obviously best if you work with your current suppliers to ensure they can continue the supply chain unbroken.
This may involve revising your credit terms with them to help improve their cashflow (while obviously ensuring that you don’t make yourself vulnerable), or giving their financial management support — e.g. endorsing applications for grants.
On the other hand, maybe your finances are suffering because trading partners who owe you money are experiencing supply-chain problems. Instead of immediate confrontation, perhaps you could pass on some of this advice to them. Give me a call if you need help with that, or anything relating to unpaid invoices.