Supplier Succession Planning

Supplier Succession Planning

The world is an unpredictable place and companies are connected in more ways than ever. A problem on one side of things invariably leads to problems on the other side. When one company falters, it tends to make trouble for other companies that depend on them.

That’s why the term ‘supply chain’ is its own analogy. When one company in the chain fails, the rest behind fall off.

So how can companies protect themselves from supply chain shutdowns? The best strategy, according to experts, is to build a solid plan.


Know the Details

It’s vital for supply chain managers to develop plans to continue procuring critical items in the event of a disruption. A key part of those plans should be an ability to evaluate the strength of your supplier companies to spot signs of weakening. Obviously, an emergency situation is an impossible thing to predict, but there are far more common things that can shut down a company that you should be monitoring. Financial solvency, for example, is a big one.

“A supplier shutdown is a big deal and is of course something that you should be monitoring,” writes experts from riskmethods, an international supply chain risk mitigation firm. “The real key to managing this risk effectively, though, isn’t about being aware of it when it happens—it’s about getting the warning signs before it happens. It’s not just about standard financial ratings. By getting alerts about topics such as slow growth or poor revenue outlook, major ownership structure changes, or major product recalls, you can be aware of your risky suppliers before they become actual threats to your business.”

Beyond that, it’s a good idea to stay informed about any additional factors that could potentially shut down a supplier such as ownership/leadership changes, natural disasters, reputational status, compliance violations, man-made risks, labor issues, and others.


Conduct Reviews

Even though you may have years-long relationships with your suppliers, you should still be conducting periodic reviews with them. Whether or not they’re completely open about issues they’re experiencing, you may still be able to discern a lot about what they have going on.

“Savvy buyers may see signals that get their attention, including innocuous comments by company leadership, changes in supplier performance due to management changes or the loss of key employees,” said authors with Supply Chain Drive, a Washington, DC-based team of journalists focused on supply chain management trends.

Suppliers should be asked about:

  • Their long-term plans for viability and growth,
  • How confident they are in their organization’s talent pipeline,
  • And their plans for replacing retiring leaders.


Build Your Network

Finally, another major part of your plan should include efforts to continually build your network of potential suppliers. Just because you’ve been happy with your current ones for years doesn’t mean you should stop making new connections. Doing so will give you a place to start if an existing supplier shuts down, and you’ll also have more opportunities to learn about new developments that could be useful for your company.

Conferences, conventions, and trade shows are among your best bets for meeting new suppliers as you’ll often be able to get to know several at once in a face-to-face setting. Trade publications can serve as a handy guide for learning about events like these and finding out about other suppliers. Alternatively, you could attend webinars, visit industry forums, and find others through your own online research.

After making new contacts, it’s important to make an evaluation of their offerings and capabilities. Touring their locations is one good option if they’re in proximity to you. If they’re abroad, then consider additional research into economic and geopolitical issues that could impact your relationship.

As you’re learning more about your new supplier, be sure to ask questions about the details of their company.

“As you begin to dive deeper into research on suppliers, focus less on general attributes — which may include basics such as target market segments, how long they’ve been in business, overall costs, and location — and more on specifics, such as average delivery times, payment terms, and the data they provide customers either before, during, or after production,” wrote supply chain experts with ThomasNet, formerly known as the Thomas Register of American Manufacturers, an online platform for supplier discovery and product sourcing in the U.S. and Canada.


Contingencies Can Save You

Having a supplier shut down unexpectedly can be severely detrimental for your business. Developing a plan for replacing them quickly and effectively is a great way to protect your company and ensure that your own operations keep rolling despite changes in suppliers.

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Category Features, Logistics