Supply chains are at the heart of every manufacturing company in the world. And, that world has been disrupted with the pandemic that has shifted supply and demand at staggering levels.
No one knew the pandemic was coming, just like no one knows when it will “end.” Supply chain leaders worldwide are challenged with navigating through the pandemic and beyond to keep their operations running, and more importantly, to make them profitable. The game has decidedly shifted from wanting to win to keeping the business running for most companies.
If you ask 10 leaders to predict the future of supply chains, you will most likely get 10 different answers. Everyone looks at supply chains through their own lens. A company’s area of specialization is going to influence that leader’s supply chain focus. The reason there are varied answers to the future of supply chain is because that answer is specific to a company’s size, industry, geographical location, business strategy and leadership.
What is clear is that companies will have to get “smarter” to stay relevant. Risk management, access to resources and assets and evolving customer needs will keep boardrooms busy. Speed, agility, size, technology, partnership development, cash optimization and transformation journey management are capabilities that supply chain leaders will have to leverage to create sustainable value.
Specific to the Coronavirus disease (COVID-19), every successful organization must get better at managing risk. It looks like the pandemic in some form or another is going to affect us for the foreseeable future. What was a crisis in 2020 will need to now be reassessed as the trigger for a business transformation. The quicker leaders understand that, the higher their ability to stay in the game.
Just because a company is surviving the pandemic doesn’t mean that it is doing things the right way. Sometimes a company survives despite itself. There are very few companies that have an intent and a strategy in place to deal with significant events that occur at low frequencies like the pandemic. The pandemic only exacerbated the failures of poorly run companies, failing to be resilient is a clear sign of weakness.
Although the goals of every supply chain operation are different, there is one common thread that can help companies better prepare for unexpected events – cash is king. No matter the event, the first thing that will stop coming, or will come excessively, is money.
Money is the lifeblood of a company, an industry and an economy. Reading through the supply chain resiliency strategies of around 250 companies in food, beverage, mining, pulp and paper and life sciences, the common question being asked is -- Do we have enough cash to cover three, six, nine months or a year?
It is important to understand that cash can mean more than money in the bank. Inventory, credits and strong partnerships can help find substitutes to liquid cash.
This supply chain resiliency tactic of leveraging cash and cash substitutes to manage the potential impact of unforeseen events wasn’t created by the pandemic, but it helped leaders become clearer on their cash strategies and pressured-tested assumptions that went into existing resiliency strategies.
The pandemic caused uncertain revenue streams, both positive and negative, and has changed the way companies manage cash. The question becomes, what do I do with my cash when I don’t really know what is going to happen in the future?
Some leaders will be more cautious with managing their cash flow strategies, while others will be more aggressive. The bottom line either way is that they must be more strategic and build a cash flow strategy in line with the relevant business context, thus creating more supply chain resiliency.
