Customers and suppliers: how business leaders can support both during the COVID-19 crisis

The challenges posed by coronavirus however are so unexpected that this requirement has increased exponentially.

Many business leaders may be considering actions that change the dynamic of the supply chain, either reducing activity in one area while simultaneously trying to increase output and headcount in another, to fulfil new demand. These actions may have unintended consequence to both customers and suppliers in the wider supply chain.

Given the uncertainty of the situation, effective and timely communication is vital. It’s essential for businesses to provide regular updates about any changes to their operations and the steps being taken to safeguard business continuity in this unfolding crisis. Your customers and suppliers alike will want to feel informed, secure and prepared for change.

Potential issues

Changing demand can be difficult to forecast and impact the whole supply chain. Large volume changes can impact quality, safety, costs and inventory.
Establishing effective methods of cash collection and adjusting terms of payment are both critical to minimise the financial impact. Quick implementations and reactions are needed across key areas like online sales, inventory management, distribution formats and servicing the vulnerable safely.

Forecasting and mitigating supplier risk around financial and operational failure can ensure supply chain resilience and efficient operation. As international logistics become more challenging, it may be wise to replace imported products with a domestic version. In addition, now is the time to identify essential versus discretionary spend with suppliers and choose where to prioritise payments to protect liquidity.

Assess

Identify issues that might impact your suppliers and customers and consider what the ramifications might be. How will the situation impact your business specifically? During a crisis, the desire to work quickly is understandable – and sometimes necessary. But take the time to examine what impact your actions will have in the medium to long term.

Taking as much direct and indirect cost out of the business to protect cash flow is advisable, but only if doing so allows you to continue at an efficient and profitable level.

Protect

Quickly develop top-down, high-level options and tie your strategic and tactical decisions into those choices to ensure synergy. What are your specific priorities? It’s important to ensure that your key suppliers and customers are ring-fenced, and that both are supported through this crisis.

Restore

Once the market is more stable, take time to think through potential ‘aftershocks’ for your business from the COVID-19 outbreak. Some industries may take longer to recover as daily spending habits have shifted during this lockdown period.

But, conversely, some sectors are likely to enjoy a post-pandemic boom. In China, for example, several areas of the economy are now quickly ramping up to 140% previous demand when compared to output before the outbreak.

These spikes in demand may be difficult to predict, but ensuring that you have the working capital and supplier relationships to reflate your business when activity picks back up is an important consideration.

The most prudent advice amid this uncertainty is to look at simplifying your business. The months ahead may prove a watershed moment for tail-end products or services. But by focussing on fewer core, profitable outputs, you may end up a slightly different business but with a much healthier bottom line and secure customer base.

Key questions to consider

• What are the main changes to your services and how are they affecting customer behaviour?
• How can you provide regular and clear communication about your policies and service updates?
• Where are the risks of financial failure and what are the opportunities to generate cash more quickly?
• Which customers and suppliers will need extended terms or different arrangements, and where your supply chain relies on travel or exports do you have alternatives in place?
• Are any of your competitors in other countries that are impacted and are there opportunities to support customers who are struggling with international supply?

If you require strategic advice and support during this challenging and unprecedented time, please don’t hesitate to contact our team here.