I was the Chief Purchasing Officer of a company when the economy tanked, and the CEO told his senior staff of the requirement to cut headcount by a significant amount. Inside my head, I rejected the directive: How could my team manage the supply chain disruption of a major recession, deliver our strategic plan, and reduce our headcount?
Outwardly, I raised no objections because those who did were facing stiff opposition. Instead, I waited and put a plan together detailing the actions and resources required to deliver the strategic plan and to manage the turmoil. I then lined out the items that could not be done if we made the headcount reductions.
I went to the CEO prepared to make the case. But two sentences into my well-rehearsed presentation I learned I did not need to present anything. The CEO said, “Jeoff, I understand that there will be considerable work for your team managing the supply chain and the company needs the strategy your team has in place. In fact, we need more innovation from the supply base, more cost reductions and better performance. Let us talk about how we achieve that in the most efficient way possible.”
APD’s Crisis Team is developing a Quick Start Guide to restarting the industry while continuing to deliver your strategic initiates.
Our strategy at APD is not to prepare for a three month, restart the industry exercise. Instead we are preparing for the worst and hoping for the best. What is the worst:
- The recovery for manufacturing is not v-shaped but long and drawn out. For automotive, plan that industry volumes do not get back to 17 million in NA anytime soon but slowly come back to 14-15 million forecasted by Jon Gabrielsen.1
- The impact of Covid-19 production restrictions, financial impact and slow recovery will be twelve-twenty four months of production, quality and delivery issues compounded by suppliers in the supply chain who cease doing business, go through bankruptcy or are consolidated into other companies.
- In the face of this turmoil purchasing teams will need to improve strategic plan results, near shore their supply base and manage crises that arise.
What can purchasing leaders do to prepare for the worst:
- Do a critical review of the pre-Covid-19 supplier risk and response methods for quality, delivery, and production issues. All will need to be upgraded.
- Identify the suppliers who were performing the worst pre-Covid-19 or signaling signs of financial distress through price increase requests. These suppliers will only get worse.
- Complete a detailed risk assessment of suppliers, new programs, commodities and receiving plants.
- Establish a critical supplier response team that includes skill sets for quality, logistics, production, and program management. This A-team should be the focal point for all supplier crisis management so that the Purchasing Organization can continue to deliver the strategic plan.
- Review and adapt the pre-Covid-19 strategic plan to the new needs of the corporation.
What can CEO’s do to assist? Ask your CPO’s: “How do we come out of this with a stronger supply chain having delivered on a strategic supply chain plan while handling the crisis?” And then give them the resources and support needed to execute.
Advanced Purchasing Dynamics has a 16-year history of helping companies implement their strategic vision for purchasing through comprehensive engagements and focused expertise. Instead of retrenching during Covid-19 we have added significant executive to manager level talent with the skills and experience required to help companies manage through this crisis.