Could your business survive supply chain disruption?
In recent years, supply chains have become longer and more complex, while the risks of disruption appear to have increased thanks to problems such as Brexit uncertainty and late payment.
Yet many businesses are still not prepared for supply chain disruptions, according to new research.
New data from Aldermore has revealed that one in 10 SMEs believe they would not survive disruption to their supply chain and nearly half (49%) of SMEs do not have contingency plans in place should their biggest supplier fail.
This is particularly worrying at a time where almost 90% of businesses have had their supply chains disrupted in some way in the last five years.
Potential threats include price hikes, Brexit, late payment, natural disasters and cyber attacks.
So what can businesses do?
Here are some top tips to help you manage your supply chain and protect your business against any potential disruptions.
1. Know your supply chain
It’s vital that you understand your full supply chain in order to manage the risks.
Yet, according to the research, over 59% of SMEs don’t fully understand all the components in their supply chain.
Just two fifths (41%) of decision makers say they know all of the business’s customers and suppliers in their supply chain, while 9% say they do not know any of their customers whatsoever.
To protect your business, create a thorough supply chain map detailing every element of your supply chain and identify how this could change in the future.
This will allow you clear visibility to easily plan ahead and properly respond when disruption occurs.
2. Create open lines of communication
As with most elements of business management, communication is key.
Given the quantity of those involved in a supply chain, it becomes even more important to ensure that communication with suppliers is always clear and regular.
By creating open lines of communication throughout your supply chain and within your own company you speed up your reaction times and limit any potential disruption to your business.
3. Have a contingency plan
Businesses might not be able to control the weather or what a post-Brexit Britain might look like, but that doesn’t mean they cannot prepare for potential disruption.
The key is to focus on what you can manage and put plans in place that will allow you to respond quickly and efficiently to any disruption.
Putting together a resilience plan doesn’t have to mean setting aside huge amounts of money or spending weeks planning, yet it could be one of the most critical projects you complete for your business.
This blog on developing a resilience plan looks at some of the common threats your business could face and how you can protect your business.
4. Regularly assess risks
With supply chains becoming increasingly complex, it is vital that you perform regular risk assessments at all levels of your supply chain.
Where possible, tap into real-time data from finance and operations. This could help to identify any potential red flags and allow you to take appropriate action at the earliest possible opportunity.
If something is identified as high risk you should consider additional strategies to protect your business and limit any potential damage.
5. Get insurance
One of the ways to protect your business interests against many of the potential threats to your supply chain is to insure against them.
As well as considering wider areas that you should get insurance, it’s also important to review any existing insurance policies you currently have and make sure they still suit your needs.
For instance, with late payment so prevalent, do you have a credit insurance policy?
Credit insurance protects your cash flow in the event a debtor falls insolvent or takes longer than the agreed credit period to pay an invoice.
While credit insurance can be provided on its own, it can also be supplied as part of an invoice finance or a supply chain finance facility.
Invoice finance additionally releases funding against the value of invoices to further protect businesses from the cash flow implications of trading on credit.
In contrast, supply chain finance, commonly referred to as reverse factoring, involves the funder advancing payment to the client’s suppliers. This allows the client to keep longer payment terms if they wish, while still enjoying early settlement discounts and stronger relationships with their suppliers.
To see if your business could benefit from credit insurance, invoice finance or supply chain finance contact us on 0800 9774833 or request a call back to speak to one of our experts.
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