COVID-19 is a humanitarian disaster on a global scale. The virus spreads rapidly, and it challenged mankind with inevitable social and economic impacts.
The impact made most of the buyers diversify their supply chain to a low-cost and neighboring market such as Bangladesh, Pakistan, Vietnam, India, etc. Also, it demonstrated the importance of having a resilient supplier. Changing from a well-established Supply chain structure to a whole new one includes many risks/ challenges.
Also, the controlling measures of the disease by the government had many consequences for world trade. Many production activities have been disrupted, first in Asia and then in Europe, North America, and the rest of the world, and there have been widespread border closures.
Previously, clients were able to check the supplier’s competence in different ways- Visiting the supplier, checking with their team, etc. However, the pandemic had put forth the clients to deal with the following challenges in new supplier selection.
- Travel restriction & Border closures
- Risk of choosing an unreliable supplier.
- Lack of knowledge of the market
- The incapability of the supplier to face the future challenge.
Through this article, I would like to address all the above challenges and how you can stop those stoppages and choose the right supplier.
1. TRAVEL RESTRICTION & BORDER CLOSURES
The travel ban restricts clients from visiting their suppliers to check their existence, capacity, and capability.
Take the advantage of Virtual world. Virtual verification method not only helps the business during the Pandemic but also in the new normal.
- Request your supplier to give you a virtual tour of their premises.
- All the well-known Trade fairs and Exhibitions are now available on the Virtual mode. So, you can explore the same.
- Arrange a Virtual meeting with the supplier to discuss with them and understand each other’s needs.
- You can also place your representative in your target supply chain country if your business is high and consistent.
2. RISK OF CHOOSING THE UNRELIABLE SUPPLIER
The major risk behind choosing the Unreliable supplier is your reputation, regulatory risk, commercial risk, and choosing an insecure and incompetent supplier.
Hence, the supplier’s reputation, capacity, and capability play a key role in a sustainable business.
Nowadays, it is important to choose a more resilient supplier. A resilient supplier is one who can face an unexpected risks such as calamities, pandemics, etc and they will recover quickly to the normal situation. They can give you the increased customer service and financial stability.
To choose a resilient supplier, follow the below-mentioned process.
- Prepare a list of Top 20 or 30 suppliers who are best in your target supply chain country.
- Or use the Power of your Network. Discuss with your network your expectation of the supplier and ask for a recommendation. If they have any previous experience sourcing from your target supply chain country, they will recommend you some of the best suppliers.
- Once you are ready with the list of suppliers, arrange a virtual meeting with the supplier and ask the following questions better understanding.
- Supplier profiling
- Production capacity evaluation
- The number of production lines owned by them and their location.
- Manufacturing capacity (Number of merchandise units manufactured per day?)
- Total lead time (Number of days taken to complete a part?)
- Do they have any previous experience in manufacturing your product line or similar?
- The number of complaints/ Claims received from their customer?
- How many are repeated complaints?
- Facilities, machinery, and equipment
- Are they willing to send photos and videos of the facilities?
- Are they well identified?
- Do they have fire safety measures?
- Number of machines they have
- Certifications and licenses
- After meeting the supplier, ask for a Virtual tour of their premises to re-assure the information provided by them. You can make a whole day appointment for the same.
- If you are not much confident in doing all these activities by yourself, you can seek an expert’s support.
3. LACK OF KNOWLEDGE OF THE MARKET
Also, few clients have comparatively less knowledge of the new supply chain markets. Due to which they end up placing orders with the wrong supplier and face some risk on the service task, export ban, etc. Besides, clients should also be able to manage different time zones, languages, and cultures which could be another potential hassle to tackle.
Do not depend solely on the information provided by the supplier. Do some research by yourself because Improper research led to wrong supplier collaboration. Poor supply chain country knowledge can create Last-minute surprises. Therefore, know your source base thoroughly by doing some research on the following.
- Know the legal requirement of the country and state.
- Awareness of the government policy
- The political stability of the country
- Understand the culture
- Location of the factory
4. INCAPABILITY OF THE SUPPLIER TO FACE FUTURE CHALLENGE
The supplier may perform well at present. However, it is important to understand whether the supplier can face any similar challenge in the future.
If not, the supplier may rely on you for any pieces of training or development, they may undergo shutdown and bankruptcy or may be incapable of adopting the latest technology.
Do not just rely on the Supplier’s catalog or the recommendation or Online websites. Evaluate manufacturing capability, market experience, access to certain raw materials, ability to export, size of the business, financial health, location, reputation, ethics, etc. Some of the key solutions to choose the right supplier are.
- Ensure supplier has good knowledge and they are professional.
- Ensure they can operate individually without much of your support.
- Check their current customer profile and Cash flow.
- Ask for their Business continuity plan.
- Enquire how they managed the previous pandemic situation.
- Ensure the supplier is facilitated with a good internet connection.
- Ensure if the supplier is proficient in using digital platforms.
If these seem exhaustive or if you feel the need for someone who can support you in choosing the right supplier, below are my additional tips.
- Hire a local representative.
- Use an Empaneled associates/ Freelancer.
- Use an accredited 3rd party Audit company for new Supplier Selection.
If you like to see a report of a Simple Factory Audit done by a 3rd party Inspection company, You visit the below link and download the same.
Please click the link below to know 6 tips for right supplier selection during the pandemic