Nobody enters the supply chain field because they enjoy chaos.
Most of us in supply chain and operations are drawn to them because we bring order and precision to what otherwise could be like herding cats. Supply chains involve so many moving parts. There is great satisfaction for us engineering types in ensuring all of those parts and products are in their proper place at the proper time.
COVID-19 has wreaked havoc with that logic. Chief Supply Chain and Chief Operating Officers know exactly what I mean because the past few months have been anything but business as usual. Even the best laid plans have gone by the wayside due to the many contingencies the pandemic has brought to supply chains.
Most companies experienced early impacts from the pandemic. In March, 75% of companies were already reporting supply chain disruptions. And Accenture research at the beginning of this crisis showed 71% of companies did not have a business operations contingency plan in case the outbreak lasted longer than a few weeks.
Crafting good from a bad event
I’d like to share a few areas where supply chain leaders can focus to use the disruption of COVID-19 to not only make their supply chains even stronger than they were, but also to help show responsible leadership for a variety of stakeholders—from customers, to vulnerable smaller suppliers and more.
New partnerships. Some supply chain leaders have put emergency procedures in place. As part of this effort, a good number of supply chains are now doing business with companies they’ve never partnered with before. When this works out for the good of all—as in the case of Unilever and Heineken partnering to make hand sanitizer—it is a great thing.
But partnering with new businesses that are less vetted brings risk. Pre-COVID-19, we know that fewer than one-third of companies—just 32%—had vetted all of their suppliers over the preceding year. Accenture’s latest cybersecurity research shows that 40% of attacks are indirect, stemming from supply chain and other partnerships—which means new partnering during COVID-19 is fraught with potential potholes. It is more important than ever to be diligent regarding “multi-nested parties.” Do you know who the suppliers to your suppliers are? Visibility through multiple tiers will help you not only avoid potentially risky partners, it will also help supply chain leaders forecast the ripple effects of decisions down the supplier chain. We’re seeing more and more low-income communities put at risk due to these ripple effects.
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Pre-COVID, just 32% of companies had vetted all of their suppliers over the preceding year.
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Cash flow relief. Unilever is also a great example in this area of a company doing right in its supply chain. It’s offering 500 million euros in cash flow relief, a portion of which will be early payment to its most vulnerable small- and medium-sized suppliers to help them with financial liquidity. At Accenture, we’re supporting the UK’s Department for International Development with a COVID-19 Vulnerable Supply Chains Fund for garments and agriculture. It provides money and technical assistance to UK businesses and civil society partners facing threats to their supply chain survival—helping the most vulnerable workers and suppliers recover from the pandemic’s economic impacts.
Now is the time to think down the food chain before you act. Companies that renege on contracts with a primary supplier need to think about the downstream results, when families who work for the supplier of that supplier in emerging markets don’t get paid because of that action.
Transparency. Most large global companies have human rights principles as part of their code of conduct. But their normal vigilance in this area is harder to deliver on than usual because during times like those we’re living in, it’s difficult to get unbiased information on new areas of operation, partners, contractors and more. I see more and more companies use a data-driven approach to get the transparency they need. Accenture worked with a German multinational conglomerate to do just that. We helped them create a Human Rights Due Diligence Tool to identify and assess risks in their foreign sourcing, production and investments. They can now visualize risks by country, site and counterparty so they can better mitigate them. And we’re helping other companies use blockchain to improve the traceability of their products and materials, from pharmaceuticals to consumer goods.
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Accenture worked with a German multinational conglomerate to create a Human Rights Due Diligence Tool. It identifies and assesses risks in their foreign sourcing, production and investments. They can now visualize risks by country, site and counterparty.
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Top leadership sets the tone
Now is not the time to be less rigorous in your supplier accountability frameworks or screening criteria. Supply chains have become more critical than ever to the common good and we must lead from the top to ensure that we’re not only delivering on our promises for product—but also maintaining the trust of our customers, shareholders and society at large.
Accenture’s latest supply chain research provides examples of what companies are doing to learn from the supply chain patterns of this pandemic—creating a more resilient supply chain in the process. I encourage you to check it out and reach out to me if you’d like to have a conversation about how your company can do the same.
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