Summary
This week’s top links address supply chain financial risk mitigation, ongoing supply chain and procurement strategy shifts, and the uptick in merger and acquisitions. I am convinced all three are inter-connected and will continue to trend upward throughout 2020. Supplier risk management is top priority for many companies. It encompasses much more than just financial risk (e.g. cost, logistics, compliance & brand image, quality & performance) But financial stability of supplier is a great place to start.
Top Links
Financial Distress – Have you spotted the red flags? RiskMethods Blog Post (8 min. read)
- Four red flags of financial distress: 1) Force majeure, 2) Changes in labor, 3) Changes in management, 4) Underperformance / profit warning
- Six options for mitigating risk
- Begin a thorough review of your contract if you suspect that a supplier may be struggling financially
- Evaluate who pays for financial distress costs (to claim force majeure, suppliers will usually have to show that they have exhausted all alternatives)
- Ask your supplier what actions they are taking, and check their supplier network and financial situation
- Can you/do you want to provide support?
- Can you source alternate supply?
- Can you manufacture yourself?
Supply Chain and Procurement Leaders Anticipate Seismic Post-Pandemic Strategy Shifts Business Wire, June 11 ( 4 min. read) Survey results of 600+ supply chain and procurement professionals
- 73% of organizations are now planning major shifts in supply chain and procurement strategy post-pandemic
- 38% supply base expansion, 34% reductions in supply chain globalization, 21% increases to inventory levels
- Biggest impacts -31%: Decreased demand, 26%: Lack of available supply, 21%: Logistics and transportation slowdowns and delays
- 39% of those surveyed said they were blind-sided by a lack of supplier and geographic risk
- 29% said they didn’t understand the upstream supply chains of their suppliers
The Supply Chain Merger And Acquisition Market Heats Up Supply Chain Management – June 8 ( 4 min. read)
- 200 mergers and acquisitions in the US supply chain industry, up 40% from the same period just three years ago
- M&A is a significant force creating new leaders and stronger competitors, capable of upending familiar landscapes
- M&A drivers were
- Geographic expansion to increase footprint and gain customers
- Acquisition of new technology to expand a company’s products or services
- Speed. It’s faster to buy than build in many markets.
- People and talent. “It is all about the people running the business”
- New capabilities. Companies often need to fill in a hole in their offerings
- Broader or deeper market reach increase capacity and gain efficiencies
- Financial arbitrage by larger companies aquiring smaller companies, leveraging earnings, equity, and debt
Note: I am posting my past letters at sc-exec.com/newsletters and have added the ability for people to subscribe. Please feel free to forward the newsletters to your colleagues.
| Subscribe & Download Past Newsletters |
Best regards,
Don
Don K Brown
| |
Unsubscribe | Update your profile | don@sc-exec.com, Austin, TX 78731