If the chain breaks – How to protect your operations when both your suppliers and purchasers are feeling the pinch.

Whether your trade is domestic or international, a healthy supply chain is what helps keep the wheels turning. If you’re faced with harsh economic conditions, however, it’s your buyers and suppliers who may also struggle to keep moving as before.

That’s why it’s important to keep communicating with those on either side of your business, and at the same time, make early provision for new supply and demand routes if it looks like the gaps are going to appear.

How strong are your supplier relationships right now? – Could they afford to wait longer for payments while you bridge cashflow? This can be a difficult negotiation, so you should consider what you can offer in return to ease their concerns – for example by extending a retained relationship with them for a longer period of time. It’s strategically important, too, to recognise that everyone in your supply chain is dependent on each other’s success. In that spirit, it will be valuable for you to work with them across the chain to ensure that payment or funding options are there for the benefit of all.

Could overseas purchases lighten the cost load? – Depending on how favourable the exchange rate, delivery speed and quality assurance you can get, you could consider sourcing material from new, international providers to ensure your supply chain is optimised. It’s logical in any case to spread your risk and build out some alternative supply routes to give you more peace of mind.

Use technology to make things simpler – With very few exceptions, if they’re not doing it already, businesses have the potential to use highly-functioning software platforms to carry out transactional tasks and manage their supply chain. Consider how you might improve the digital process at supplier and buyer level to improve your efficiencies across the board. You can save valuable time and provide reassurance to your customers that you are trading healthily despite challenging circumstances.

Make sure you can finance for the unforeseen – Good supply chain management depends significantly on making wise cash flow decisions – something which is your insurance against suppliers who cease trading with little or no notice. It pays, therefore, to analyse what extra cash or finance options you might need to call upon to switch supplier and act decisively.

Please contact your local HSBC representative to discuss how we can help you and your business.