What Lessons has COVID-19 Taught Buyers and Suppliers
The onset of COVID-19 caught many business owners off-guard. Raw material shortages, delivery challenges, and obtaining financing for supply chains were some of the difficulties companies had to face. Ultimately, buyers and suppliers learned that to overcome these hurdles, they need to work collaboratively. By working with the right supply chain finance company, international companies can support collaboration and streamline operations for an entire supply chain, resolving immediate cash flow challenges that could drastically impact a business.
This article discusses the lessons buyers and sellers learned from COVID-19, including the benefits of utilizing trade finance, which includes services like non-recourse financing, to improve liquidity during disruption.
Lesson 1: Know Your Supply Chain
While supply chain disruptions can happen to large or small companies, the most critical factor is how a company handles these circumstances, regardless of the size of their business. By identifying weaknesses in the supply chain, buyers can adapt their business contingency plans accordingly and use methods to monitor and mitigate potential risks. Suppliers should also have contingency plans in place. Many businesses are leveraging real-time analytics to track changes that could alter suppliers’ risk profiles.
A company’s suppliers are an essential asset, and investing in supply chain efficiency enhancements can improve vital decision outcomes. Buyers can begin by mapping out supply chains and identifying crucial subcontractors.
Additionally, companies need to know which risk factors are present in their industries. Cyber-threats, natural disasters, warehouse fires, legislative changes, logistics interruptions, and demographic challenges can all come into play. Keeping a supply chain resilient during disruptions requires preparation and established best practices cohesively across all suppliers.
Lesson 2: Embrace Technology and Trade Financing
Buyers and suppliers alike benefit from Third-Party Risk Management software and other technology that enables informed decision-making during business interruptions. By integrating real-time risk management platforms into the operational infrastructure, the supply chain ecosystem becomes more transparent, supporting faster and more appropriate responses during a crisis. Documentation digitization is another technological advancement that facilitates smoother trade transactions amid disruption.
In addition, trade finance services, which includes non-recourse factoring, can increase trade visibility and mitigate risk through credit monitoring and vetting protocols, which is crucial when supply chains are in need of added security. By ensuring compliance with local regulations, these services can also reduce operational expenses and allow for efficient cross-border shipments.
Lesson 3: Adopt a Flexible Approach
Traditional distribution networks fail to emphasize the importance of collaboration and fostering long-term buyer-seller relationships. Businesses that communicate openly with the supply chain members about trade financing possibilities can optimize cash flow and operations. A strategic allocation of working capital enables buyers and sellers to respond to emergencies with greater flexibility.
Today’s global trade market is evolving rapidly, and conditions change frequently. The need to adopt flexible and digital trade solutions has been present for years. However, it was not until COVID-19 exposed the infrastructure’s inability to function during a crisis that change became inevitable. In a post-pandemic economy, trade disputes, duties, quotas, and the introduction of new regulatory measures will require the same level of flexibility to keep supply chains robust.
Lesson 4: Promote Supply Chain Transparency
Supply chain transparency is another essential component of achieving business resiliency and involves combining fragmented supplier systems into a single collaborative infrastructure. The ability to share data in real-time keeps all parties informed and up-to-date on changes that could otherwise require multiple communication efforts.
Visibility into the supply chain can minimize production delays by detecting issues before they have the chance to impact vital elements of production or distribution. For example, when a disruption occurs, suppliers could respond by immediately ordering components from back-up subcontractors.
Increasing transparency in the supply chain ensures buyers can make more responsible sourcing decisions. Meanwhile, multitier supply chains can resolve additional concerns regarding sustainability, business continuity, and regulatory compliance. Instead of only examining the first tier of the supply chain, procurement strategies should focus on the supplier network as a whole.
Connectivity, transparency, technology, and flexibility will empower buyers and suppliers to overcome future disruptions and avoid costly complications. The resiliency-building lessons learned from the pandemic have taught us that establishing collaborative solutions can drive better trade outcomes. With an international trade finance company, buyers and suppliers can align their goals and secure financing to address their cash flow obstacles.