are often required where some kind of unforeseen happenings may
not be ruled out While no body can think and plan for Tsunami or
Hurricane Katrina Purchasers without contingency plans may face
embarrassments as it may lead them scrambling for supply and
paying outrageous fees.
Purchasers do learn a lot about contingency planning in the wake
of many unthinkable happenings.
The best way to go about it is
not to wait for it to arrive to learn that contingency planning
is something that you should have done it earlier.
So what does
that mean for purchasing? A lot. Say, for example, if an
influenza pandemic does occur, supply chains lacking good
contingency plans will result in many companies being driven out
The world has withstood influenza pandemics before
(three times in the 20th century), so your company can indeed
survive with good plans in place.
With less prepared competitors
going out of business, your contingency planning may actually
help your company thrive in the long term.
Here are some things to consider in your contingency plan:
1.Establish strong supplier relationships now
They will mean more than ever. With reduced workforces
across all industries, supply of critical items will be tight.
Suppliers will have to pick-and-choose to whom they provide
their limited stock. Those buyers with arms-length or
adversarial relationships with their suppliers will struggle.
2.Make sure that your suppliers have
The US government has issued a
Business Pandemic Influenza Planning Checklist at http://tinyurl.com/qlnvt.
your critical suppliers to
complete and maintain the checklist and provide it to you on a
bi-monthly basis so that you can assess the strength of your
3.Adjust your sourcing strategy
is common for purchasers to focus on buying from a single source
in order to get the most highly-leveraged pricing. In times of
crisis, this strategy exposes you to increased risk.
have relationships with multiple suppliers - ideally in
dispersed geographical areas - in case a supplier's operations
are brought to a halt by the influenza pandemic.
4.Re-evaluate inventory levels
In the event of an influenza pandemic, demand for the
goods or services that your organization provides will change.
For health care products, the demand is likely to increase. For
luxury items, the demand is likely to decrease.
Discuss with your top management what kind of strategy you
want to have for related changes in your inventory levels.
And if you believe that demand will rise, don't wait until
an outbreak to decide that you need to purchase more
inventory - your suppliers may not have the inventory nor
the staff to handle the increase in demand when everyone is
scrambling for the same items.
Conversely, if you expect demand for your company's products
or services to decline,
you don't want to be stuck with tons of inventory.
In that case, you may want to take a lean inventory approach
to ensure that your company has the funds to survive a
period of decreased demand.
5.Assess the location of your suppliers
In the past few years, the increase in global
sourcing has resulted in many buyers dealing with suppliers
across the globe. Low cost countries have been viewed as
great places to source for reducing product cost. But where
is bird flu spreading among humans right now ?
Yes, low cost countries! Plus, you have to remember that low
cost countries may not have advanced healthcare to battle
Suppliers in these countries may be particularly susceptible
to the consequences of an uncontrolled outbreak.
Furthermore, customs restrictions may tighten in order to
contain the spread of the virus, making it more difficult to
import goods from other countries. You may want to
diversify the location of your suppliers to reduce risk.
6.Revise your Force Majeure clause
Make sure that your contract contains a Force Majeure clause
that specifically addresses pandemic influenza.
You need to be protected from being committed to any
purchase quantity guarantees if your company is affected
by an outbreak.
7.Prioritize department tasks
Identify critical tasks that must continue to be
done in the wake of an influenza pandemic and less
critical tasks that could be eliminated. Document
procedures for all critical tasks. You don't know
which staff members will miss work due to their
own sickness or to care for loved ones, so make
sure that all staff members are trained on the
critical tasks. For each staff member, identify a
backup person or two for their work.