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How to Protect Cash in Times of Supply Chain Disruption

Spools of thread on sewing machines

When events outside your control threaten to upend operations at your manufacturing company, the first move to make is to protect cash flow. In moments of extreme upheaval, as we’ve just experienced, making moves to protect cash flow quickly will help you to weather the storm—especially when you’re not sure how long that storm will last. 

We spoke with several customers about the steps they took to batten down the hatches at their organizations when the COVID-19 pandemic struck and how they avoided wasteful spending when their cash reserves were threatened. 

So don’t take it from us. Learn from these seasoned, successful manufacturers. 

Communicate Quickly 

Whether customer demand has changed or your suppliers can’t deliver, any disruption in your supply chain will cause a ripple effect of communication. First the team has to decide how to handle the situation internally, and then the game plan has to be communicated to customers and suppliers. This often leads to back-and-forth negotiations and internal conversations. 

In moments of disruption, communication is key, and the sooner everyone becomes aware of your plans the better. 

With Covid, your communication is just ten times as important…and it’s already really important.

Christopher Beaschler, DuraMark

Set Internal Controls

Some habits die hard. When disruption occurs and you’re unsure how demand for your products will change, it’s important to set some internal ground rules about how you’ll proceed. 

DuraMark, for example, put an alert in their ordering system that was triggered on any purchase order over a thousand dollars. This alert informed their finance team of the order, so that they could double check whether that much inventory was really needed. In the past, they often ordered enough supplies to get the best bulk prices. 

In uncertain times, however, their finance team was willing to pay a higher rate to keep their inventory conservative. Learn more about how they set up these controls in this short video. 

How DuraMark Managed Through COVID-19

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Create a Single Source of Truth

The best laid plans don’t mean anything if they aren’t carried out perfectly. When multiple versions of spreadsheets start floating around and emails go out at a rapid pace, it’s easy for things to “fall through the cracks,” as Troy Mauk of Global Interconnect says. 

Every manufacturer knows that it only takes one late part to stop the lines and delay a shipment, which is why every part counts—especially when the future is uncertain. 

Global Interconnect Didn’t Let Anything “Fall Between the Cracks”

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Beware of Inventory Costs 

All of these points lead up to a single truth: when you buy more inventory than you need, you waste cash. 

Not only have you spent that cash on the parts themselves, but you also have to pay to store them. Those unused parts take up valuable real estate and bring unnecessary overhead costs along with them. 

Learn how Napoleon conserved cash during the COVID-19 crisis by getting crystal clear on which orders needed to ship sooner, which were delayed, and which were cancelled. 

How Napoleon Saved Millions

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The phrase “cash is king” is never more true than in times of supply chain uncertainty. Learn how to overcome supply chain risk and carry less overstock with SourceDay.

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