Corporate Development Perspectives in an Era of Supply Chain Disruption
A Riveron Supply chain and business process improvement expert recently moderated a Corporate Development Forum webinar discussion with perspectives from Brad Eckerdt (Wisconsin Stamping & Manufacturing), Katya Kramer (Agility Health), and John Strenger (SPS Commerce). Recent labor and supply chain shortages have tested the resiliency of businesses across many industries, and these panelists examined ways to ensure business continuity and realize new potential.
A related article explores perspectives on mergers and acquisitions, valuations, and diligence, while this segment recaps the panelists’ insights on the labor and supply chain factors currently shaping corporate development.
Adjusting drivers and broadening channels for supply chain acquisition
Few industries were fully prepared for the impacts of the pandemic-induced supply chain disruption. The ability to react with flexibility became paramount. For industries requiring raw materials in the door, the driver shifted from pursuing the best margins and lowest pricing to sourcing for mere availability. Customers were largely understanding that they would need to absorb pricing increases for a limited period, and these arrangements have proved amenable if paired with ample communication, transparency, and innovative problem-solving.
Even though markets continue to be expensive, companies need order volume to continue growth. Consequentially, speed to market has become a core emphasis, and companies have sought solutions by broadening the search for suppliers. For instance, many medical supply companies faced exponential demand at the height of the pandemic. Measures were put in place to ensure supply chain resiliency, including longer-term contracts and partnering with the government. As an additional source that had not historically been a central strategy for some of these healthcare supply organizations, refurbished equipment and parts harvesting also became key aspects of their strategy. Stemming from this shift in perspective, hospitals are now beginning to reprioritize maintaining and refurbishing existing equipment as well.
Safeguarding existing customer relationships and forging new ones
As companies face labor shortages and supply chain disruptions, a key focus has become understanding why customers stay. Leaders must not only take care of their existing customers but are also looking for ways to add additional value to their current base. By studying and investing in existing clientele, a company is able to better help solve problems for customers, and this provides the added potential to grow in partnership. Even if companies considered these factors in the past, the current circumstances have put a spotlight on their importance.
To meet customer demands, companies have been forging new relationships with never-before-considered suppliers. This trend could be considered an up-side for many suppliers who previously lacked the opportunity to work with those organizations. For many companies, a key priority is maintaining solid relationships with suppliers to ensure a consistent, reliable source of raw materials. To safeguard that product is able to reach the end customer, companies are looking to lock in pricing when possible, emphasizing customers with whom they have blanket orders.
Considering the role of remote work, retention strategies, and durability amid labor shortages
In this challenging environment, companies experiencing an upswing in demand would increase their headcounts by roughly 25% if they could find the workers. Many organizations offering popular products and services are down to a skeletal workforce, with interested buyers being forced to steer clear of the risk in assuming labor force burdens.
It is not uncommon for skilled employees to be able to walk out of their current companies and entertain five competitive offers, when larger organizations are advertising for warehouse workers at $23/hour. Now more than ever, retention boils down to an emphasis on a healthy work environment – ensuring that employees feel valued while offering competitive benefit plans.
To hedge, companies must also consider more assertive recruiting of new talent with the expectation of higher turnover. In addition, although geographical growth is not a priority for many companies in the current climate, the search to acquire labor has caused some organizations to plan expansions into regions (e.g., Mexico) that might offer a more cost-effective or readily available workforce.
Globally, while some industries face less of a labor shortage, prices reflect an increase of demands and expectations from workers. Meanwhile, for companies in sectors heavily impacted by labor shortages, much of the turnover is out of their control. Many companies are responding by building up the durability and agility of their distribution channels.
Though more complex than it may seem, a rapidly increasing trend is the concept of drop shipping, also understood as the “endless aisle” in e-commerce. In its deployment, customers purchase a product online from a brand, and the shipment happens directly from the item’s manufacturing warehouse. The benefit is that brands never have to keep items in stock and are able to shift their operational focus to other areas of growth.
Pre-pandemic, companies had limited to no success onboarding new hires as remote workers, but now that reality has evolved into one with the potential for success, and it has opened up several more possibilities with regard to integration planning. Companies are seeing that when new hires come in without the prior experience or expectation of an in-office culture, they fare better and are more interested in positions with remote possibilities.
From a company leadership and human resources management perspective, the shift is more complicated. Developing new rhythms for in-person forums, extending personal development plans remotely, creating consistent sharing platforms, and translating what promoted employee health and satisfaction requires continued creativity and agility.
Refining approaches to acquisitions and integrations
As the pandemic presents ongoing impacts, corporate development leaders have learned the importance of accepting uncertainty in managing supply chains, nurturing customer relationships, and sourcing an effective labor force. Tools do exist to limit the level of disruption: companies can succeed by continuing to be resourceful, collaborating with clients, and embracing innovation through technology. A related article further examines valuation approaches and other impacts to mergers and acquisitions.