Canadian organizations continue to grapple with supply chain challenges

Despite a gradual reopening across the country, Canadian companies are still grappling with procurement and supply chain challenges initiated by the Covid-19 pandemic. A recent article from Ian Brennan and Harry Lake, partners at BDO Canada, examines what organizations can do to mitigate their supply chain risk.

According to a May 2021 Canadian Federation of Independent Businesses (CFIB) report, 41% of Canadian business owners are worried about business logistics, up from 29% near the start of the pandemic in April 2020.

Over the last year, shortages, lockdowns, and border restrictions have impacted every industry’s supply chains. Notable examples include lumber shortages that have affected the construction industry, and computer chip shortages that have affected auto manufacturers and consumer electronics.

Brennan and Lake identify three key risk areas for organizations to target as they combat their continuing supply chain challenges.

The first area is labour capacity. As some companies cut costs and workforces during the pandemic downturn, this reduced manpower. Some were also forced to reallocate remaining workers to crisis task forces. If they are operating with reduced manpower, companies need to nonetheless ensure their mission-critical functions are reaching minimum service thresholds, according to BDO.

Next, companies need to examine their supply chain exposure. When China was initially struck by the pandemic, companies saw the risk of sourcing all or most of their products from a single location. 2020 saw many firms shift procurement from China to other low-cost Asian countries, rather than driving any significant trend in near- or reshoring. Supply chain diversification will continue to be an important strategy for firms in the future as natural disasters, extreme weather, political instability, and health crises increase in frequency and severity.

The third area identified by Brennan and Lake is procurement fraud and compliance. The Covid-19 pandemic brought increased risk of fraud and regulatory non-compliance, and firms need to remain vigilant by utilizing advanced procurement and contract analytics to spot and deter fraud and non-compliance, according to BDO’s experts.

Brennan and Lake also recommend reinforcing supply chain resilience. One facet of this is implementing diversified sourcing and identifying contingency plans for alternative sourcing of essential products. Companies should also assess their supplier relationships to improve efficiency, as well as make plans for procurement modernization – including digitalization – that can further improve resilience.

For companies that are cash-strapped, attention should be shifted to liquidity assessment and planning. Brennan and Lake note that companies should prioritize spending where absolutely necessary, while also examining if better prices can be obtained through a new vendor selection process. Companies can also try negotiating payment terms with current vendors.