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Supply Chain Strategy, Planning & Optimization

Authors: Jeff Jorge and Erich Bergen The trade war dispute between China and the U.S. prior to 2020 instilled uncertainty and mixed messages of the benefits of a global economy. Companies were cautiously considering nearshoring as a solution. Then the COVID-19 pandemic arrived, causing great disruption in many companies’ supply chains and leaving them with idled plant floors, empty warehouses and unsatisfied customers. Because of this disruption, companies have a greater incentive to consider nearshoring some or all of their key supplies. For context, nearshoring refers to an organization’s transfer of certain business operations, in particular its own manufacturing capability or a key supplier, to a nearby country closer to the demand location for its manufactured products. For U.S. companies, nearshoring may mean moving a supplier from China, one of the U.S.’ top trading partners, to Mexico or Canada, the U.S.’ other two largest trading partners. Additionally, in considering a move from Asia, some manufacturers with European presence often evaluate select countries in Eastern Europe, such as Poland and Slovakia, which provide analogous benefits for companies with a European manufacturing footprint.  Initial consideration filter: Labor- vs. capital-intensive products While the suitability of nearshoring is highly specific to an individual company and its products, there is one initial and reliable filter employed towards determining whether such a strategic decision holds further exploration: labor content. Specifically, whether a company’s products and its value-add capabilities rely on a greater proportion of manual labor versus automation in the production of its goods.  Regional consumption potential and market size opportunity aside, Asia-based operations and supply base expansions saw their rise early on due to a strong connection with abundant labor supply, low wage rates and increasingly greater production capability.  Fast forward 20 or so years to today, when the productive workforce in such low cost countries achieved greater prosperity. The result: labor cost inflation and a growing purchasing power of the populous combine with logistic challenges and the rise of a trade war across key world economies. Suddenly, for companies whose products rely on intensive labor input, the total landed cost of manufactured or purchased goods from low labor wage countries begin to lose their appeal.   Organizations with “capital-intensive” products are also looking to nearshore their supply chain in the wake of the pandemic. Capital-intensive products require high-precision machine operations and automation, with a comparatively lower manual labor content. Examples would be manufacturing an automobile’s drive train and steering system. The serious supply chain disruption of 2020 makes the decision to rely on a supplier in a low-wage, distant country suddenly look like an expensive proposition. Thus, nearshoring manufacturing of these types of products becomes particularly attractive, even when moving this manufacturing may be difficult and expensive in the short term. A June 2020 survey from Gartner of 260 global supply chain leaders found 33% had moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years. Other sources indicate a double-digit decline in U.S. imports of manufactured goods from China from 2018 to 2019 – in no small measure due to the trade tensions between the two countries. The result: an offset in imports from other countries and the acceleration of nearshoring supply to the Americas.  For instance, in the same period, U.S. manufacturing imports from other low-cost Asian countries increased by $31 billion, while imports from Mexico increased by $13 billion. In essence, while the trend toward nearshoring had begun prior to the onset of the COVID-19 pandemic, the pandemic exacerbated the effect of China-centric tariffs, creating an accelerant for companies to consider nearshoring their operations and suppliers when possible and feasible. China and other Asian countries do not make the decision to nearshore an easy one, especially for products that require substantial transformation and value-added labor. China in particular has the workforce, equipment, economic system and currency that gives them an advantage over many other countries vying for sourcing preference. Beyond manufactured items, China retains the source of many raw materials incorporated into a number of essential industrialized goods. Intentional or not, this is a strategic position (if not an advantage) for China that frequently poses challenges for mature supply chains in need of change but also dependent on such factors.   Logistical challenges Labor and materials constitute one of many input variables to manufactured goods. Once made, they have to be transported – and the variables to be considered are many, including: Physical establishment of buildings, processes, people and technology Cost of moving, including movers, replacing broken items and prepping the new space Transition cost, including possible down time and supply interruptions during the move  Logistics of establishing new shipping lanes and distribution channels from the new supplier Possible investment tax credits offered by the jurisdiction of the new supplier One of the most direct benefits of nearshoring is its positive impact in a company’s working capital. Specifically, by reducing the shipment lead-times and related inventory in transit, the total ‘hold time’ for cash outlay to suppliers and receipt from customers, makes it such that working capital ‘float time’ is often reduced to days – instead of the typical six to eight weeks of transit time between China and the U.S. Increased working capital strengthens the balance sheet, provides reduced dependency on credit facilities, and directly contributes to the organization’s financial health – to name a few.  Factoring in both the logistical costs of moving product and the cost of capital provides a company with meaningful perspective and confidence in its decision to keep production / sourcing stay in China or another Asian country, or to nearshore.  Nearshoring considerations Data-driven viability assessments are an important piece of any near-shoring pre-deployment evaluation. When considering the challenges of near-shoring, forward-thinking manufacturers consider a wide range of variables, some of which include:  Freight and insurance costs: The long spans of ocean separating Asian supply locations from the Americas come with a comparatively high cost of shipping and insurance relative to a near-shore location like Mexico. Not surprisingly, the cost of shipping from China has fluctuated in 2020 due to the pandemic. According to Hellenic Shipping News, in October, shipping costs from China to the U.S. West Coast were 30% higher than the same period in 2019; costs to the East Coast almost doubled. Lead times: By bringing their supplies closer to the demand points for their products, companies reduce long lead times, among other benefits. Doing so enables a company’s products to reach the end customer faster – which also has a direct impact in working capital (shorter hold times and lower inventory needs), customer satisfaction and competitive market performance, to name a few. These benefits are in the times of “normal course of doing business,” and do not factor in the impact of disparate time zones, significant language gaps and culture alignment differences that become even harder to manage during a global pandemic.  Labor costs: The difference in labor costs between Mexico and China has become clearer in recent years. Mexico labor rates have remained effectively flat. According to Statista, from 2019 to 2020, manufacturing labor costs per hour for China increased from $5.78 to $6.50 USD, while Mexico experienced a much smaller increase from $4.66 to $4.82 USD over the same time period. Couple this with rising labor cost and overall inflation in China, and the case for relocating manufacturing labor to the Americas can be compelling.  Manufacturing labor costs comparison – China and Mexico  Labor availability: Mexico, along with some Eastern European countries, have highly experienced labor forces that are adaptable to different types of manufacturing. While most industrialized areas in manufacturing-centric regions come with competition for qualified labor, the emergence of industrial parks in locations adjacent to such high-demand regions provide access to a growing labor pool at competitive local rates.  Stability in tariff regime and trade relations: The U.S.-Mexico-Canada Agreement (USMCA), the end result of negotiations from two distinct administrations and their resulting policies (Barack Obama and Donald Trump), foster an environment for trade relations between Mexico and Canada that is far more stable than those with China and other countries. This favors near-term and long-term planning considerations of Mexico as a manufacturing and import/export hub for the manufacturing sector’s leading performers.  Mirroring: Larger organizations are also looking to create “mirrors” or redundant supply sources in two or more locations to create resiliency within their supply chain. This may mean a company will have similar suppliers in China and a nearshore country, balancing capacity between both locations. As the business grows, supply volumes grow in both locations. If one location is shut down by a natural disaster or pandemic-like event, the company can more easily shift operations to the unaffected country’s supplier. Organizations ranging from consumer product companies to heavy motor equipment suppliers realize they are exposed to risk in their supply chain in ways that could make it difficult to operate profitably or even shut down the business. Investigating alternatives, which will require comparing all of these variables in more than one country, typically require a company to seek outside assistance to make a smart decision. One way companies can investigate if nearshoring will help bolster supply chain resiliency is through a “battle drill.” Conducting a battle drill Technical capability, historically low wage rates, available labor pool, existing supply of capital equipment and inputs, attractive export/import tariff structure, and favorable currency exchange rates are just a few of the compelling factors that, until recently, had made China and other Asian countries among the most attractive manufacturing destinations in the world. These factors, coupled to prosperity at home (particularly in the U.S.), contributed to nearshoring being of little interest to many U.S.-based manufacturers.  It is no wonder, then, that it would take a scenario of tariffs-meet-pandemic for manufacturers to undergo supply chain pressures significant enough to warrant nearshoring consideration. Yet, consideration alone is not sufficient to build a resilient supply chain that can withstand such headwinds, and organizations that survived the recent disruption in supply chain recognize the need to prepare for the next round of similar disruption.   One way to prepare is to conduct a battle drill. In essence, this entails a simulation exercise by which a company undergoes the scenario planning, feasibility study, cost estimation and nearly every pre-deployment action except actually nearshoring the target operation or supplier.  A complete battle drill would include dynamic scenario modeling, deep analytics on material movement and total applied cost, new facility simulation, inventory buffer build, facility decommissioning and re-start cost determination. A good battle drill includes a preliminary work plan to implement the nearshoring effort, which further crystalizes the timing, resources and dependency requirements. The output of such an exercise is a confident decision on whether to nearshore and, if so, the specific economic, tactical and strategic benefits in doing so. Together, these items provide the necessary detail for subsequent steps, including internal organizational alignment/change management, budgeting and possibly external debt to finance such operations’ relocation.  For supplier-related nearshoring, this battle drill includes selecting the most likely inputs and/or items to be sourced in the Americas, producing the necessary drawings and specifications, researching and qualifying potential vendors, and conducting a multivendor bid process. Coupled with analysis in capacity planning, freight, insurance, transit time and tariffs, this exercise places a company in sure footing to determine whether a supply base should be relocated to closer shores, as well as where and to whom.  The battle drill exercise can largely be outsourced to a capable provider to accelerate execution, improve outcomes and reduce the overall investment in reaching a “go”/“no go” decision to nearshore.  Given its high degree of specificity, this battle drill approach significantly increases the confidence and speed required to inject resilience in one’s supply chain, while yielding the necessary quantitative and qualitative detail for potential next steps should it yield a “go” decision to nearshore.   Nearshoring as a transformative organizational catalyst Irrespective of geopolitical or socioeconomic shifts – and their effects on trade relations and economic policy – critical supplies that rely heavily on remote sources are more vulnerable to disruption than those near their consumption point. A disruption such as a global pandemic can make minor distance vulnerabilities swell to a crippling effect on a company’s supply chain. The current public health crisis that has decimated a number of companies with fragile supply chains stands as proof.   The current COVID-19 crisis is unlikely to be an isolated event in coming years. This prospect of a pandemic-laden world calls for sound leadership decisions and the prudence of foresight, planning and action in the face of known and unknown variables. Companies owe it to themselves, to their team members and to their customers to investigate nearshoring as part of an instrumental variable in injecting resiliency into their supply chain.  Even if a company decides to keep its existing suppliers, and not to nearshore, the clarity that emerges from better understanding one’s own supply chain, its potential vulnerabilities and opportunities to materially improve speed, agility and working capital can have a profound effect on organizational strength. And strength, pandemic or not, is invariably welcome. 

Irrespective of geopolitical or socioeconomic shifts – and their effects on trade relations and economic policy – critical supplies that rely heavily on remote sources are more vulnerable to disruption than those near their consumption point. A disruption such as a global pandemic can make minor distance vulnerabilities swell to a crippling effect on a company’s supply chain. 

Supply Chain Analytic & Financial Solutions

Supply Chain Resilience

Supply chain resilience: exploring nearshoring to unlock new frontiers of strength

Authors: Jeff Jorge and Erich Bergen The pandemic has exposed the strengths and weaknesses of nearly every organization in nearly every industry, but what has been most telling is how organizations have responded to this crisis. There are those that have had to succumb to the financial impact, while others — even in the same sector — have been able to stay afloat. A survey of attendees at the 2020 Original Equipment Suppliers Association (OESA)  Automotive Supplier Conference  reveals   the majority of respondents said the global pandemic has accelerated their organization’s desire to create alternative supply chains and/or supply base. Jeff Jorge, Baker Tilly principal and international services practice leader, presented “Black Swan confined: Leveraging macro-level turmoil to unlock supply chain and organizational resilience” at the annual conference. He discussed what organizations can do to turn significant external pressures into a competitive advantage as well as how they can plan for future “black swan” events. Guideposts Leaders who believe the concept that challenges bring opportunities for innovation and growth seem to oversee the organizations that have best weathered this crisis. For organizations that are still struggling to see the potential, Jorge said he recommends looking at the following guideposts. They range from factors we cannot control (guideposts one and two) to elements that are more controllable (guideposts three, four and five): Geopolitical and social economic risk: This is everything that we see, not only the global pandemic but every dynamic and interplay among the large economies (e.g., U.S., China, the European trade bloc and countries within it, Latin America, etc.) as well as the sectors and governments that permit this interplay of economic prosperity to occur. These are the “big things” happening outside the four walls of your organization that will most likely affect you somehow and will be influential in what you do next. Disruption-based competitive pressures: The pandemic forced organizations to make significant changes quickly, and many came to the unhappy realization that their competitors were better prepared than they were. For the most part, organizations have little insight into the inner-workings of their competitors. That unknown creates a different kind of external stress. Rapid foresight processing and planning: This is the first (and crucial) step in how an organization can become less reactive and more anticipatory. Leverage data analytics and planning foresight to understand the current reality head-on, to make decisions that preserve the value the organization has created to this point — and to enhance the value it generates in the future.  Supply chain DNA manipulation: Successful leadership embraces radical change when it is necessary. As it relates to supply chain, this translates into leveraging internal and external information to take a clear-sighted perspective of what you have been doing and look at making changes that you may have never thought possible or would have ever considered before.  Sustainability: No matter what changes an organization has to make to both survive during and thrive following a catastrophic event, leadership has to ensure the actions it has put in motion are not a short-term fix. That the decisions made today require a longer-term view and, simultaneously, inject operational and cultural resilience that enables the organization to survive the next major disruption — not just to get through this one.  Combined, these factors create a continuum from macro-level events that stretch into the four walls of an organization and, in doing so, shine light on the fact that what may appear as a victimization of a company due to external factors are, in fact, more manageable issues that empower organizations to become more proactive. It is up to leadership to determine how to harness the factors that will have a profound impact on their organization for the better and act accordingly with the expectation of such a leadership role.  Use guideposts to maximize resiliency To use these guideposts in a way that is actually meaningful and actionable, Jorge suggested “evaluate the output of guideposts three, four and five in order to create a platform for growth that is sustainable and avoids risks that could put you in a position to behave differently from peers in your sector.”  Even though your organization cannot control the first two stages, be mindful of them, Jorge said. In fact, use what information you can glean from those external factors to shape what you do in the foresight processing and planning stage. He suggests borrowing a page from organizations that lead their field in supply chain responsiveness and resilience by following the key sequential actions they take, including:  Integrate supply chain strategy and enterprise strategy Leverage analytics and visual/dynamic scenario planning to evaluate the economic and strategic benefits from possible supply chain changes. Doing so can fundamentally elevate the organizational view far above rows and columns on a spreadsheet — and more powerfully equip one’s team to cut through the complexity of supply chain nodes and the decisions related to them — in such a way that dynamically impacts income statements, balance sheets, racks of inventory, and nearly every facet of how a company’s supply chain defines the overarching relationship with the market and itself.   Decisively implement alternate business models or supply chain (re)designs that increase velocity in information processing, planning and action.  Figure 1: Real-life example of deep analytics and dynamic visualization for a company near-shoring a portion of its manufacturing activity from Asia to Mexico. [Source: Baker Tilly, 2020]  Integrated data gives organizations the ability to plan properly, respond thoughtfully and transform how they not only react to changes to their supply chain, but also drive profitable growth.  Once an organization is employing data analytics to be more proactive, it can use that information to change the “DNA” of its supply chain with confident and assertive measures. Before March 2020, it would have been unthinkable for a well-oiled supply chain organization to change what it has been doing for years. The pandemic has made it necessary, even imperative, for organizations to institute drastic changes to survive the current economy and to move forward in a post-pandemic world. It has triggered organizations to reconsider and rework the operational excellence that has been woven into the DNA of its supply chain and then implement the technological updates required to survive the next disruption that may be around the corner.  Finally, to transition from post-shock stability into sustainability, an organization should focus on and drive growth-enabled actions, which inevitably leads to ongoing near real-time supplier risk monitoring and management. While an organization may already have a pulse on some variables related to the risk of its supply chain, leadership should be taking a hard look at how far downstream into its supply base it can see. With the combined approach shared here, manufacturers can glean visibility into layers far beyond the first tier of suppliers and risks therein, resulting in an aggregated dashboard-style view of the health of its supply chain. A view that is monitored on an ongoing basis, with results “pushed” to functional leaders in their respective organizational areas in a nearly real-time manner.  Build this into the rhythm of an organization in running the business and leading its people, and one can begin to see how the journey from reactive to anticipatory is both achievable and, with proper commitment and support, sustainable.  Leadership’s role Executing strategic and business alternatives with discipline and rigor relies heavily upon sound leadership. As Jorge said in his session, “the three controllable guideposts — those that help transition an organization from a position of ‘pandemic victim’ to an empowered one — are unlikely to happen without people working together to conquer obstacles that individually may seem insurmountable, yet are highly achievable collectively.”  For successful execution, Jorge encourages leaders to consider the following:  Harness uncertainty: Consider how the impact of uncertainty can be leveraged to supercharge team unity and performance and to unlock additional organizational strength. You are likely to be surprised with what your team can achieve. Plan and prioritize: Use analytics, visual insights and dynamic strategic planning to clarify organizational priorities and unearth the untapped capabilities mentioned previously. Assess organizational culture: Reflect on whether your organization’s culture allows for creative engagement during times of crisis or ambiguity as well as for psychological safety where team members can offer ideas, be vulnerable and develop solutions without feeling they are at risk by voicing their perspective. Leverage the current environment, one where our professional lives collide with our personal/home life, to supercharge the establishment of a culture of “whole self –inclusion" and the performance excellence that inevitably follows. Watch it positively transform how your organization responds to challenges and accelerates capitalizing on opportunities.  Lead intentionally. Be visible, communicative and empathetic. Recognize one’s role as a leader and the responsibility to crystalize the vision of a future that has not yet happened. A future that actually begins today and that you — the leader — will guide the team to. Show them that your organization’s tomorrow is going to be better than its today and, while you may not have all the answers, collectively, you will chart the path and shape such a better future — starting now.  Baker Tilly professionals are ready to help optimize your supply chain operations. For more information on this topic or to learn how we can help, contact our team.


Baker Tilly’s Jeff Jorge, principal and international services practice leader, presented “Black Swan confined: Leveraging macro-level turmoil to unlock supply chain and organizational resilience” at the 2020 Original Equipment Suppliers Association (OESA) Automotive Supplier Conference. He discussed what organizations can do to turn significant external pressures into a competitive advantage as well as how they can plan for future “black swan” events.

Leverage disruptions to unlock supply chain and organizational resilience

Watch The world is changing faster than ever and manufacturers have had to evaluate their supply chain to accommodate shifting suppliers, trade tensions, budget constraints and overall economic uncertainty. As we adapt to this new environment, manufacturing and distribution companies must begin leveraging all sections of their supply chain if they want to become more flexible and responsive.   This  one-hour session  discussed  the top supply chain issues manufacturers are facing and explored  how a business can begin their strategic realignment and strengthen their supply chain. We shared  some case studies and explored  how companies can better equip their supply chain to thrive and grow in this changing business landscape.    Speakers  Jeff Jorge,  Principal and international services practice leader  Cameron Reid,  Senior Manager  

This one-hour webinar discussed the top supply chain issues manufacturers are facing and explored how a business can begin their strategic realignment and strengthen their supply chain.

Engineering a more resilient supply chain

Authored by Jeff Jorge and Erich Bergen Over the past few years, manufacturers of all types have faced disruptions in their supply chains related to tariffs, trade agreements, natural disasters and now a pandemic. With supply chain turmoil becoming more frequent in volume and more significant in impact, manufacturing and distribution companies have to become increasingly nimble and knowledgeable about their supply chains, not just to thrive and grow – but often, to survive. The pandemic was initially so disruptive to supply chains in large part because the global economy shut down so quickly that most companies did not have time to lock in alternate sources for key supplies. The pandemic was disruptive to supply chains for a variety of reasons – dependency on China, the shutdown of ports, the just-in-time philosophy for supply management – but largely because many companies had little insight into how interlocked the different tiers of their supply chain are.  Prior to the pandemic, however, manufacturers were already looking for alternatives to China for key supplies, primarily due to tariffs. According to the U.S. Census Bureau, from 2018 to 2019, imports of manufactured goods from China declined by about $90 billion, a 17% drop. U.S. manufacturing imports from Mexico increased by $13 billion. There is certainly a maturity spectrum for supply chain disruption preparedness. Regardless of where your organization is on the maturity spectrum, organization leaders should be prepared to consider provocative strategies for their suppliers, their management and work forces, and their data systems, and they should be prepared to act.  Supply chain yoga – inject flexibility When supplies and trade with China shut down at the onset of the pandemic, supply chains – which traditionally have difficulty pivoting – proved they could shift more dramatically than anticipated. That being said, this was mainly true for manufacturers that had already started their pivot away from China because of tariffs and trade wars. For example, a manufacturer of machined metal parts for the U.S. market sourced most of their supply from China. Their business had been hurt by tariffs, but when the pandemic started it accelerated their search for suppliers in India, Vietnam, Eastern Europe and Mexico to provide them not only with redundancy in the near term, but also potentially an alternative source in the long term. Prior to the pandemic, many companies were attempting this search for alternate suppliers on their own, but they struggled due to language barriers, cultural barriers and lack of contacts in different countries. They also were proceeding in this search in a somewhat casual way, until the pandemic severely disrupted supply chains. An alternative approach is for companies to seek assistance from firms with experience in quickly breaking down these barriers and with the right connections to help find alternatives for key suppliers. Companies have to seriously consider what their supply chain of the future is going to look like, and have the organizational structure in place to pivot as necessary regardless of disruption.  Questions to consider: If the pandemic constrained access to a key China or Asia-based supply, were you able to pivot your business in the last several months? Have you accelerated a redesign and created alternative supply chains to propel growth during these times?  Have you been able to plan for and create new strategies to deal with ever-changing issues within your supply chain?  Tariffs, trade wars and the pandemic all led to supply chain disruptions. With disruption common, is your company prepared to handle it? To onshore or not onshore – consider the question and find the answer specific to your company  Organizations should deconstruct operations, which may lead to entertaining reshoring, or moving the supply chain away from Asia and closer to the U.S. While reshoring is not for everyone, a 2020 study from Foley & Lardner noted that 70% of manufacturing executives agree that because of the pandemic, companies will reduce their focus on sourcing from the lowest-cost supplier in favor of higher supply chain resiliency.  Organizations first have to do the work to truly understand all the tiers of their supply chain, as well as the key data for their business. The challenge is that not every company has the ability to get the data they need from their own systems to make sense of the truth, nor do they have a good process through which they can look at supplier options and make a thoughtful assessment of what they should do. In general, key supplies are freight-, capital- or labor-intensive. Freight-intensive products are usually heavy and expensive to export, and usually produced close to where they are consumed. For example, the costs of reshoring a car frame that could be built inexpensively in China and shipped to the U.S. would be prohibitive, just looking at the cost of freight alone. These types of products are generally already made in the Americas, so there is no business to “shift.” Capital-intensive products use high-precision machine operations and automation, with a small amount of manual labor. Examples would be manufacturing a car’s drive train and steering system. Many of these types of products have been made in low-wage countries for many years, but interest is skyrocketing in reshoring or near-shoring these operations. Why? Because serious supply chain disruption makes the decision to rely on a supplier in a low-wage country suddenly look like an expensive decision. It therefore makes sense to consider reshoring or near-shoring manufacturing of these types of products, even when moving this manufacturing may be difficult and expensive in the short term from an operations perspective. Labor-intensive industries include agriculture, mining, hospitality and food service production. Automation investments to replace human labor in these industries often do not make business sense. Many of these types of products are still made in China or other Asian countries. As the price of labor increases in these countries, however, the appeal of moving production closer to the U.S. increases – assuming a business can find a capable operator for a site and the right equipment, and find, hire and train the right people from local populations. Ultimately, a company will launch a facility in the place where it can get the greatest benefit and the lowest risk of supply chain disruption. As part of their reshoring research, organizers likely will also re-evaluate just-in-time (JIT) inventory policies and hold more supplies closer to their main offices or plants. The Foley & Lardner study noted that 62% of manufacturing executives said they will decrease their focus on JIT manufacturing models. Questions to consider: Has the global pandemic accelerated a desire for your organization to create alternative supply chains and supply bases? 
- If so, how have you acted upon such need – such as evaluating the business case for near-shoring, or executing analytics to better understand how (and when) to take action? 
- If not, what specific measures are you taking to insulate your supply chain from its current footprint structure? Have you been able to establish alternative locations closer to home? How do geopolitical considerations factor into your reshoring strategy, and which response to specific outcome scenarios gives you the greatest supply chain resilience? Revitalization of product, market and client mix Supply chain disruption gives organizations an opportunity to think about new sources of revenue, which could be through new product development, partnering with other businesses or moving into new markets.  The pandemic has created an environment where products or services can come together in ways that organizations would not have contemplated prior to the pandemic. A “contact-free” economy, with an increase in e-commerce, telemedicine, online education, and automation throughout the organization will create opportunities for new delivery models and new ways for organizations to meet customer demands. Questions to consider: Has your organization embraced business model reinvention?  As part of your enterprise strategy, have you identified new product development partnerships?  Have you identified new markets to penetrate with new or existing product mixes?  Does your overall product strategy need to shift to accommodate for supply chain shifts?  What have your competitors done to change focus? What strategic partnerships are possible in your area? X-ray vision meets truth serum – increased visibility and transparency A more transparent supply chain can help organizations move from being merely responsive to understanding, anticipating and becoming fully proactive. Part of this is just understanding the important data a business needs to operate. Sometimes the data doesn’t exist in a useable format, but often the data is hidden and siloed within different divisions of a company, in programs that are not easily assimilated with each other. Visibility is not just about data, however. It’s also about organizational culture. The manner in which an organization behaves – with one another in the organization or with the market – sets the course for organizational development that outshines industry peers. Vulnerability and psychological safety among organization members plays a major role in breaking down silos and making it easier for team members to act quickly in a time of crisis, like the pandemic. Questions to consider: How well do you know the tiers of your supply chain beyond the first tier? Do you have access to real-time data that creates supply chain visibility, spend and sourcing analysis, and logistics support to create necessary insights? Is your organizational culture one of brutal (but kind) honesty and transparency, where team members – irrespective of seniority or experience – raise issues, discuss solutions and address challenges openly? How does your organization’s technology strategy tie into your overall enterprise strategy? For example, has there been a movement from on-premise data storage to cloud storage?  Decentralize and empower While many companies may prefer to execute many organizational functions – accounting, technology, human resources, marketing – in house, times of rapid, significant disruption expose the perils of vertically integrating non-core operational activities. Organizations need to focus on core things that, as a business, they need to keep in-house because if they don’t, the business doesn't move forward.  When it comes to staying on top of the supply chain, training and retraining your global trade management people might not make sense if they can't stay current enough with the pace of change. Strategic supply chain decisions may be better managed with help from external specialists. Top supply chain operators recognize this and demonstrate world-class performance in ways that best benefit the business. Questions to consider: Have you assessed organizational/team capability considering the pace of external change and knowledge requirements and made choices about re-skilling, new hires or outsourcing functions to support organizational success? Have you comprehensively evaluated all your organizational processes and systems?  Have you examined shared services which can support rapid recovery capabilities to help you operate smoothly and equip decentralized teams to respond well in a crisis? Put the unknowns to work Great organization leaders never let a good crisis go to waste. Leaders will discover team qualities they otherwise would not know if it were not for a crisis. Some teams form a sense of unity and defy the odds and do something spectacular for the business. How can executive leaders leverage the perfect storm of supply chain disruptions during periods of increased trade tensions and business disruption due to a pandemic?   For example, in 2006, Ford Motor Company pledged its famous Ford blue logo along with its headquarters, factories and other assets to qualify for $23.5 billion in loans so it would not have to get a bailout loan from the federal government. Ford’s business stabilized and grew, and in 2012, it was able to “buy” its assets back. Collateralizing assets is outside-the-box thinking that can manifest if an organization has the right culture where risky ideas can be freely discussed. Questions to consider: Does your organization have the right culture for creative team engagement during times of crisis or ambiguity?  Have you maximized the impact of dynamic strategic planning in clarifying organizational priorities and unearthing untapped capabilities?   Do you know how to leverage the impact of uncertainty to supercharge team performance and unlock unknown organizational abilities? Do you have a culture of “psychological safety” so key team members can safely offer ideas during a pandemic or other uncertain time? Do you have adequate cash flow or access to debt or other financing to ride out disruption until normalcy or a pivot happens? The impact of the pandemic likely will continue well into 2021. Organizations that leverage their visibility and insight into their supply chains will accelerate the transition to more responsive business operations. Decentralizing and empowering decision-making will help an organization become more proactive and make decisions that will enable a more streamlined and resilient manufacturing and distribution process.  Baker Tilly’s supply chain professionals are equipped to help your business, for more information on this topic or to learn how we can help, contact our team.  

Regardless of where your organization is on the maturity spectrum, organization leaders should be prepared to consider provocative strategies for their suppliers, their management and work forces, and their data systems, and they should be prepared to act.

Supply chain pivots can support organization resiliency

Video In the span of six weeks, the world as we knew it came to a halt. We experienced a massive economic shift from sustained growth, even if lined with skepticism for its long-term sustainability, to a drop of nearly 30% in the U.S.’s daily economic output. While this cataclysmic stoppage has often been in response to containing the pandemic spread, forward-thinking organizations have already begun to plan their emergence from the shutdown – and to redefine the future of the sourcing function. Join Baker Tilly in this on-demand webinar to learn best practices, practical examples and actionable tools leveraged by the sectors’ most progressive organizations in shaping a new reality of sourcing – today. Key learning objectives: Understand the five guiding posts in redefining sourcing and operational frameworks under the new economic reality Gain insights on best practice-based phases and actions associated with sourcing initiatives Identify the risks associated with supply chains and mitigation strategies Understand the near- and long-term benefits of a well-structured sourcing initiative Apply a directional framework to integrating such items into a resilient sourcing model for your organization  Who should watch: Finance: CFO, VP of Finance, Controller Procurement: Chief Procurement Officer (CPO), VP and Director of Sourcing, Procurement Manager Operations: COO, VP of Operations Baker Tilly presenters: Jeff Jorge
Principal – Supply chain practice leader (Baker Tilly) Cameron Reid
Senior Manager – Sourcing practice leader (Baker Tilly)
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Join Baker Tilly in an on-demand webinar to learn best practices, practical examples and actionable tools leveraged in shaping a new reality of sourcing – today.

Re-defining sourcing: economic uncertainty as the trigger for operational efficiency and reinvention

Authored by Jack McCraine As companies face uncertainty about post-pandemic sales and service strategy, many distributors have found it challenging to increase sales volume and points of distribution, which were industry pain points before COVID-19 placed more reliance on remote selling.  Service providers such as Amazon Prime, Provi, Barley Sober and numerous other e-commerce platforms are benefitting from having robust remote selling systems and strategies in place before customer demand increased in this new competitive landscape. Customers who have less availability for face-to-face calls and small talk are challenging the distributors’ ability to perform. Instead, customers are taking the initiative to educate themselves about product offerings, leveraging reviews and their own insights to make decisions or outright shielding themselves due to social distancing and the effects of COVID-19. The lack of brand loyalty, new consumer preferences and the pressure for stock-keeping unit (SKU) rationalization makes it more challenging to successfully grow incremental business.    The pitfalls of traditional sales and service strategies Many organizations are looking for better results, yet are adverse to risks associated with major changes – continuing to rely on nominal departmental or incentive tweaks to “re-motivate” the sales team. When considering how to transform business without hemorrhaging market share and reasonable results, organizations should consider these questions:  Does it make sense to change a 30-year-old sales and service strategy?  Does a sales rep visit the customer to influence their order before it is placed?  How effective is the current business strategy when measured against the return on investment?   Customer demands have skyrocketed and are expected to increase for the foreseeable future. The need to be more effective and efficient while engaging customers and increasing the customer experience will require employee routines to be overhauled to maximize sales and profit. This demand for products needs to be balanced with the need for employees and customers to stay safe.  Remote selling: reframing the sales pitch Remote selling is contact-free customer engagement that utilizes a combination of techniques such as phone calls, emails, catalogs and social media posts. Remote selling strategies are common across all distributors and have been utilized in varying degrees for decades. When implemented correctly, remote selling leverages technology, business intelligence, automation and proper oversight to connect with customers, drive sales and maximize profits. Integrating remote selling in your company can benefit your business by:  Increasing accountability  Sales calls conducted as if the boss was standing next to you Error-free process utilizing intelligent automation The right objective with every sales pitch with business intelligence Data-driven charts and graphs As prevalent as remote selling has been for decades, most companies have not considered the benefits of updating their preferred sales methods and strategies. Holding onto outdated industry paradigms can hinder a company’s implementation of progressive business strategies. Most distributors are not managing their data effectively. They have not challenged current repetitive routines nor considered how additional processes could be automated to accelerate business performance.  Distributors need a business intelligent approach that allows them to leverage their data, translate it into effective reporting, and leverage the insights for actionable results. Distributors should re-examine each team member’s role and determine how they can repurpose their people into new roles that allow for their personal and professional growth while yielding better results for their business. These changes could allow for accelerated business metrics with long-term sustainable increases in sales, market share and profit.  Assess various aspects of your business  Understanding your current business operations can better position your company to implement necessary changes to adapt to the evolving market and meet your goals. These are the recommended areas of focus and necessary questions to ask while examining your business:  Engage in strategic scenario planning to determine current and long-term goals 
-What does the business require to achieve its strategic plan?   Recognize your cash flow position 
-Can the current sales and service strategy deliver what the company requires from a cash flow standpoint in the “new normal,” post-COVID-19 pandemic?  
-Can the company reach its goals with the current products, or is divestment or investment required?   Understanding your supply chain  Comprehend your current technology capacity
-Do you have the right applications, tools and resources to achieve your goals? Compliance to contracts and distribution agreements 
-Everything in business is connected; how will adjustments to your company’s sales strategy in one department affect other departments and commitments to your supplier partners?  Implement a hybrid selling approach  A hybrid approach combines a reasonable frequency of face-to-face interactions with remote selling, when applicable, to foster trust, help deliver the optimal sales pitch and render a preferred order. An accurate and honest assessment of your business goals, cash flow, supply chain and technological capabilities will better position your business to incorporate and adapt to remote selling. Building a sales strategy template that incorporates company standards, processes and protocols helps ensure more consistency across presentations and often leads to better results and a more accountable sales team.  Innovate with technology Many technologies are readily accessible, and often customizable, to help businesses address a variety of needs. Due to the increase of demand in this technology, the overall cost of these technologies has decreased, which is why this is finally an affordable solution for distributors. The methods that follow help businesses to capitalize on opportunities and have more productive interactions with customers. Customer delivery notification automation alerts the customer that their delivery is en route, as well as communicates other important information, like what is on the truck and the total cost for the delivery. This process is similar to following your packages across the country with a mail carrier service tracking number. This provides a way to set up a repeatable process and provide an exceptional customer experience. The customer is given time to review the order before it arrives, process payment, or simply prepare to receive the delivery prior to arrival to expedite the process. This level of information can inform your customer that their order has left the warehouse, and then again that you’re one stop away from arrival. For customers that require additional service after delivery, an internal communication such as a text or email can be sent to select employees in your organization. This internal communication notifying the right people will improve response time of any post-delivery follow-up and enhance execution of additional opportunities with the customer.  Robotics process automation (RPA) replaces the manual, mundane tasks performed by employees with timesaving solutions performed by software robots – allowing employees to focus on higher level, valued-added work. For example, an automated email could give the customer time to mentally prepare for the sales call by checking inventory levels and overall performance of your brands, or to do their own research. An advance email notification prior to the sales call could motivate your sales team to fully prepare by communicating directly to the customer their last order, the year-to-date performance of all SKUs in easy to read charts and graphs, and a recommended next order. Automating this process provides accountability for your sales team by ensuring their “selling objective” is delivered as if the boss were standing right next to them.   Preparing for the future is often hard to do, but expanding upon the same methodology of RPA in your business to teach your system to make decisions based on data with business intelligence is powerful, and a great way to move into the future. The use of customer delivery notifications, business intelligence and RPA technology can save your company time and efficiency, and create effectiveness that can be used to make additional sales calls to nurture opportunities that will grow the business and improve the customer experience.  How we can help  Sales transformation will help you achieve an exciting future state by combining business intelligence and intelligent automation with remote selling strategies. Baker Tilly professionals can help you assess your business, leveraging best practices to achieve sustainable solutions, and develop your remote selling strategies to maximize employee potential, enhance the customer experience and yield better results.  Contact us for more information on how to incorporate remote selling into your business. 

Baker Tilly discusses considerations for implementing remote selling strategies into your business.

Retail

Small Business

Implementing remote-based selling strategies into your business

The COVID-19 pandemic has disrupted critical supply markets around the world. Organizations reliant on transoceanic shipping, air travel and ground transportation to reach suppliers and customers are now tasked with navigating halted operations and shipment delays due to varying regulatory restrictions and shelter-in-place orders.   Every industrialized country has been impacted by the pandemic. “Economies and supplies are way more interconnected, if not more codependent, than ever before,” said Jeff Jorge, principal and international services practice leader, during Baker Tilly’s webinar, From survival to recovery: shielding your supply chain from COVID-19. The heightened awareness of the global economy has stunted the movement of people and slowed or idled the production of goods – resulting in dwindling supplies and increased costs for goods and freight. Jorge said that sourcing and product flow have not changed much in the United States, and will not do so until inventory depletes. Currently, the biggest impact on the economy stateside is the volume of products being transported and restrictions on products by customs and border protection agencies. Some products, such as medical supplies and personal protective equipment (PPE), have fewer restrictions and enjoy priority status as they are processed; other products are stalled indefinitely. Additionally, restrictions and processing times are expected to increase with impending U.S.-Mexico-Canada Agreement (USMCA) standards, which will factor product origins into the manufacturing and distribution process. Historically, the supply chain has heavily relied on China for labor and goods, including the city of Wuhan, where COVID-19 is believed to have originated. As the virus spread in the early months of 2020, economic activity across China was brought to a standstill – affecting customers, employees and organizations throughout the world.  Supply chain flexibility As governments create tentative plans to reopen economies, and factor in the possible resurgence of infections, it is more important than ever for organizations to create flexible business models that convert COVID-19-related challenges into opportunities to find innovative ways to make and move product.
By embracing new ways of conducting business, organizations can serve customers, reduce costs and capitalize on supply chain responsiveness – helping to ensure a successful, sustainable future. The first step is prioritizing next steps for the foreseeable future, as outlined below.   NOW – the first 30 days To the extent possible, focus on tactical, forward-planning activities. Shift thinking from making decisions based on organizational priorities and assumptions to making decisions based on customer needs. This will help create an immediate benefit to your organization and establish the framework for a more resilient supply chain. Communication is key. Companies should establish a cross-functional crisis management team to communicate status and plans with owners and shareholders – engage with customers to manage expectations regarding delays, prioritizing products critical to meeting their immediate and near-term needs. Provide appropriate hygiene and safety protocols and supplies for employees Assess options for adapting manufacturing to products that assist in combating COVID-19 Review safety stocks and inventory levels of critical products and materials across supply chain Mitigate potential disruptions due to supplier constraints and service reductions; if possible, renegotiate agreements Assess alternative supply providers, networks and markets; consider reserving or procuring air freight, international shipping or ports with fewer restrictive requirements months before future orders and inventory are expected to ship, so you can more seamlessly resume operations Consider tapping into existing lines of credit and apply for any relevant government-sponsored COVID-19-related assistance Even while taking these immediate actions, “don’t take your eye off of cybersecurity,” said Jeff Peterson, director and supply chain and operations services leader. Bad actors attempting to compromise organizations and their data are more creative and vigilant than ever, taking advantage of the uncertainty and ensuing anxiousness of the pandemic’s effects. Secure and accurate data creates a secure foundation for efficiently managing potential disruptions to inventory, manufacturing and operations, transportation and logistics. NEXT – 30 to 120 days out Forward planning intersects every aspect of the supply chain and requires leadership to consider different scenarios about how an open economy or global recession may affect businesses. Each executable plan should strategically refocus product offerings and supply chain planning tools to align with customer priorities, eliminate complexity and consider the possibility of expanding into new markets in the post-pandemic period. Review manufacturing strategy and contract service providers; consider insourcing production of components or parts previously sourced from high-risk regions Determine the cost advantages of relocating manufacturing and distribution based on labor availability, as furloughed workers may have found jobs elsewhere Establish capacity with distributors, who will likely see an influx of service and capacity requests as businesses around the world resume operations; procure air cargo capacity to offset likely long lead-times for ocean freight Develop plans to implement, expand and optimize online shopping platforms, enterprise resource planning (ERP) software, intelligent automation, data analytics and manufacturing technologies to help eliminate repetitive work and streamline operational functions LATER – four months to two years out Begin implementing tools and processes based on strategic insights and crisis scenario plans. Leverage your visibility of and insight into the supply chain to accelerate the transition to more responsive business operations. Be proactive and make decisions that will enable a more streamlined and resilient manufacturing and distribution process. Prepare for significant rehiring and retraining efforts as operations resume or increase Integrate functions to respond to, prepare for and relaunch into new market economy Consider targeted M&A transactions for capacity, market share or innovation Establish online channels for sales and customer service Implement redesign across manufacturing and distribution networks Implement redesigned sourcing strategies for critical materials, components or equipment While supply chain interruptions related to the pandemic threaten the survival of many businesses, focusing on this “now, next, later” strategy is an effective way to focus your company’s resources and prepare it to better address future trade policy shifts and supply disruptions.  For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.
Baker Tilly COVID-19 support Baker Tilly is ready to help you with practical advice on informing and supporting your employees as well as keeping your business running.

While supply chain interruptions related to the pandemic threaten the survival of many businesses, focusing on this “now, next, later” strategy is an effective way to focus your company’s resources and prepare it to better address future trade policy shifts and supply disruptions.

Automotive & Mobility

Coronavirus Resource Center

Automotive and mobility company coronavirus resources

Small and family business coronavirus resources

Supply chain flexibility key to turn COVID-19 challenges into opportunities

Authored by Jeff Jorge and Kate Crowley As the coronavirus (COVID-19) pandemic in the U.S. spread in March, leading to shelter-in-place orders in most states and a rapid slowdown of the national economy, businesses started adopting Baker Tilly’s “now, next, later” framework to address supply chain challenges. “Now” is focused on the first 30 days; “next” is focused on the following 60 days; and “later” focuses on 90 days and beyond. In an article for Area Development, Jeff Jorge and Kate Crowley noted that in the coming months, successful companies will be the ones that manage their cash flows well, support and protect their employees as they shift to new working environments, demonstrate their continued value to customers, and stabilize their supply chains. The article can be accessed here.

Read this article from Area Development, in which Jeff Jorge and Kate Crowley discuss Baker Tilly’s “now, next, later” framework to address supply chain challenges amidst the coronavirus pandemic.

Family Business

Coronavirus recovery and growth resources

A “now, next, later” approach will guide supply chain shifts related to pandemic challenges

The CARES Act and related programs are constantly evolving and small businesses are looking to understand the implications and impact these changes might have on their business. Baker Tilly partnered with the Wisconsin Motor Carriers Association (WMCA) to offer insights for small businesses and help prepare them to make informed decisions during this challenging time.   Listen to WMCA’s on-demand webinar, featuring Baker Tilly’s Chris Schmidt and Josh Mueth, as they discuss the variations of the CARES Act, the Payroll Protection Program (PPP) and other Small Business Administration financial assistance, and state and federal tax law changes. Baker Tilly presenters: Christopher Schmidt, CPA: Partner Josh Mueth, CPA: Senior Manager  To learn how Baker Tilly specialists can help, contact our COVID-19 support team.

Listen to Wisconsin Motor Carriers Association’s (WMCA) on-demand webinar, where Baker discussed the variations of the CARES Act, the Payroll Protection Program (PPP) and other Small Business Administration financial assistance, and state and federal tax law changes. 

CARES Act: A guide for small businesses

 Businesses with a manufacturing or distribution sector have most likely had their supply chain impacted by the coronavirus pandemic. At a time when both COVID-19 news and resources can feel overwhelming, having a knowledgeable source for clarity and structure is both a respite and a source of strength.  Listen to Baker Tilly’s, informational, on-demand webinar to learn about different approaches leveraged by some of the world’s leading companies to protect their supply chain against the pandemic’s impact, strengthen it from future disruptions, and explore practical insights and resources to help your business protect and enhance their value now, next and in the post-pandemic stage.   Our informational discussion addresses:  An understanding of the pandemic’s impact on supply chains  Best practices to overcome obstacles when dealing with disruptions to supply chains and how to spot the next wave of vulnerabilities Areas to improve resilience of your supply chain today and better position it to thrive once the crisis has past. For more information on this topic, or to learn how Baker Tilly’s Value Architects™ can help, contact our team.


Listen to Baker Tilly’s on-demand webinar to learn about the effects  COVID-19 has had on supply chains and explore best practices to  safeguard your business.

Government Contractors

Healthcare & Life Sciences

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Construction

Health plan coronavirus resources

Healthcare provider coronavirus resources

Medical device and pharmaceutical coronavirus resources

Construction coronavirus resources

From survival to recovery: shielding your supply chain from COVID-19

COVID-19 is impacting every aspect of our daily lives, especially in manufacturing.  The Precision Metalforming Association (PMA) hosted a roundtable discussion where metal forming and fabricating executives shared how they are leading during this crisis, managing their supply chains, overseeing cash flow, working with their local governments and more.  Listen to the recording to learn how to manage your own companies during this crisis. Jeff Jorge, international services practice leader at Baker Tilly was among panel members and shared what to keep focus on the next 30, 60 and 90 days and how to navigate the supply chain during these uncertain times.

Listen to the recording of this roundtable to learn how metal forming and fabricating executives are managing their supply chains, overseeing cash flow, working with their local governments and more.

A roundtable discussion on COVID-19 … and its impact on the metal forming and fabricating industry

Organizations that rely upon a supply chain to provide products for their operations will need to understand how their supply base has been impacted by the crisis, whether temporary or permanent sources will need to be considered, and how their operations may be impacted based on changes to the supply chain. 

Based on your potential recovery scenarios and organizational needs, you may have to consider the following in evaluating supply chain and operations impacts.

Insourcing/near-shoring/onshoring strategies

COVID-19 recovery and growth resources to protect and enhance the value of your organization