By Robert Insall BTG Advisory.
Survival is about being strategic. Company directors and investors that choose to simply stop paying suppliers may be hurting their own post-lockdown recovery, as well as their suppliers.
In this continuing series of articles, we outline the most frequently asked questions by our clients and offer our insights. In this article, we discuss how companies should think strategically about supply chain and furlough options.
Our economy is made up of interconnected supply chains. Companies would be well advised to keep in mind corporate self-interests in the broader context of interdependence across all stakeholders. In respect to managing suppliers, more than ever, a strategic approach is required to balance near-term self-interest and long-term mutual dependence. Companies should identify where existing supply chain repayment time horizons can be used to their advantage. For example, by purchasing from wholesalers on existing 90-day credit and selling on to pre-identified demand and collecting revenues within 90-days, effectively securing free short-term financing. Where existing supplier repayment time horizons are too tight, suppliers may be motivated to agree to an extension to preserve their revenues. Thus, knowing how Covid-19 is directly affecting both your suppliers and your customers can help businesses to strategically navigate the lockdown. By contrast, if too many companies adopt aggressive self-interested positions, the net effect could be worse for all leading to more insolvencies and a weaker post-lockdown recovery…