KEY POINTS:
It is not known when the economic climate will start turning upwards in 2009 or whether it will at all, so businesses should draw up robust contingency plans to deal with any scenario.
Supply chain and procurement expert Alan Day from State of Flux says New Zealand firms have the benefit of being agile and able to change readily but they should still have plans in place as the year begins.
Small and medium businesses need to accept there could be risks within their supply chain if the people they buy from or sell to get into trouble.
A back-up plan is essential, because if a supplier fails to deliver essential products it is not just the immediate sales that will be lost.
"Studies show most organisations can last five days but after that customers go elsewhere and never come back. Sales will dip and never recover," Day says.
Businesses should look at the way they are managing contracts with customers as well as suppliers.
New Zealand firms work on trust and are fantastic at fostering relationships. But they should be thinking about light contract management to make sure that if something happens they are covered, Day says.
The cost of doing that is quite prohibitive for a small business but it is possible to draw up just one contract that can be applied to the different suppliers and customers.
Day says there are many more products available to help businesses to manage their supply chains.
Some insurance companies are even looking to introduce supply chain risk insurance.
Business should also make procurement systems a priority during tough times, and the first step is to ensure they are paying the right people with the right skills to do the job.
"Procurement needs to be a qualified area, not an administration one."
Unfortunately the sector is short-staffed and often not seen as a profession.
"Traditionally what's happened is procurement people are those who are bad at sales or who can't work in a factory," Day says.
But in these uncertain times, businesses need to be focusing on their savings and procurement should be bumped up the scale of importance.
By carefully "trimming the fat" from the business - so looking at costs that are not being used effectively - businesses may find they can reduce costs by more than 10 per cent, which can make a huge difference, Day says.
E-auctions for online requisitions are a cost- and time-effective way of helping businesses to get the best possible price.
They are used extensively overseas but are not as common in New Zealand - Day hopes firms will make the most of services available.
They also need to monitor how procurement decisions are being made and to do that requires consistent, auditable processes that measure the process, rather than the results.
"If you are managing the quality of processes then you're encouraging consistency and can improve."
Day says it is encouraging to see businesses are still making investments in areas such as technology rather than taking a knee-jerk response to the down-market, but they do need to ensure that they are being realistic.
"People are still spending money on this area but the worst has not hit us yet."
