Checklist: COVID-19 Critical Business Decisions for Distributors

In light of the current COVID-19 pandemic, which is likely to result in severe disruptions to your business, we have developed a quick checklist of decisions that distributors must make in the short-term, beyond workforce safety-related actions that you may have already taken. We would be glad to assist you with these decisions.

Focus on alternate sources and core suppliers’ inventory status in light of potential and existing supply disruptions.

As your sourcing director finds alternative sources of supply, give them a framework for assessing new suppliers and making quick buy decisions, including:

  • comparing inventory costs and buy price (including cost and payment terms)
  • assessing risks in core vendors
  • identifying alternate sources

Set up priorities for on-allocation items in case of demand disruptions.

  • Determine how to prioritize ‘on-allocation’ products to customers: (existing vs new) or (volume vs profitability).
  • Make sure core customers are served and orders are fulfilled.
  • Create customer communications reinforcing your value proposition, especially to core customers as you go overboard to help them. Provide sales teams with a ready-to-use message template that communicates a consistent message and support to core customers, reducing time-to-communicate and increasing clarity.

Focus on improving cash flow and minimize risks in the short-term.

  • Accounts receivable: Analyze and classify in terms of risk to avoid credit challenges.
  • Accounts payable: Analyze and classify where additional terms would help in line with alternate sources and buying decisions.
  • Inventory:
    • Leverage opportunities for moving slow-moving inventory to release capital for higher-demand items or product lines.
    • If you see the possibility of expanding any of your existing/adjacent product lines (such as safety-related products), instead of deploying new capital, explore the possibility of shifting capital across product lines. In other words, direct your investments to products that might have a higher demand coming out of current crisis, rather than traditional product lines.
  • Profitability and pricing optimization: Explore and set quick rules for setting prices for ‘on-allocation’ items vs other items AND existing vs new customers.

Form a COVID-19 response team to coordinate communication and make timely decisions.

Build a cross-functional team with a clear roster of participants and clear decision-making rules.

After meeting your short-term needs, you’ll have the capacity to move onto mid-term considerations, including scenario planning for your business.

Give us a call if you need support in any of these areas. We’re here to help.

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