When a customer visits a store and finds the exact product they are looking for, or they order online and have the product delivered to their house or office, that is evidence of an efficient supply chain at work. But sometimes, the supply chain gets interrupted in some way and businesses have to scramble to find alternatives and avoid disappointing their customers. To ensure none of these things happen, businesses must put measures in place to ensure products are sourced and reach their customers in time and the best condition possible. So, what can businesses do to minimize the impact of such interruptions?
Identify Any Potential Sources of Disruptions
The first step in planning for and minimizing supply chain interruptions is identifying potential sources of disruptions. The most common reasons for these interruptions include:
- Pandemics – Pandemics are at the top of the minds of most business owners because we are in the midst of the worst pandemic in recent history. Although it was almost impossible to predict the impact of this pandemic, business owners could do well to understand how pandemics could impact supply chains in the future. Pandemics make it harder to produce products by making it challenging to source raw materials, in addition to making it harder to transport finished goods to customers, as we see now with the disruption in air transport.
- Transportation hiccups – Due to the global nature of most businesses and an increase in international business, we have strained domestic and international transport conduits. This strain has led to an interruption in supply chains the world over. Transportation delays and interruptions can be made worse by other factors such as natural disasters, pandemics, and a breakdown in communication.
- Natural disasters in production zones
- Poor quality checks and management – quality management, if not done right, can lead to supply problems due to delays and recalls of products that may have already shipped.
Stress-Test Your Supply Chain
With the potential sources of interruptions identified, you could stress-test your supply chain to see where it is most vulnerable. For example, you could try not ordering products from one supplier and instead opt for another to simulate a breakdown in transportation, which forces you to switch suppliers.
Doing these stress tests allows you to find any weaknesses in your supply chain in a controlled environment. This way, you can eliminate these weaknesses and put contingencies in place before a real disruption happens.
Create an Emergency Plan
Once a business understands what could cause a disruption to the supply chain in their particular line of business, the owner should come up with an emergency plan. This plan should ideally include ways to source alternative products in case of supply issues or innovative ways of having products delivered in case of transportation issues.
Business owners should also set aside some emergency funds for such scenarios because sourcing alternatives or transporting products through new routes can be a lot more expensive than they are used to.
To get a better understanding of what an emergency plan would entail during a disruption, it is helpful for business owners to understand the principles of supply chain management. There are lots of different courses that will teach you not only the basics of supply chain management but also equip you with the knowledge on what to do during such times. Click here to learn about earning a Supply Chain Management certificate,
Diversify Your Supply Base
When geopolitical, social, and legislative factors are taken into consideration, it becomes easy to see why sourcing products from a single supplier can be devastating for your business should the factors affecting their deliverability change.
Start by engaging multipliers in different locations who can scale up and pick up where another supplier might leave off in case of a disruption. It is also important to choose suppliers who are located in areas that are mapped out properly and protected from disruptions. For example, Chinese manufacturers are some of the biggest suppliers for businesses all over the world. If there is a disruption anywhere else in the world, people turn to China, which would place a strain on their supply chain and hurt people who only rely on China for their products. Diversifying gives the option of switching to another supplier in a scenario like the one above.
Have Backup Inventory
Having backup inventory ensures you have enough products or raw materials to see you through short periods of supply chain interruption. Having a backup inventory is not only important in helping you keep your business going, but it also gives you enough time to identify and engage alternative suppliers.
For most businesses, three months of suppliers and products should be more than enough. The most important thing here is to ensure you balance your inventory storage costs, which can be quite high, against your business’s needs. You do not want to spend too much money storing too many products when you need to spend money sourcing for new suppliers.
By investing in warehouse inventory management system, you can efficiently minimize the interruptions and improve the productivity within the warehouse inventory, which will be huge cost saving.
Identify Backup Suppliers
Backup suppliers should be part of your emergency plan and should be identified early on to ensure you are not looking for suppliers when you are already behind on the delivery of goods. They should ideally not be on your list of diversified suppliers as they should only be contacted in dire situations. Backup suppliers should be able to ship products fast, meaning they have a very short lead time and should be available at all times unless something unprecedented happens.
Backup suppliers should be located in stable areas or regions that are less likely to be affected by any of the factors you have identified above. Once you have identified which suppliers would be best for your business, get in touch with them to build a relationship. A good business relationship ensures you can call on them in times of emergency and they can prioritize your order or requests within reason.
If you do not find a supplier in time or find that using an alternative will be too expansive for your business, you could try to manage demand, so the inventory you have goes as far as possible. One of the most effective strategies when doing this is encouraging people to buy a similar product that might not be heavily impacted by the interruption. This reduces the demand for the product whose supply might be affected.
Another strategy is rationing products. This can be done in two ways. The first one is encouraging people to buy a limited quantity of a product. This can be done by making some changes to your website or on the checkout process. Second, you could try to supply products to customers who impact your business the most. These are customers you cannot afford to lose. Choosing which customers to prioritize will depend on your business and industry, but it is important to identify these customers so you can serve them first when they request products whose supply is compromised.
Talk to Your Employees
When a disruption happens, a lot of things need to change to ensure the business keeps running and delivering products as usual. Your employees are the biggest assets during these times. This is because you might have to change the way you do business, and having them on the same page will make this a lot easier.
When your employees are on the same page and understand what is going on, it allows you to relax and depend on them to do the right thing. Talking to them also gives you a chance to map out their new responsibilities, so they know what parts they will be playing during the disruption.
Document the Process
Once you get everything back in order, it is important to look back to explore what worked and what did not. Doing an audit of what you did to get things back in order also gives an insight into your vulnerabilities and solutions that had the most impact, and that were most helpful in getting things back in order.
Remember that businesses that can manage risks and interruptions as they happen are always in a better position to get out of those situations in good shape.
Partner with a Logistics Company
Having a logistics partner to help you when disruptions happen can save your business. They can support and advise you every step of the way, and they can also help you identify alternative transportation options and suppliers who can serve your business when your mains suppliers and supply routes are compromised. They should also be able to advise you on the best ways to reduce your costs as you switch to alternate suppliers and logistics options.
When a supply chain is disrupted, a business can be thrown off balance as they scramble to source products, find out what the problem is and rectify it, all the while trying to meet customer expectations. Having a long-term plan in place, or the ability to come up with a plan of action as things are unraveling, ensures you do not have to through all the above. While supply chain interruptions are a reality of doing business, knowing what potential risks exist, planning carefully, and having alternate suppliers can all help minimize the potential losses often associated with such interruptions.