How To Overcome Supply Chain Shortages

EVO Payments, US on 11/18/2021

Your business’s supply chain is likely a complex web of interdependent relationships where one disturbance can throw off the entire system. It’s no secret that supply chains in many industries and parts of the world have experienced serious dysfunction. Unfortunately, there may be certain individual variables that can only be solved by time—not by money, planning, or persuasion. The wise old expression “you can’t get blood from a stone” is certainly relevant when updated to “you can’t get a pallet of goods from an empty warehouse.” But for many other aspects, good planning can make a big difference. Consider the following advice, and help your company be more prepared for this global phenomenon.

· INVESTIGATE YOUR SOURCES ·

Become aware of which countries and cities are involved in your own S.C., and what major factors are at play there.

If you deal in things like household goods or food, things may be easier, because inputs for these (wood, fabrics, produce) are available worldwide. Items that require rare materials or specialized manufacturing equipment, on the other hand, are more prone to disruptions. You may need to do a little detective work. Does your supplier produce rubber gaskets in only one plant in Indonesia? If so, your disruption risk is higher than if they’re diversified.

The factories and people who make your components are likely already half a world away—so why not a little added distance? Many companies are now using what’s called a “China Plus One” strategy. This may sound like a sitcom about mismatched roommates, but it simply means sourcing items from one’s original Asian supplier plus one additional country. Take note, though, that areas without high-capacity ports and container ships will translate to longer waits.

· PREPARE A FORMAL RESPONSE PLAN ·

A mental checklist of half-formulated ideas is not going to do much good when there’s an emergency deadline looming. It is a good idea, for instance, to start pursuing options for alternate sources of supply now rather than later; lay out a timeline and your goals. In the event of postponed workflow, you may also need a staff plan regarding furloughs or limited hours, and how to communicate changes.

If your company is large enough to afford consulting services, it may be worthwhile to contract with an efficiency expert to help formulate your plan. Whatever that plan may be, put it down in writing and share it with teammates. Schedule a meeting to review, talk through “what if” scenarios, and make adjustments.

· UPDATE YOUR INVENTORY POLICIES ·

A “Just In Time” replenishment model may not be ideal at present. Should you to build an inventory of finished goods, or just some necessary supplies? The internet has tutorials with formulae to help calculate amounts.

Should you increase your amount of “safety stock” held? The tumultuous toilet paper shortage of 2020 was worsened by stockpiling, which—like during World War II—led to public service reminders that hoarding is unfair to others. In that sense, it is up to each leader to determine their corporate social responsibility obligations. Additionally, holding too much stock can be a waste of capital—especially if spoilage or obsolescence factor in.

· ADDRESS OUTBOUND LOGISTICS AND POLICIES ·

On the flip side, you may not always be on the “receiving” end of delays. Be mindful of barriers to your product/service delivery methods, and evaluate alternatives. Prepare contingency plans that address customer service concerns. Will you offer partial refunds for lateness? Should you create a phone script for fielding complaint calls? Unfortunately—fair or not—the customer who needed their widget on time may still feel delays reflect poorly on your company. It may seem as if anyone who’s not living under a rock should be aware of supply issues, but customers might be more understanding if you specify the nature of the hold-up.

· ONGOING AND SHORT-TERM PROSPECTS ·

In the short term, supply chain malfunctions are likely to remain a severe problem. The good news, however, is that advances in technology will eventually help society to address existing distribution problems. Things like additive manufacturing (3D printing), RFID inventory systems, improved ERP software, and the evolution of old linear models into digital supply chains will continue to improve efficiency in the global economy.


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