How can businesses protect themselves against supply issues?
There’s been so much in the news lately about stock not reaching its destination or a complete lack of supply of some items. From Brexit red tape and paperwork to huge ships blocking supply routes, to a shortage of drivers when goods do reach our shores, there’s been one hurdle after another that businesses have had to contend with.
Supply chain upheaval is likely to continue well into next year, through one reason or another. So, what can businesses do to relieve the pressure?
Spread your wings
It’s probably common sense, when you can’t get hold of items from one place, to look elsewhere. There’s a huge drive to buy from local companies at the moment, given the problems within distribution. However, whilst this will solve one problem, it may spark others, e.g. a rise in prices, which, eventually, will have to be passed on to the customer and which could affect your competitiveness.
China has made itself the price prince of the globe, and we have perhaps come to rely on their manufacturing too much. In the short term, it may well be more expensive to source items from another country, but from a political point of view, this could be a good move if China takes its bat home completely. Who knows what lies in wait around the corner, concerning the politics of other countries—such as Russia or America?
Having suppliers in more than one country is a good move, logistically. Don’t just look at sourcing elsewhere the one or two products you’re in desperate need of, but all of them. Knowing you can find all the elements of what you offer elsewhere, even if they are of a cheaper-but-perhaps-slightly-less-desirable-quality, may allow you to claw back some margin if you’re forced into purchasing one of them at a higher price. Nothing has to be set in stone, and this could be an effective short-term solution.
Don’t put all your eggs in one basket. Research second, third, fourth and fifth options for every aspect of your product and packaging, and vary where they originate from, too.
Use technology to get on top of things
If you’re still recording your stock control on pen and paper, you’re seriously at a disadvantage in 2021. Invest in quality technology that covers all aspects of stock control. You don’t want to find out that you’re out of an item when the last one has been used/sold—you need to know well in advance of this, given the challenges in the supply chain.
Carry out a risk assessment
In business, it’s much better to head problems off at the pass, i.e. before they appear.
For example, there’s been a huge shortage of microchips coming out of China, who is the main supplier. Though micro chips are not often sold in their native form, they are an integral ingredient of practically every electrical/technological item on the market.
Companies in the UK, as a result, have been forced to refund orders and have suffered reputational damage due to the micro chip shortage; if they had planned for such an outcome, they could have removed certain items from sale at the first sign of trouble and prevented this from happening.
Conduct a ‘what would we do to minimise disruption?’ exercise for all your products immediately—don’t wait for an issue to appear.
Ensure good financial management
Having a grip on your finances and a healthy cash flow is a must. If all your funds are tied up in stock you can’t shift or items that are on order but which haven’t arrived, it’s then difficult to move to another supplier.
Again, investing in technology that can help you see where your financial commitments are at any one time, regarding stock on order, etc., the easier it is to make alternative plans if supply issues crop up.
These are just a few ways to avoid the fallout of supply issues. Do you have more? Tweet us at @intheknowemag
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