Your supply chain is the lifeline of your business. If this supply chain is disrupted, it could sink your company.
One of the top challenges for business leaders is how to protect their company from undesirable events that could have a huge impact on their bottom line. From an economic perspective, companies have been facing a lot of external constraints over the past few years.
Disruptions in the supply chain are an ever-increasing risk that threatens global supply chains but can be managed. Here are five things businesses can do if they want to reduce their risk of supply chain disruptions.
Supply Chain Disruption
The supply chain sector is one of the most important parts of the economy, but most people don’t think about it. It extends from producers like farmers and landowners to retailers and consumers. As a result, supply chain disruption has large-scale economic ripple effects causing hardship for many Americans. The good news is that effective leadership and analysis of supply chain disruptions can help organizations plan and respond effectively in a highly unpredictable environment.
Steps To Protect Your Business From Supply Chain Disruption
1. Building internal capability
2. Collaborate with your suppliers to eliminate unnecessary points of failure
3. Work with vendors to mitigate risks
4. Strengthen your supplier management system
5. Keep accurate inventory balances
1. Building Internal Capability
Building internal capability is about attitude. The ability to adapt is key, and this doesn’t just mean developing new skills or learning one-off skills. It also means thinking about how your business operates and how changes can be implemented to cope with unexpected events and changes in market conditions. It’s about being flexible and thinking long term rather than short term. It’s about developing relationships with your suppliers and customers which builds trust and confidence which helps facilitate long-term planning.
The most important thing to know when building internal capability is that it’s not just about adding money to your pocket. It’s important to keep track of how you spend your money, and whether the amount you spend is appropriate for your income level. Knowing how much you have to spend is important because that determines what options are available to you. For example, if your business is spending more on IT than it needs to be, fine—upgrade the software; if it’s spending money on marketing that you could be spending on customer service or research instead, make some changes; if you need more money for your team than you think you can budgets.
Some ways to build internal capability include updating your team members’ skills, updating your budget, and creating a detailed invoice.
2. Collaborate With Your Suppliers To Eliminate Unnecessary Points of Failure
When you have team members, it’s important to have detailed discussions about strategy. This can help with coordinating how you’ll deal with problems. Many business owners feel their various suppliers’ responsibilities too closely. This leads to silos where problems can fester and spread, often resulting in financial setbacks and product obsolescence. In the case of Supply Chain Disruption, abnormal supply chain conditions can occur because of issues with one or more major suppliers causing an unexpected delay in goods moving throughout the economy and offering the little potential for recovery.
Supply chain disruptions are par for the course in today’s economy. But they pose a particular threat to small business owners, as they can lead to product shortages, increased shipping costs, and disrupted product delivery times. To combat these risks, you need to ensure your suppliers (and competitors) are working together effectively. At the same time, you need to be aware of potential supply chain disruption — whether it comes from your own business or a competitor’s — and be ready to respond quickly enough to protect your business and reputation.
3. Work With Vendors To Mitigate Risks
Supply chain disruptions are a growing concern across organizations. These disruptions occur when a vendor fails to deliver goods or services on time or within budget. The consequences can include product shortages and price increases, both of which can harm your bottom line. To help organizations better manage supply chain disruptions, a variety of vendors have emerged that can help secure your product delivered on time and within budget. From taking inventory to coordinating with suppliers to secure transportation services, these vendors can help you mitigate risks in various important ways:
⦁ reducing risks of disrupting production
⦁ protecting against risks of bad or unsafe products being shipped to you or your customers
⦁ reducing the impact of business interruptions affecting your supply chain
⦁ Testing and validating supplier readiness
⦁ Creating a complete, regularly-updated and tested kit of tools and guidance for first responders and other
⦁ emergency personnel for responding to crises
⦁ Capital equipment financing/lease solutions
⦁ recovering from disruptions quickly
4. Strengthen your supplier management system
Supply chain disruption (SCD) is one of the most feared and prevalent events in business today. It occurs when a supplier changes its delivery schedule, quality, or pricing without notification to the customer. Of course, customers can detect changes in deliveries even before the supplier makes them. However, there is usually no way for suppliers to know if their deliveries are compromised unless it is reported to the customer immediately.
Many companies have implemented SCD prevention strategies but these systems are not cost-effective unless they are constantly monitoring and managing multiple responses from various sources in the supply chain. This can happen because of a supply shortage or an unstable financial environment, for example. In such cases, companies may resort to using anonymous payment processors that enable them to sidestep traditional supply chain management systems and handle payments directly between the client and the merchant. However, strengthening your system cybersecurity can go a long way towards mitigating supply chain disruption.
5. Keep Accurate Inventory Balances
Keeping accurate inventory and knowing how much inventory is left in stock at any given time is a vital business management skill. Any disruption in the supply chain can result in huge price increases or lost sales. An inventory management system helps you keep track of which products your suppliers have, and can help you identify problems. It also helps you check for competitor discounts and coupons, so that you know whether or not your prices are going to go up tomorrow.
The best inventory management system is one that has a built-in list integration with eCommerce platforms so you can check out what products are available for sale with ease. You can create different lists for different categories of products, then add individual products using the search function in the system. This will allow you to quickly get an understanding of how much inventory is left in any given category and what order would be the best to sell these items in. Inventory management systems also help you save time by making it easy to see which products are taking up space in your store or whether any open orders need to be fulfilled. They also help you prevent supply chain disruption by making sure that all inventory is available for sale at all times.
Supply chain disruption is a growing area of concern for companies who want to meet today’s needs with additional efficiencies and innovation. This is particularly true for businesses that are transitioning from using physical stores as their primary distribution channel to using online channels like Amazon. Many of the ideas by industry experts and consultants are aimed at supporting existing businesses in gaining new competitive advantages in today’s marketplace. However, many new start-ups would benefit from integrating some or all of the practices discussed above into their overall supply chain planning to gain an edge in the new marketplace as well as the date.