How To Future-Proof Your Businesses Against Today’s Supply Chain Challenges

By: Paul E. Roberts, Principal – Roberts Statistical & Consulting Services, Los Angeles

“The definition of being in business is about managing risk.”

That’s what a friend and business attorney once told me about managing the operations of a company. The Leadership of an organization must strike a balance between its purpose in the marketplace and the chances it takes to bring on new products and services, new customers, directions, and ideas. Manage that balance well and you create the opportunity for smoother operations, more sales growth and profitability.

Mismanage it, and you open yourself up to unnecessary challenges, lost sales, and stagnated growth.

Today’s small businesses are challenged more than ever by the external forces around them. Customers demand to be engaged on the platform of their choice. Competitors are looking to use their own niche offerings to move sales away from your company to theirs. Most of all, economic challenges in local, regional, national, and international markets can affect your organization’s ability to do business daily.

Product and Service Availability in the US:

Over the last century or so, US markets have transitioned from an agrarian system to a manufacturing economy, and now, especially in the West Coast region, a service economy. Many of the products and services we expect to see and use in our daily lives are not made here, whether that be locally, regionally, or nationally. These expectations rely on a supply chain that is supposed to get us these products and services when we want them, in the way we want them, and for a price that we expect to pay for them.

This worked to some extent until the beginning of 2020. The pandemic exposed a number of significant issues and challenges with our current service economy. Supply chains have broken. Imported products that used to take six to eight weeks to get from manufacturing dock to your door now take 16-18 weeks. Inventory levels held by your business are increasing so that you can guarantee your customers product availability, but higher inventory levels mean cash flow is reduced as more resources are needed for logistics, warehousing, and product procurement.

Manufacturers are at capacity and are forced to focus on their No. 1 and No. 2 product offerings instead of the various put-ups, fragrances, and options they used to provide. The idea of a just-in-time inventory system has been flipped on its head, the result of product lead times and availability challenges. With extended lead times, even special orders can take months to get. New custom runs are fulfilled today based on how important your business is as a customer to the vendor.

To move forward and continue to exist as an organization, SME and legacy businesses are being forced to rethink their procurement processes based on their vendor’s current supply chain.

What Your Business Can Do Today to Alleviate Supply Chain Challenges:

Businesses rely heavily on their procurement departments to have the products and services they need when they need them. Today, the value provided by purchasing cannot be overestimated. Changes in product availability have caused many companies to change their product offerings “on the fly” so they can take care of their customers.

Many economists believe that the supply chain will take years to recover. It may not be until the end of 2023 before we begin to see any relief. Some even suggest that what we are seeing now has become the “new normal”. Whatever the case, what your company does now will pay dividends down the road.

Businesses need to have a clear understanding of their industry. You cannot expect your company to thrive in a vacuum. This includes understanding where the products they use are made, where they come from and how they get to your door. External forces that affect each of these processes can mean the difference between profits and loses:

·??????Are the products your company needs coming from overseas, from across the country or are they local and can they be picked up?

·??????Is the packaging that items arrive in important? Do you need to break them down and sell them in partial case quantities or in single pack/use?

·??????What is the storage needs for these items? Can they be stored at ambient temperature? Are these products delivered in pressurized cans that must be segregated from other non-hazardous products? Do you need to refrigerate or freeze them to ensure product quality?

·??????When your business uses or delivers products to their customers, are there special handle requirements need for your users/delivery personnel?

All the above, including knowing the economics and regional/national issues about where the products your company uses are important parts of creating value for all stakeholders.

Communicate, Communicate, and then Communicate Some More:

Customer/Vendor associations are much more engaging today. They used to be just an opportunity to buy, but not anymore. Having a good relationship with a vendor can mean the difference between getting the products and services you need in a timely manner and getting them when your order comes up in the queue.

Your business’s vendors value the information you can provide them about what is happening in the marketplace you serve. Communicating well with your vendor pays dividends. Often, vendor ask you to report the sales you make of their products and services so that they can target their product’s end user for feedback, promotions, and opportunities for additional product/service sales. This information is then routed back to you as their primary supplier giving you additional sales opportunities.

The efforts you company’s procurement department makes to maintain a good relationship with your vendors is paramount to maintaining adequate inventory levels. Your suppliers utilize the data you provide from purchases and sales reporting to break down where products are going from a local, regional, and demographic standpoint. These insights can provide valuable insight to your company’s own sales and marketing departments, allowing for more direct advertising of new products and services to like clients. How this information is parsed after it is generated can lead to more sales and profitability.

Monitoring the Economy at All Levels:

Having a good relationship with your vendors is a great start, but understanding what is going on in the local, regional, national, and international markets you serve is a must. Even if your business’s reach is only in a local community or region, what is going on nationally and internationally can mean the difference between a sale or having your customer go to a competitor because your business does not have the product they want in stock.

We have all heard the stories on the news:

·??????Container ships being moved farther out to sea, having to stay out of port for extended periods of time as port docks are overcrowded due to a lack of personnel available to unload ships.

·??????What once cost between $2,000 and $3,500 per container to get an order loaded and shipped from overseas now costs $20-25,000 per container, based on a non-guaranteed delivery date. Needing a guaranteed delivery date can cost upwards of $40,000!

·??????Trucking companies in desperate need of drivers as the average age of a truck driver continues to increase.

Knowing what is going on in and around the products and services you sell will give you an advantage over those just waiting for their next delivery. Most products today must travel hundreds or even thousands of miles to get to their destination. While many manufacturers provide transportation of their product from their dock to yours, it may be time to see if creating a relationship with a 3PL warehousing and transportation service can provide your business with additional cost savings.

Understanding the cost of transportation that is included in the vendor’s cost of an item is an important part of your company’s overall profitability. While vendors often offer pickup allowances, they likely do not cover the cost of getting the products you need from their point A to your point B. Transportation companies that are independent of your vendor’s delivery systems can provide delivered cost savings and give your procurement department a more definitive delivery timeline. This gives you more control over the inventory levels you need to carry.

Rely On Your Industry Associations and Buying Groups:

Another valuable tool in the Supply Chain information arsenal is participating in industry associations and regional/national industry buying groups. Industry association provide news and data as to what is going on in their regional, national, and international markets and provide insights that can be used to make informed decisions. They also provide great prospects for networking, learning, and certifications that can enhance your company’s standing and reputation in the marketplace.

Regional and national buying groups provide many of the same opportunities for news, data, and networking. They also offer vendor discounts and purchasing growth programs that independent businesses do not normally have access to. Buying groups also offer regional and national programs where your organization can participate in the sales of many of these products to national account programs facilitated by the buying group. While dues are usually collected buying group members to fund the ongoing operations of the group, this cost is usually more than outweighed it provides through sales, cost savings, and networking with similar members in other regions.

Knowledge is Value:

Understanding what is going on in the markets you serve is as valuable to you as it is to your customers as well as your vendors. Being as transparent as possible with all stakeholders allows you to maintain your supply levels and provides value to all that your business encounters. Knowing what’s happening in the supply chain will help your organization realize whether it needs to expand its offerings to like vendors, create a good, better, best scenario of product availability, or change the way procurement with vendors is handled. Making informed decisions based on the data at hand will allow your business to move forward with smooth business operations and continued growth and profitability.

Does your company need a business plan? Is your existing business plan due for a refresh? Has your company lost focus and you are looking to re-energize it? RobertsSCS is here to work with you to bring your business processes into focus. Call us today at (310) 972-8243 or reach out to us at [email protected]

About RobertsSCS:

Roberts Statistical & Consulting Services ─ RobertsSCS ─ offers results-oriented strategies, mentoring, and insights to optimize operations for legacy companies looking for 21st Century upgrades to improve profitability, increase sales growth, and future-proof systems for sustainability.

Using 30-plus years of operating and management experience, RobertsSCS works with businesses with $1-30 million in revenue to create better efficiency, synergy, and outreach.?We provide developmental, strategic, and executable plans of action at multiple levels: wholesale, retail, B2B, and B2C for organizations desiring to maximize industry market share.

Knowing the market environment and the status of each business we work with allows us to provide customized insights on growth and profit opportunities at the local, regional, and/or national market level.