Tips for Figuring Out Your Company's Supply Chain - 2 Examples and a Template

In the last issue, you discovered how the Law of Supply and Demand impacts the way you operate your business. But knowing how to balance your customer’s demands with your ability to supply those demands is challenging when forces like supply chain disruptions are out of your control.

Lately, we’ve heard this phrase, supply chain disruptions, quite a bit.

But Seriously, What is a Supply Chain??

As with other catchphrases like The Great Resignation and The New Normal, we hear them (often ad nauseam) but may not understand what they mean.

It's not your fault. After all, supply chain and logistics were topics only those working or expressing an interest in operations seemed to know about. Even the New York Times confessed to never having a “logistics beat” before the pandemic.

Investopedia offers a great definition of a supply chain:?

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.

A keyword in that definition is "network." Although a chain implies a linear, one-directional flow (see above illustration), most organizations' supply chains rarely flow that way. Instead, once sketched a supply chain would likely look like a web of interconnected people and organizations, each playing a critical role in delivering goods and services to customers.

Elements of a Typical Supply Chain

• Raw materials: includes the source goods required to produce products and provide services. For example, minerals, agriculture, textiles, natural gas, metals, forest resources, and knowledge.
• Producer: extracts and converts raw materials into "useable" goods and services (i.e., refining oil into gasoline).
• Distributor: distributes goods and services from the producer by means of rail, air, ship, land, pipeline, and broadband.
• Wholesaler: provides goods and services in bulk quantities at a discounted rate.
• Retailer/Service Provider: offers goods and services directly to the end-user.
• Customer: the end-user, recipient, or consumer of goods and services.

While supply chains vary in complexity and may not include all of the above elements in certain industries, rest assured, every organization, regardless of size or industry, has a supply chain.

A “disruption” can happen upstream or downstream in your supply chain and directly impacts your ability to meet customer demand. As an operational leader, one of your responsibilities is to reduce the risk caused by the interconnectivity and potential over-dependence on certain people or organizations in your supply chain.

Let’s examine this by looking at the supply chains of three types of organizations. ?

Example 1: A Seafood Restaurant

Suppose you decide to treat yourself to your favorite salmon dish at your favorite restaurant. Because of the pandemic, it’s been about two years since you last dined in. You don’t bother looking at the menu, because you already know what you want.

But when the bill arrives, you have sticker shock! The cost of your meal has jumped by 25%! Before being quick to accuse the restaurant of price-gouging, consider their supply chain.

Although there’s plenty of salmon in the Atlantic Ocean, there aren’t enough fishermen to catch them. This reduction in labor supply causes the producers (salmon tank farms) to raise prices hoping to stave off demand.

To add insult to injury, the cost of rubber has increased which means tires are more expensive. The war in Ukraine translates into higher fuel costs. The food distributor’s trucks need tires and fuel to deliver the salmon to the restaurant. ?And there you have it – a domino effect of price increases throughout the entire supply chain.

Example 2: A Service-Based Business

Remember, no organization is immune to the whims of the global marketplace and its effect on supply chains. This includes service-based businesses.

Consider my company, Equilibria, Inc. As producers, we convert our teams' knowledge into useful information that our clients leverage to scale up their teams, upgrade their technologies, and document key processes.

As a service provider, one of our signature tools is laminated stick figures to facilitate the implementation of our services. Last year we noticed a spike in the number of clients requesting our Business Parts Analysis service. The successful delivery of this service requires the use of our laminated stick figures. However, as we placed orders for more stick figures to the manufacturer, we were told there was a minimum 90-day waiting period.

Turns out, there was a global shortage of lamination sheets!

The lamination sheets were on boats stuck at sea and it'd be a while before the manufacturer could catch up on their production schedules. Being creative, we thought we'd handmake some of the stick figures, but most shelves at the retail stores were completely out of stock. We didn't delay providing these services, but we made sure to let our customers know not to expect lamination on their stick figures.

What Does Your Supply Chain Look Like?

Have you ever sketched your organization's supply chain? If not, then take advantage of this template.

1. Download the template. It is a PowerPoint file.
2. Figure out the product line or service offering you'd like to start with.
3. Delete the elements that do not apply.
4. Complete the template.
5. Try to predict what can go wrong in every element of your supply chain.
6. Apply mitigation techniques to safeguard against risk (coming up in the next issue).

Final Thoughts

Disruptions are inevitable. However, with careful planning and a keen awareness of your supply chain, you can mitigate the risks associated with unpredictable changes in supply and demand. Coming up in the next issue, I'll share with you three mitigation tools you can use right away to protect your organization.

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Alicia Butler Pierre is the Founder & CEO of Equilibria, Inc. – an operations management firm specializing in business infrastructure for fast-growing small businesses. She’s the author of the two-time Amazon bestseller Behind the Fa?ade and host of the top 2% Business Infrastructure podcast. Alicia’s also an adjunct instructor at Purdue University and Nichols College. A chemical engineer turned entrepreneur, she’s advised, designed, and optimized processes for companies including Shell Oil, Coca-Cola, and The Home Depot.