Suppose you have just produced a great product. Not only is your product excellent, but your marketing strategy is on point too. Suddenly your product is in high demand, but there is a problem: a broken supply chain. Without the proper channels to satisfy customer demand, all your effort and hard work will be in vain. This is what happens when an inefficient supply chain rears its ugly head. If your customers can’t receive goods on time, it doesn’t matter how great your product is.
With the objectives of creating efficiencies, satisfying demand, and reducing costs, supply chain management plays an essential role in meeting an organization’s short-term and long-term procurement goals. And mind you, the supply chain involves more than just shipping the product to the consumer. It extends its tentacles to purchasing, warehousing, logistics operations, resource management, and information flow management.
In an ideal world, a well-functioning supply chain should work like magic. But because we don’t live in a 100 percent utopic world, things can go topsy-turvy. You see, today’s global supply chains are leaner and dispersed. As such, they are vulnerable to natural disasters (like floods and earthquakes), global pandemics (such as COVID-19), cyber-attacks, political unrest, and fluctuating product demand. Given these challenges, you need to devise strategies to ensure that these challenges don’t disrupt your supply chain management.
How To Handle Supply Chain Disruptions
As your supply chain starts faltering, so does your customer satisfaction. And we know, when your customers aren’t happy, it’s a matter of time before your beloved business folds. That said, what steps can you take to minimize supply chain disruptions? While achieving a non-zero supply chain disruption borders the impossible, the below strategies provide insights on handling supply chain disruptions.
Whereas you can’t predict risks with 100 percent certainty, you can minimize supply chain disruptions by mitigating some well-known dangers. For instance, when onboarding a supplier, scrutinizing their financial records can help identify the potential future risk of insolvency.
Even though you anticipate risks, don’t be complacent. As such, devise the following risk management strategies to stay ahead:
- Identify and document potential risk events
- Deploy a supply chain risk management framework to categorize risks according to the severity and establish the impact on the business
- Keep your eyes peeled on the risks
- Appoint champions to ramp up accountability
As a risk manager, don’t forget about unknown risks. Unknown risks are tricky because they are hard to predict and challenging to integrate into the contingency plan. While pandemics like COVID-19 and political uncertainty make it hard to know what’s around the corner, businesses can aim for damage limitations by involving the entire team.
Combating risks collaboratively makes employees feel empowered to proactively identify risks falling in their areas and inform the management to act promptly when a future threat is detected.
While the novel coronavirus pandemic turned the large part of 2020 into a movie with a bleak storyline, surviving businesses have been given a lifeline to learn and live. In the future, events that appear to be too distant can significantly impact your supply chain and other operations when caught flat-footed. To avert this, deploy a proactive risk mitigation strategy.
Reference Your Business Continuity Plan
Will you stop enjoying your favorite meal because the spoon has broken? Similarly, in business, if power cuts hamper your supplier, should yours suffer as well? Many adverse events can hit your business. As a result, having a robust contingency plan helps you devise an alternative course of action (backup plan).
One way of ensuring business continuity amid product shortages is recruiting alternative suppliers in different locations. This way, you cushion your business from price fluctuations, transportation delays, and other factors specific to the supplier.
Ultimately, manage suppliers’ uncertainties by expanding your supply network. Recruit multiple suppliers-small and big, far and nearby. With this, your business eliminates the risk of relying on one single supplier. While you might lose the benefit of economies of scale through supplier diversity, balance this forgone cost with the associated costs of supply chain disruptions.
Stock Multiple Products
Inventory management is a delicate function that requires some balancing. Overstocking subjects your business to tying too much cash in inventory. On the other hand, understock and you find yourself unable to cope with product demand. In light of this, keeping adequate inventory levels minimizes supply chain disruptions without hurting your business’ liquidity.
Proactive stock management helps in anticipating demand, thereby adjusting inventory levels appropriately. While counteracting the effects of unpredictable or rare events is daunting, businesses can wade off a considerable chunk of predictable risk events affecting inventory levels.
Remember, when carrying out your inventory management, make sure you are socially responsible while at it. Although warehouses play a pivotal role in your supply chain management, many create waste and energy inefficiencies. With this in mind, learning how to make your warehouse more eco-friendly is a great place to start.
Manage Product Demand
If you find it overwhelming to manage the equation’s supply side, then manage the demand through switching and rationing strategies. With the switching procedure, a business dealing in multiple products can entice customers to buy products facing oversupply. This goal can be achieved by offering discounts and aggressive marketing.
On the other hand, the rationing strategy encompasses meeting the demand of your critical customers for products facing a supply shortage. This way, you keep customers that will help your business thrive.
Supply Chain Vulnerability Audit
Because disruptions in the global supply chains can spell a disaster for businesses and customers alike, take time to navigate the weakest links in your supply chain. Yes, mistakes happen, and not every situation can be avoided. However, take time to identify vulnerabilities in your operations. This way, you will nip exposures at the bud, saving your business unfortunate surprises.
It’s everyone’s dream for their supply chain to work like a well-oiled machine. But when disruptions throw a spanner in the works, your operations can come down tumbling to a halt. However, this doesn’t have to be the case. With proactive planning, you can restore operations faster or even avoid disruptions occurring in the first place.
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