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Surviving supply chain disruption

Supply chains get disrupted all the time, and when they do, it can seem as if the wheels of commerce have seized up. You can’t get enough ingredients, components, supplies, or products to keep your business ticking. But with the right contingency strategies in place, you can minimize the impact on your business.

The shock of disrupted supply

You’re on your way to work and decide to grab a cup of coffee. Popping into your local café, there is a large sign saying they’ve run out of coffee. Or cups. Or water. Whatever it is, you’re surprised a key ingredient is missing.

This can happen as behind most businesses is a ‘supply chain’. For the café, the start of the supply chain could be the grower (who relies on employees to harvest and ships to deliver), to the wholesaler (needing fresh beans each week), to the roaster (requiring the wholesaler to deliver just in time), to finally the café (who relies on the local delivery van and customers turning up).

A crisis anywhere along the chain can be disruptive:

  • A pandemic could stop customers from getting to your business but so could a fire, roadworks or a shop refit. It doesn’t have to be a major disaster to impact your business.
  • Weather events, natural disasters, an international crisis or a shipping delay can cause havoc across whole industries.
  • Talent gaps or shortages of staff (especially seasonal workers in agriculture or tourism).
  • A lack of raw materials or components due to political issues in another country (even war or diplomatic wrangling like Brexit).
  • Cyberattacks and security breaches.
  • Industry strikes, changing border regulations or accessibility issues.

Even human error can result in a supply chain block while COVID caused the most significant supply chain shock in recent times, exposing the vulnerabilities in production and supply for a wide range of industries. An increase in demand for certain products saw shelves sitting empty as manufacturers struggled to keep pace with consumer needs.

Managing supply chain disruption

While these events are generally unavoidable, having a plan in place to reduce the likelihood of a supply shock happening and to reduce its impact on your business can help mitigate disruption to operations and cashflow.

Start by developing scenarios that could impact your business at each step of your existing supply chain. Do this by listing all the moving parts of your business that relies on some outside delivery. Prioritize these from mission-critical (your business will close without supply) to important (you could survive for a time without them).

Next to each, build out what you’d do to manage this risk, for example:

  • Research and set up alternative suppliers so if one fails you have a back-up. If you rely on one major supplier, it could be time to start buying smaller amounts from others to build up a track record and relationship.
  • Using your industry contacts to find similar businesses who may agree to reciprocal sharing arrangements when the time comes.
  • Reviewing the continuation of particularly vulnerable product lines and consider whether the risk is too high for your business without guaranteed delivery frameworks. In effect, deleting some items for sale.
  • Considering if your production processes could be changed to more secure or local suppliers to reduce risk of disruption from a distance. It might cost a little more but replacing low-cost components for a local supplier may make sense.
  • Increasing the amount of stock you hold, particularly for products with a higher risk for disruption and are vital for the viability of your business.

Regardless of what actions you can take to survive this type of disaster, have a communication plan that you and all employees can access, to ensure you can proactively and transparently manage supplier and distributor relationships.

Using technology to manage your supply chain

When you buy a tracked item from an online store, you can often see where the item is on its travels. Therefore, technology should give you tighter control over every link in the supply chain, with carefully monitored shipping, tracking and invoicing notifications for real-time updates. This includes greater transparency over stock levels, allowing you to track and monitor peaks and valleys in demand and sustainably adjust your supply or distribution requirements to suit. Analytics also give you early insight into product vulnerabilities, so you can proactively introduce safeguards to reduce any disruption before it happens. 

Summary

Supply chain disruptions are inevitable. The result for your business may mean lost revenue and even lost customers, production downtime, inefficient use of resources, waste, as well as increased storage requirements (and associated safety hazards).

How you handle them, however, is something you can control. By evaluating risks before they occur, planning your response and diversifying your suppliers, you’ll be in a better position to minimize and even avoid disruptions to your business.

To conclude

Conduct a supply chain audit and diversify your supply chain to increase resiliency if necessary, then try:

  • Increasing the inventory you hold (if essential) to give yourself a buffer. These may be finished goods, critical components or raw materials.
  • Adopting your industry tracking technology to set up early detection systems to monitor for red flags that could signal significant disruption is imminent.
  • Setting up contingency plans for each step of your supply chain and establish clear processes to action in the event of a supply chain shock.
  • If you need finance or want to talk about accessing online payment facilities to take advantage of a new business model, talk to us.
Contact us

Contact us

Contact a Small Business Team member to discuss how we may help you achieve your business goals. We are here to assist every step of the way.

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Disclaimer

For informational purposes only. There is NO WARRANTY, expressed or implied, for the accuracy of this information or its applicability to your financial situation. Please consult your financial and/or tax advisor. Full legal disclaimer

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