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Supply Chain Crisis: Coping With the Global Ripple Effect

If you're an American business owner, the increasing challenges in the supply chain are likely on your mind right now. From product shortages to global delays, and unbelievable shipping rates, times are like never before with the impact of COVID-19, resulting in both a worldwide spike in demand and a drop in manufacturing capabilities. The business impacts of supply chain shortages are clear. But beyond sales capacity and stocking shelves lies an even deeper impact: brand perception. A global ripple effect The current supply chain crisis we face highlights the fact that even in isolation, everything has a ripple effect… in this case, a global one. More than ever, businesses of all sizes have been met with a key truth: the business community is global, and we are all sharing the globe’s resources. So when a business that is critical to the supply chain closes down or faces disruption, it starts a chain of reactions that affects us all. Delays mean dissatisfaction Looking out into the port of Long Beach, CA, there are dozens and dozens of ships still trying to come to port. This backlog, and its inevitable impact on delivery time, is causing major strain among business partnerships, frustrations among leadership, and massive customer dissatisfaction. Not only are things taking longer to arrive, they are also costing more to ship, with international costs rising and customer promises falling by the wayside. Companies are left with a difficult conundrum: bill clients for the extra expenses you have incurred to keep your business running or absorb the costs in exchange for brand loyalty. The central question is this: What is a brand to do when so much of their offerings are suddenly out of their control, with no foreseeable resolution?

While there is no clear answer to this pressing global question, here are a few tips for managing our current supply chain chaos, as discussed in my recent Business Growth Cafe interview with Supply Chain consultant Richard Montellano, founder of RAM Supply Chain Inc. Avoid single-sourcing Though the cost and time saved in single sourcing is a relief for many organizations, it can also result in sustaining significant losses. The cost of going through the process of vetting a new supplier, training them, and taking additional insurance against risk can be high. As such, many small-scale firms choose to single-source their supplies in order to save internal costs, which can get very high among companies who seek to diversify their operations. However, single-sourcing means that the business may easily be crippled by any supply chain disruptions such as the one we are having right now. If we want to survive the fast-changing business landscape as a result of the pandemic, we need to broaden our sourcing options. Identify key components or products you need and develop multiple suppliers for these. Diversifying helps minimize risk, which in turn increases reliability in the eyes of your customers. Make partners, establish relationships Diversifying resources means building a “supplier network” that is closely tied to your business. This allows you to share risks, costs, and capacity. Here are some tips on how to create a solid supplier base: Be flexible with business terms. This can be done via contracts that have a large number of contingency clauses. This will ensure that suppliers have enough critical information to present critical products or services in a timely manner. Be as specific as possible when describing your needs. This will enable suppliers to provide products and services that are tailored to meet your requirements. Be as open and transparent with suppliers as possible. This will help them provide the right information and respond quickly when problems arise. Both parties will benefit from such a relationship. Companies should have confidence in suppliers' ability to perform the task at hand and suppliers should have confidence in the company's ability to pay it.

Remain data-driven As is central to all aspects of business, data management is key to making better decisions, improving efficiency, and increasing productivity along your supply chain -- especially in critical times like these. Data holds a vast amount of information about businesses, products, and customers that can help solve problems in the supply chain and other company decisions. The more data is available, the better a company's decision-making becomes -- and the more you are able to see your customers so you can respond effectively and maintain your brand image. While many companies neglect data management, it is critical to identify roadblocks (both on the supply side and customer side), and effectively respond to maximize your brand-customer-supplier relationship. Here are a few ways to keep company data top-of-mind: ● Take time every week to categorize, sort, and label data. ● Keep track of the previous months' data as well as the current month's data to create a continuous record of success. ● Look for ways to develop your data management plan and make changes as needed. ● Work with a team to manage data. This can include everything from your sales reps to your suppliers. ● Always be willing to develop your plan, and make changes as needed. There are many things you can do to cope with problems in your supply chain and resulting tears in your brand perception. At the root of it all, though, is this key message: anticipate potential difficulties, prepare for them, and maintain a transparent, data-driven system so you can nip whatever comes your way in the bud as you engage on both the customer and supply side.

With a willingness to adapt to disruption and develop and evolve your game plan at all stages of the process, you will sleep more soundly at night, knowing that you are ready for whatever comes your way next.

Learn more about current supply chain issues and their impact on businesses in the US and worldwide in my Business Growth Cafe podcast discussion with Supply Chain consultant Richard Montellano, founder of RAM SupplyChain Inc. here.

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