As we are finishing up year two of the COVID-19 pandemic, businesses are understanding more than ever the importance of their supply chain and the impact it can have on their operations. In the past, finding materials that were needed to operate your business usually wasn’t an issue, and maybe at the worst, it was only a phone call or two away.
Today, when you hear supply chain being discussed it seems like the conversation is constantly centered on long lead times, supplier allocations for customers, drastically increasing import and container fees, shipping delays, etc. With these new issues, it is more important than ever to be strategic and really understand your supply chain. But what does this even mean?
Ask A Lot Of Questions
For starters, we believe it means asking a lot of questions as to where your raw materials or other supplies are coming from and how they are getting to you. On the back end, it’s asking those same questions about the means with which you plan to deliver your products to your customers. Below are some questions that may help you get started:
- Do you know what items are absolutely critical to run your operation?
- Do you have any materials that you single source (meaning you only buy from one supplier)?
- If so, have you investigated any backup sources for these items, especially if they are critical?
- Do you source any of your materials overseas and are you having issues obtaining them?
- If so, have you investigated the potential of sourcing these items domestically?
- Have you kept frequent communication with your suppliers to let them know how much material you will need over the next month/quarter/year?
- Are you confident that they will be able to deliver on that, or do you need to look for additional supply?
- Do you understand the transportation methods by which your products arrive at your facility and the risks associated with each of those?
If you haven’t asked questions like these and spent some time looking at your supply chain we recommend starting as soon as possible!
Supply Chain Moving Forward
Based on the information we have gathered and continue to gather within our network and industry channels, our anticipation is that delays and constraints within the supply chain will likely continue for at least the next one to two years. What’s interesting is that despite this, businesses continue to show record amounts of revenue and profit which is leading to additional demand for materials and other components. Because of this, you will likely need to be intentional and creative as we navigate through these headwinds. For instance, would it make sense to manufacture components yourself that historically you may have purchased? Or can you invest in some additional research and development to check on the feasibility of changing certain components within your product(s) that are more easily sourced or even standardize components across different items or models to reduce the complexity you have to deal with? While some of these questions may seem a little outside of the box, small changes in areas like these might mean the difference between having items that are 100% completed and ready to ship versus having items that are 95% of the way there but are required to sit on a shelf for a couple of weeks while waiting on a certain component before they can be completed.
Unfortunately, there isn’t a perfect plan or playbook out there on how to navigate these issues and it is likely that most of you have probably already read many articles on the current state of our supply chain. Our goal with this article is to simply highlight the importance of being proactive, establishing a plan, and being open to change, and willing to challenge the status quo. It’s hard to imagine that anyone could have predicted the degree of disruption the global supply chain would experience when the pandemic began but now that we know it is here for the foreseeable future, the challenge becomes what are you going to do about it in order to set your business up for success in both the short-term and the long-term?
Contact your Rea advisor today to find out more about supply chains and how we can help you manage your business!