One of the unforeseen aftereffects of a global pandemic has been an ongoing broken supply chain. Many companies have relied on a constant and consistent stream of products and raw materials from established suppliers. Having lasted and profound relationships with your suppliers is a good thing. However, in this current supply chain ‘crisis,’ many suppliers cannot get you what you need to run your business. Hundreds of container ships floating offshore with no one to unload them as well as a transportation shortage of drivers and trailers compound this phenomenon.
This means we need to apply creative thinking to find ways to get our much-needed raw materials and products. Without a doubt, our costs are going up. The classic supply and demand premise is busily at work. Big Box retailers and large conglomerates have the advantage of deep pockets, tight supply agreements, and huge influence. This puts the rest of us in search of alternatives to fill our supply needs. In addition, many critical items have been put on ‘allocation.’ This means that each customer only gets a portion of what has been ordered based on what is available, or worst case, gets nothing while more significant customers get at least some. For multi-location businesses, this can be problematic.
What do these supply chain shortages mean to your business? Besides having to pay more for materials and products across the board, backorders, out of stocks, and lack of raw materials, your business cannot sell what it cannot produce or put on the shelves. One key material or part can stop your production lines from running or your customers from coming into your storefronts.
Find Alternative Distributors and Sources
While working closely with key suppliers usually is a good thing, it is even more critical now. It is essential to understand the upstream issues they are facing as well as your own. They are not purposefully withholding supply and are likely working to resolve the shortages as well. But we cannot blindly rely on their efforts or what has worked in the past.
We must seek alternative suppliers and distributors. Sometimes the product is available, but not from the traditional sources. Sometimes this may be a short-term problem that might resolve if given enough time for your traditional sources to get the product.
But if your business relies on a steady stream of materials or products, it will serve you well to seek out alternative suppliers and distribution channels. Be aware, though, many of these alternative suppliers are facing the same or similar shortages and give a ‘first priority’ to their existing customers overtaking on new ones. In fact, many suppliers are not returning calls or ‘ghosting’ requests for a product from new customers due to meeting their commitments to their existing customers.
Other suppliers want more of your business than just the products in short supply. Therefore, you need to analyze the impacts of having a single source for all of your products and consider spreading your supply spend across multiple sources. This is a common practice among manufacturers who rely on a steady stream of parts and materials to keep their production running at an efficient rate.
If you see your competition can get these materials or products, ask your sources why they cannot provide them. If they cannot resolve the issue, seek alternative solutions, including buying from your competitors at retail and selling at cost for key items. While this may sound like heresy, sometimes having one product out of stock will cause your customers to buy the related items, often with higher margin, from one place that has them all. Or, if it is raw materials, this tactic can keep your production lines running and turning out sellable products.
Go Straight To The Source
While going up the supply chain is not always an alternative, it can provide insight into other channels that might have the product in inventory that you were not previously aware of. Perhaps, you might find that the manufacturer is close by, and your volume is such that they are willing to sell directly to you. Related to this tactic is picking up the product from these sources using your own transportation or arranging transportation on your own. Since the shortage of trucking and transportation has exacerbated the situation, anything you can do to provide transportation that you have an element of control over can be extremely valuable. There are many potential outcomes, but we are all in this together and applying prudent tactics to obtain supply are the things we must do to sleep better at night, knowing we are not just standing still but trying to resolve the supply issues.
Find Alternative Materials and Products For Your Business
Sometimes a leading brand or product differentiates itself by its key ingredients. If this crucial ingredient is in short or no supply, consider using the alternative product that may not be as ‘good’ but might be available. Sometimes these are obvious choices, but often you need to look to find the alternatives that will do the job or provide the materials. Some suppliers ‘stockpile’ key ingredients in order to level out their cost. These suppliers may have key ingredients where others might not. Therefore, diligence is called for in searching out alternative products, materials, and solutions.
Redesign Your Supply Offerings
If you have applied some of the creative methods mentioned above and still cannot find a supply, consider redesigning your offering. For manufacturers, this can mean redesigning around a material or parts shortage. If the current part is made with material that is in short supply, are their alternative materials that would be as good or better? The move over the last few decades to ‘outsource’ our supply to the global economy has had an enormous impact on our current situation. Consider seeking out or starting back up domestic supply for critical items. You may pay a somewhat higher price, but higher costs are better than no production and no sales. In the case of one commercial vehicle manufacturer, they had to redesign their complex assembly to source it domestically. While this was a significant investment, the alternative was idle production and a lack of sales. Not doing these things can cause even good companies to go out of business.
For a retail sales company with multiple locations, they needed to re-think what they traditionally carried in their retail outlets. A common statement from retail store managers is ‘we can’t sell what we don’t have.’
This motivated the company to add complementary products and impulse items that their typical demographic might purchase. This was in addition to acting using the strategies above. Maintaining retail traffic and existing customers is key to survival. This is commonly known as ‘pivoting’ your business model from its well-established core.
It can be risky, but the alternative is to become paralyzed and a passenger on a sinking ship.
We must be proactive in resolving our supply chain issues. This may well be a short-term phenomenon, but can we risk waiting? The backlog of supply and the shortage of transportation and transportation workers is significant. Best case, it will take months for this to begin to return to normal, if it ever does. We must apply creative energy to fully understand our unique situation.
