What is satisfaction other than your customer finding exactly what they need neatly stacked on the shelves, or delivering exactly what your customers ordered without making excuses? It’s like magic, right? But when everything goes south, it could be frustrating. Your goods haven’t been showing up at the dock on time for a while now. And you’ve been worried. Oh! you should be worried. Your customers are accustomed to these conveniences so it’s only normal for them to visit other stores when you can’t fulfill their orders. If you don’t want to lose your customers, then you have to protect your business from supply chain disruption.
Fast communication, a global supply chain, and a faster time to market are the most important features of an interconnected business world today.
When a shipment is late or never shows up at all, then there’s a reason to panic. A disrupted supply chain has a ripple effect in all areas of your business.
It creates uncertainty for your business and customers alike. It draws attention to supply chain dependencies that seemed hidden when everything is going smoothly.
From pandemics to natural disasters, transportation failures and delays, cyber-attack, and price fluctuations, the list is endless.
Some of these disruptions are localized and small, affecting few industries or businesses, in other cases, they are globally felt, especially when the affected region services a diverse range of supplies like the Asian market.
Did the pandemic hit you hard? Has a cyber-attack disrupted your supply chain? Have you thought of how to protect your business from supply chain disruption when there’s a price fluctuation? Keep these tips in mind to prepare you for the next emergency:
#1. Diversify Your Supply Base
The next time you are considering how to protect your business from supply chain disruption, diversification should come to your mind.
When the times are hard, satisfying your customer’s needs would no longer be difficult when you diversify. This is why diversification should be a part of your overall business plan.
Without a robust supply chain, your business could be at risk and the effect could be money and time-costing disruptions.
You can prevent this risk by seeking alternative resources to fill in the gap when supply chain disruption arises with your primary supplier.
It’s not always about finding the cheapest alternative you can get when there’s a supply strain, it’s about sustaining a supply chain that keeps your business afloat.
Go out of your circle and explore to discover if you can source the products you need elsewhere and find more opportunities.
Don’t over rely on large supply companies, also consider sourcing from local suppliers to solve the problem of proximities when you need supplies quickly.
#2. Manage Product Demand
If exploring supply chain strategies seem difficult or expensive, then managing the demand is another approach you should consider to protect your business from supply chain disruption.
There are two strategies you can implement; the switching strategy and the rationing strategy.
The switching strategy means when you have multiple products, you take steps to influence your consumers to purchase a product that is not supply-constrained to reduce demand on products with supply chain disruption. This can be achieved by giving incentives such as temporary discounts to encourage purchase.
Using the rationing strategy means you have to distribute the product with limited supply to your most important customers first.
The idea is to satisfy the needs of customers who would impact the future of your business. To achieve this, you have to identify your valuable customers and their needs.
Your most important customers will differ based on the goals of your company. But ensuring their supply is undisturbed will make customer retention easy for you.
#3. Conduct A Supply Chain Vulnerability Audit
Even when you have several supply chain backups, mistakes happen and it’s only normal. This is why you must protect your business from supply chain disruption.
If you’ve been experiencing unexpected challenges with your supply chain, then it’s time to conduct a supply chain vulnerability audit. This might seem time-consuming especially when it’s a busy season for you, but it’s in your best interest.
List out weak areas and focus on creating alternatives. You must also assess the different conditions that can affect the routes of your supply chain.
Conducting a vulnerability audit is the first step in preparing for future surprises. Evaluate your backup plan to check if your solution is truly working or if you should explore more efficient ways.
#4. Collaborate With Your Suppliers
While a supply chain disruption could cause a lot of problems for your business, the solution could be as simple as collaborating and communicating with suppliers.
Develop a communication framework and a collaboration platform that would aid the exchange of information between you and your suppliers.
This would mitigate supply chain risk, facilitate collaboration, reduce errors and cut costs.
Communicate your forecast and customer demand cycles with your suppliers.
In essence, when there’s fluctuation, your suppliers will be prepared and equipped to protect your business from supply chain disruption. This means you are being proactive instead of being reactive.
#5. Cash Is King
When considering supply chains, you also have to think about cash flow. When was the last time you conducted cash-flow forecasting?
How long can your business last when there’s a supply chain disruption? Do you have a line of credit to obtain a short-term loan and secure your backup inventory?
Good cash management is vital if you want to protect your business from supply chain disruption. Excelling businesses practice effective cash conversion cycle (CCC) management.
CCC is a business measurement that expresses the period it takes for your company to convert its investment into cash flow from sales.
In sum, it means if your cash has been tied up for more days in your inventory and raw material than in days to sell, then your business is at risk of sinking. The more you grow, the more cash you’ll need for your business.