“It’s always something” is a phrase we use a lot especially these days. It seems every year brings with it challenges and disruptions that businesses in every area of the economy must identify and overcome. The difficulties 2020 brought with it were particularly disruptive and many of us are still experiencing the effects. But overcome them we must. The first step to overcoming any challenge is to identify it; only then can we work towards a solution. This year, so far, seems to be all about disruptions to the supply chain. Let’s take a look at some of these common supply chain challenges and how they can be tackled.
A primary concern any business owner or purchasing officer is the cost of raw materials and the expenses associated with a purchase. These costs hit directly to the bottom line. With the rising cost of energy, fuel, and freight, compounded by more global customers, new technologies, new regulations, and increased labor rates, there is a lot of pressure on maintaining operating costs and product margins.
What’s a solution? One of the major costs and areas of variability is transporting raw materials from point A to B. Globalization has stretched raw material sources to far-off locales. Minimizing transportation is a winning strategy, and that points to finding and developing local sources.
Reducing the number of hops it takes to get materials to your shop reduces the complexity of the transport (changing from one mode to another), reduces the handling reduces the miles traveled (and therefore the fuel, labor and time) and reduces the chances of uncontrollable events affecting the transit (such as severe weather, accidents, etc.).
A major difficulty these days is the lack of availability of raw materials. This has been a great concern since the beginning of the pandemic (and events such as the Ever Given incident in the Suez Canal kicked us when we were down, disrupting nearly $10 billion worth of trade). The Institute for Supply Management (ISM) conducted a survey which revealed “record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices, and difficulties in transporting products across industries.
When the supply chain is running smoothly, there are no problems; but when issues arise, things can come to a complete halt.
Traditional inventory control strategies focus on past performance to determine inventory strategies. While precise algorithms are used to determine requirements: the problem with this approach is that it isn’t agile enough to adapt to unexpected situations. The solution likely lies in a new approach to supply chain management: one that uses up-to-the-minute insights to determine market shifts and establishing the demand faster. Closer relationships with suppliers and more frequent check-ins with suppliers on raw material status is the order of the day. Being open to evaluating alternate or substitute materials in your application is a possible route to navigating lead times that go from predictable and reasonable to outrageously long and “we’ll make it when we make it.” Communication is extremely important these days along with the visibility of status. As we like to say around here: ‘no surprises’ is the goal.
Supplier/Partner Relationship Management
To reinforce the communication aspect on the material scarcity issue, one of the most undervalued aspects of the supply chain is the relationship between manufacturers and their vendors. It is important for all parties to create, understand, and follow mutually agreed-upon standards. This allows all parties to understand what they’re doing well, but also helps identify opportunities for improvement. The importance of the relationship between supplier and buyer is only growing, which is why a strong working relationship should be a major goal. Unsurprisingly, communication and visibility are the foundations of such relationships. Frequent and early communication helps smooth out those rough areas of this challenging environment.
From the team at Breiner, we know the importance of the relationship between ourselves and our valued customers—their success is our success.