Over the past 3 years, disruption has become the new normal. Whether it has been the impact of “getting Brexit done” through to the small matter of a worldwide pandemic where entire economies were shut down and populations have been locked in their homes. Now as 2022 is well underway, the subsequent effect of these government measures and a geopolitical disruption has been rocketing inflation and energy prices.
No one could have predicted the unsettling and frankly bizarre amount of twists and turns supply chain leaders have faced… but without an elusive crystal ball what can be done to combat supply chain instability?
We’ve compiled a list of 4 key strategies for your business to consider. They are not designed as “solutions” to the challenges you’ll face, moreover, they are points of reference for discussion and collaboration as solving these issues are interdepartmental and complex.
It’s also worth noting that these challenges are made significantly easier when powering your decision-making with data. As a supply chain software platform with an incredible diversity of users spanning a multiplicity of industries, we know that being able to collate the data required in one place is essential. Then share access amongst your teams, standardise processes, insightfully analyse supplier information and then act accordingly giving you a competitive advantage and the best possible chance for success. No luck required.
We’ve ordered our themes from customer-facing (downstream of supply) to supplier-facing (upstream) considerations for your strategy to combat supply chain instability.
1. Order Management
It may seem strange for the first strategy in supply chain management may actually be a sales directive, but hear us out! By shaping the commercial focus of your marketing and sales teams, you can stabilise cash flow around products that have availability and are less at risk of supply chain fluctuations. By working with product marketing teams and communications executives, you can narrow or reduce your marketing efforts to push products that will deliver ROI and keep customers happy. No one likes receiving post-order bad news of long lead times. So why not get ahead of this and work with the situation you have?
Another tactic could be to flex prices based on availability and supplier pricing, with extra margin built in. This may not be the first tactic in the locker, but where constraints are severe, it may help ameliorate risk and ensure you’re not promising prices to the customer that make your margins razor-thin when you can deliver – if you can deliver at all.
Another option could be to introduce allocation rules into the sales function to stop any particular salesperson from monopolising your stocks to hit bonus, or encouraging your customers to panic buy (rightly or wrongly) and then potentially damage the trust they have in your entire operation.
2. Portfolio Management
As one step upstream from the sales operation, the portfolio management task often fits into the marketing or commercial function. Some businesses are making big changes to handle the supply chain crises, with automotive giants Ford not only cancelling orders for their massively popular Fiesta model but also removing the 3-door option entirely from their portfolio. This is a big move and the first time they’ve done this in the 40 years the model has been on the market.
This rationalisation can pay dividends, however, especially if there are limited shared materials and components between models, or the shared components can be used elsewhere in more profitable products.
Additionally, your supply chain teams can look for alternative components or materials that can be used either temporarily or as an ongoing fallback option.
To ensure either of these options is viable takes a significant amount of data collection and analysis. How can you find alternatives if you haven’t got a full map of your supply chain volumes, and supplier relationship management resilience measures?
3. Allocation Optimisation
The first of our purely supply-side strategies, optimising the allocation of constrained resources is an essential practice and relies on the link between sales forecasting and understanding your supplier dynamics in detail. Without data and a platform to manage this – it’s incredibly difficult to enter pricing discussions and negotiations on stock with any kind of power. If you don’t know what your options are, you could easily make the wrong decision on suppliers, hand them too much power to dictate pricing or be beholden to your current supplier as onboarding would take too long.
So what can you do?
Streamline onboarding – SourceDogg makes this entire process much easier and simpler, and largely hands off from your internal teams.
Work with suppliers to identify alternative materials or components to increase supply availability.
Look for alternative suppliers – again a data and mapping exercise, but an invaluable one to help spread risk.
Incentivise suppliers – your success is their success. By working together, preferably with a supplier relationship management platform, you can incentivise suppliers with faster payments or larger call-off orders to help stabilise their operation too.
4. Secure Supply
Maintaining continuous supply seems like an obvious objective, but in practice with plates spinning and a huge amount of disruption around every corner, it can be a deceptively difficult one to achieve.
By using a supply chain management platform like SourceDogg, it’s easier to consolidate supplier sub-tiers to negotiate directly and increase your purchasing influence. You can also prioritise where there would be the biggest impact from a lack of supply.
By partnering strategically with your supply chain and managing your relationship through software you can also work together to develop a joint risk strategy to manage inventory and look for opportunities to pre-buy in volumes and therefore increase resilience to supply shortage and price fluctuation. This could be in the form of tactical pre-buys where the balance of risk favours larger advanced orders as unfulfilled customer demand is commercially less attractive than holding slightly more stock. This may mean a strategic review of contract terms across the supply base. This is something again made easier to audit by keeping all of these contracts in one place, digitally.
We know there are no magic bullets in dealing with supply chain disruption, but by looking at these four strategic pillars to combat supply chain instability your teams will be able to proactively deal with whatever comes their way in the most data-focused and agile way.
These themes and tactics are designed to offer talking points amongst your teams, but we strongly believe that your people and processes will be vastly improved by embedding digital and data practices into these decision-making processes.
SourceDogg is here to help.
Whether it’s consolidating your data, mapping the supply chain in a meaningful manner or streamlining and standardising the onboarding process so you can bring on new suppliers quickly and easily to cope with these disruptions – our platform handles it all… and more. Get a personalised demo today from one of our supply chain experts and discover a new way to deal with disruption.