Handling Supply Chain Disruptions
June 2, 2020
The idea of supply chain disruption isn’t new. Everything from worker strikes to weather to new taxes and tariffs can cause unforeseen changes to your supply chain, forcing you to quickly adapt and overcome. Supply disruptions and shortages can change how supply chains function daily and long-term, taking the idea of supply chain business operations to a whole new level. No longer is it a few stores, a few suppliers or manufacturers in a few places. It’s everyone and every business.
As a technology provider, we’ve seen the impact of unexpected disruptions across our client industries, from dips in retail EDI transactions to an incredible pickup in dropship and eCommerce needs, to food and beverage producers who are struggling to keep up with a radical shift in demand. As we continue to help our customers navigate the obstacles, we wanted to share with you what we’ve learned.
Managing Ongoing Supply Chain Disruptions
Some supply chain disruptions are short-lived, such as power outages from local storms. Others may take time to recover from; clean up after Hurricane Katrina went on for years without restoration to essential buildings, and COVID-19 caused months of supply shortages. Long-term supply shortages and disruptions that are ongoing for several months can lead to deeper impacts.
Many businesses rely on a complex system of vendors, suppliers, 3PLs, manufacturers, and/or retailers within their supply chain. When external factors disrupt the ecosystem, some businesses can quickly shift to overcome the limitations by limiting product types or shifting production. However, many have a challenging time addressing the issue. Ongoing supply chain disruptions can lead to several outcomes, including long lead times, delivery delays, and issues with communication.
In these situations, consumer packaged goods companies become unable to keep up with skyrocketing demands for essential or popular items. When certain industries become affected, products can go to waste. For example, if there are no restaurants buying food because of demand problems, farmers will have to let literal tons of vegetables and other food rot. Companies that rely on international producers and suppliers often scramble when trade halts, causing further problems in the supply chain.
The Importance of Business Continuity
Business continuity is the bedrock of surviving any market change. Having a continuity plan can help your employees stay calm and proceed through any situation with confidence. At the same time, both for service providers and retailers, a continuity plan reassures customers that the quality of your offering has not diminished and provides the transparency you need to garner customer trust and loyalty — both of which are essential in the midst of a crisis and during recovery.
For example, many brands responded to ongoing supply shortages and disruptions caused by COVID-19 through email messaging in 2020. Those emails are great for keeping customers informed, but they are just a hint of what an effective business continuity plan entails.
Your plan should include, among other things, details on critical processes, communication plans for employees and supply chain partners, a list of essential contacts (such as insurance and finance contacts), and steps to protect your inventory and business systems.
You may also wish to have multiple plans that pertain to a range of emergencies. For example, TrueCommerce’s business continuity plan includes backup and disaster recovery for all data, constant contact with data center providers, processes to enable a fully remote-capable and secure workforce, and ongoing support services.
Keeping Your Doors Open — Even When They’re Closed
When a local supply chain disruption occurs and causes business closures, even temporary ones, have lasting effects. Local stores lose sales at the moment and consumers with continuing needs may flock to other stores that are still open — giving competitors the chance to steal customers in the long term.
On the flip side, stores that are able to stay open benefit from a shift in supply and demand, often gaining a temporary monopoly of customers, who may then see their business as a more reliable option simply because it was there in their time of need.
In the age of the internet, digital eCommerce has provided the next-best option for staying open for many businesses across industries. Digital selling has been escalating for years, with marketplaces like Amazon leading the charge. In 2020, many industries responded to supply chain shortages and disruptions by selling online, leading to more than a 220% YoY increase in online sales volume in April alone.
Not sure how to get in on the action? eCommerce software can help you create your online storefront, or connect with online marketplaces without needing to be a designer or digital whiz so that you can get back to selling, fast.
Expanding your business online has more benefits than simply allowing you to stay afloat. You can continue to sell lots of products but also reach new customers. This expands your customer base and can also create a positive, lasting impression on buyers who know you’ll be there for them, no matter what.
Creating a Stronger Supply Chain With Technology
During volatile times, communication becomes an immediate necessity for business survival. For large businesses with complex supply chains, it is important that employees understand how to react and the strategy for moving forward.
However, you should also ensure your partners, vendors, and suppliers are up to date. By keeping communication lines open and transparent, you’ll be able to quickly respond to changes in any part of your supply chain, from raw material availability to sales channel demand shifts.
In a 2020 report from the Industry of Supply Management, 53% of companies struggling with supply chain disruptions were also having trouble communicating with their overseas supply chains. As a result, they were unable to place imperative orders, understand lead times or make proactive decisions to get parts and products where they needed to go. In some cases, a reactive supply chain simply isn’t enough to stay ahead.
Technologies such as supplier enablement and vendor managed inventory (VMI) are designed to combat supply chain disruptions around communication and provide a platform for proactivity that will help you weather any storm.
With automated Electronic Data Interchange (EDI), you can move through the order process quickly and effectively communicate your needs to suppliers across technical maturities. At the same time, VMI puts inventory management and replenishment in the hands of your vendors, so you can spend more time addressing the needs of your customers and ensuring profitability across your supply chain.
Planning for Future Supply Chain Disruption
It takes a lot of planning, assessment, and dedication to achieve the crisis management expertise that your business needs to survive future supply chain disruptions. No business will be perfect in every emergency, but your ability to respond quickly and strategically will play a critical role in how you fare.
The good news is that it’s never too late to start developing new strategies to manage the unexpected. You can implement cloud solutions like TrueCommerce Foundry rapidly, which can help you sell your products in new channels, connect with your suppliers and even bring on new partners as you expand. With the right technology and guidance, you can catch up to the competition and quickly outpace them!
For those able to shift from defense to offense and take advantage of new opportunities, there’s an even greater benefit. When the chips are down, you want people to come to your business first, knowing that you’ll be able to provide the services and products they need. If you can reach that point, you’ve won — you’ll be able not just to survive unforeseen market changes, but maintain a competitive edge during them and beyond.
Improving Supply Chain Resilience
Supply chain resilience is your system’s ability to function and adapt in the face of challenges and changes, including supply chain disruptions. Building increased resilience can help you ensure your supply chain can overcome and continue to operate during disruptions and shortages.
Some strategies you can use to improve resilience include:
- Adding safety stocks to warehouses: Safety stocking involves having extra stock available at your warehouses. When supply shortages or disruptions occur, you can continue to provide customers with the products they need while you sort out a long-term solution.
- Diversifying suppliers and distributors: If you rely on one supplier or suppliers from one location, you can increase your resilience by having multiple suppliers in more than one area. This system allows you to continue to receive goods if trade shuts down or a supplier experiences issues. Diversifying your distributors can help you continue to send out goods in the face of problems on that end.
- Distributing across warehouses: If you have multiple warehouses, you can improve your resiliency by spreading them across different geographic regions. This solution can help increase your reach, offer quicker services to customers and cut shipping costs for you and them. Multiple warehouses across regions can help protect you from international trade problems in one country or national disasters.
When paired with other supply chain management strategies, resilience techniques can help you create a stronger supply chain system that can react quickly to problems along all sides of the chain.
Build a More Resilient Supply Chain With TrueCommerce
To effectively handle supply chain disruptions, planning must be done well in advance and across all levels of your organization. This includes ensuring your inventory levels are managed appropriately, outlining what supplies, personnel, and additional resources are needed for each type of emergency and how the aforementioned will be deployed and adjusted in response to supply chain disruptions.
A solid emergency plan will enable you to sell goods to people outside of your customer base and traditional channels but, more important might be the psychological influence your company wields after the fact. And, finally, these plans will always need improvements. They are never finished. With each response, your team will gain knowledge and be better prepared to save the day.
To all those whose businesses are experiencing the effects of disrupted supply chains, TrueCommerce is here for you. If you have questions about managing your supply chain or expanding your sales channels, reach out to see how we can help.
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About the Author: Lindsey McGee is a Marketing Content Writer specializing in supply chain strategy, thought leadership, and education. As part of the marketing team at TrueCommerce, Lindsey strives to provide thoughtful, accessible information to help business owners grow and manage their operations. Lindsey lives in Pittsburgh with her husband, Cody, and rescue pets, Delta and Izzie.
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