by Shawn Stuart
Supply chain disruption continues to plague facility and supply chain leaders, but the nature of those challenges has shifted significantly.
In 2021, transportation bottlenecks and product shortages occurred due to major shifts in consumer buying behavior. By contrast, today’s landscape is troubled by product overages, rising inflation, and overstuffed warehouses in some sectors, while other sectors struggle to access raw materials and significant backlogs.
We are realizing that our supply chains will continue to be affected by volatility, uncertainty, complexity, and ambiguity (referred to as VUCA) going forward. This means a whole host of risks now become the norm and require a different level of planning and execution. Here are several risk mitigation tips navigating these challenges in an efficient and profitable way:
1. Move Past Last Year’s Sales To Forecast Demand
Last year’s inventory turns no longer begets future fulfillment success. Today’s fast-changing market demands a more flexible and nimble approach. You must also look at demand sensing data that may exist outside your organization in your distribution/retail channels, as well as incorporate global market news. In addition, your inventory minimums may need to change for certain risky product categories–meaning adding product inventory cushion to your warehouses (i.e. “just in case” inventory).
2. Build Optionality Into Your Manufacturing Processes
Review your current product production processes with sales, merchants, and manufacturing to identify ways to build in options. For example, if you produce commercial and residential grade products, make sure the same manufacturing line can do both (i.e. one- and two- ply toilet paper). These may cost more in upfront investment, but will ensure you are ready for volatility. If you have a raw material that is an input in a large percent of products, consider adding redundancy to your supplier line from a different country/market, even if the pricing is unfavorable.
3. Simplify Your Facilities And Processes
You may not be able to address every external supply chain factor, but make sure you simplify the processes you truly “own” wherever possible. Reduce vendor partners for equipment and facility services like forklifts, docks/doors, HVAC, etc. Ensure planned maintenance programs are digital and tie down to the asset-level. Reduce process steps or outsource anything that isn’t core to your competitive advantage and doesn’t disrupt your connection to the customer relationship.
4. Beef Up Your Strategic Partnership With Carriers
While we’ve seen a great deal of improvement in shipping of late, don’t assume the trend will continue. As their capacity eases, timing may be optimal for negotiating a long-term and mutually beneficial arrangement. Ensure these partnerships include product visibility even when outside your enterprise. Build in resilience by investing in committed partnerships with leading carriers now.
5. Keep Your Leaders Focused On What’s Next For Customers
Senior leadership must have a consistent cadence and dialog with customers. These insights can be paired with historical forecasting data as well as internal indicators and emerging research. Predicting future demand is never going to be a fool-proof endeavor, but with careful attention and monitoring, it’s possible to stay right on the cutting edge.
Supply chain disruption and volatility is here to stay. The old playbook is gone and a new one is needed. Distributors, manufacturers and other facility leaders must execute differently to ensure their businesses are resilient to the turbulence ahead.
Shawn Stuart is Director of Strategic Business Operations at Miner, the docks and doors special division of OnPoint Group.