Disruptions to supply are inevitable. The latest being the potential disaster of the holiday “shipageddon” where companies may see extreme constraints on parcel companies. Delivery networks cannot keep up with the changing shift of purchasing habits from the pandemic; the move to more online and less in brick & mortar locations. Businesses importing goods will also see shortages of containers causing disruptions. Even companies that do not manufacture products overseas may feel the impact if the raw materials come from abroad. The holiday season is quickly approaching and many businesses are already short on inventory supply because of interruptions earlier in the year. There is no dispute this will have an impact on the busiest and most profitable season for most consumer goods companies.
So how can the impact of supply chain disruption be managed? See below for four ways to help mitigate these risks for your company:
- Forecast into the future: With uncertainty in deliveries, it is necessary to plan further out into the future. The normal weeks of supply level may need to be adjusted to account for delayed or cancelled future orders. If companies can move purchase orders up or produce more of the top products, now is the time to do so. This may be a good solution for short term disruptions but depending on carrying costs, may not be ideal as a long-term solution. It is important to look at demand and make sure goods aren’t over purchased.
- Pad lead times: Normal lead times are not feasible during a supply chain disruption. The lead times will need to be extended to account for delayed goods. With a great forecasting system, the longer lead time can be factored in when calculating need and send alerts for earlier reactions to trends.
- Adjust Product Demand: In some cases, more supply of an item may not be available now or in the near future or may be too costly to purchase or manufacture. Companies can take steps to manage the demand of an item. This can be done by pushing demand to a similar item by offering a discount or increasing marketing of the like item. Another way to slow demand of a product is to increase the price. But, companies must be careful to keep the consumer and the situation in mind when making these decisions.
- Shift to a Secondary Source: When possible, having multiple vendors to supply raw materials or finished goods is ideal. When one factory, city or country is hit with supply chain disruptions, a secondary source can stop the disruption from affecting the consumer. Having a hierarchy of vendors in your planning system helps put options at your fingertips. Defaulting to start with the Primary vendor, it can also store all of the information needed to purchase goods from any of the vendors listed on a product.
At the end of the day, supply chain disruptions may be unavoidable. But there are ways to mitigate the impact these disruptions can have on a company and its bottom line. And luckily supply chain disruptions can be short lived. Getting through and mitigating these supply chain issues could result in business growth or better KPIs. Some are even predicting a strong rebound post COVID-19 shut downs-with a payback from lost months.
For more information on how SAFIO Solutions can help your company in times of supply chain disruption, contact the industry experts at: https://safiosolutions.com/
SAFIO Solutions is here to help you emerge stronger than ever. We make the forecasting process efficient and effective by gathering all your data into one location and providing a user interface and custom dashboards that give you the vision into your business. You gain confidence needed to take the actions that will optimize your inventory, enhance profitability and increase operational performance.