Supply-Chain Solutions That Create Better Business

BY: Dave Wyttenbach


In an Amazon world, where everyone is accustomed to unlimited selection and two-day delivery, the current supply-chain crisis is affecting all aspects of life, from groceries and gift-giving, to cars to kitchen remodels.

But why is this happening and what can individual businesses do to minimize the impact on your bottom line? What are your options for serving customers through this challenge when so many factors feel like they are outside your control?

The Situation

Some of this supply-chain situation stems directly from unfortunate economic effects of the Covid-19 pandemic. For instance:

  • Manufacturing was disrupted when the disease spread among factory workers causing production shutdowns and slowdowns. 
  • Many businesses incorrectly predicted reduced consumer demand, anticipating financial hardships that didn’t materialize for everyone across the board. They produced less, reduced inventory, and limited selection to avoid overstocks.
  • Transportation and shipping paused early on when traveling across borders and state lines was either restricted, limited, or highly discouraged.

Interestingly, though, the supply-chain challenges are not caused exclusively by the pandemic. In some cases, the system was already experiencing issues that were simply exacerbated or exposed by these new stressors. In the end, the system will benefit from a closer look at improved processes and universal standards.

In the meantime, how do businesses survive the fallout?

Control What You Can

Until the supply chain either returns to normal or gets overhauled and improved, the country’s commercial operations need to adjust and adapt. 

Consider some of the following ways to mitigate the consequences of the supply-chain situation on your business and use this opportunity to improve and fine tune your own internal systems to create better business practices now and for the future.

  • Maximize existing business opportunities. When new auto sales dropped off because inventory wasn’t available, many dealerships shifted focus to their service departments. If people can’t buy new cars, it only makes sense there will be an increased demand for repairs and maintenance. Examine your own business for products or services that may have been lower volume or lower priority items to determine if there is new interest or increased demand for something you already provide.
  • Look for ways to extend or expand your offerings to match current demand. When restaurants couldn’t welcome guests inside, some quickly converted to curbside and carryout services (maximizing existing services). In addition, some eateries chose to invest more fully in outdoor seating by creating or expanding outdoor dining space. Recent adjustments have included attempts to extend the outdoor dining season by adding propane heaters, fire pits, covered seating areas, and other creative options.
  • Proactively manage inventory by incorporating longer lead times into your ordering process. Accept the fact that things are just going to take longer to acquire for the foreseeable future and compensate by anticipating needs sooner. Instead of looking at what you need next month or for the next quarter, consider what you will need in June and order in January. If possible, project out the entire year and get the resources in place to minimize disruption to production or sales.
  • Fine tune your ability to predict trends and estimate needs. As your business matures, it becomes easier to use historical data to predict seasonal trends and business cycles. Now is the time to tap into that knowledge to help provide those longer lead times on all your orders.
  • Budget adequately for higher shipping costs and inflated prices for raw materials. While likely temporary, inflation will be a real consideration in the short term. In some cases, for example, the price for shipping tripled over the last year. Be sure to budget appropriately for cost increases related to supply-chain concerns.
  • Take advantage of efficiencies whenever possible. Review your systems for unnecessary steps or excessive use of materials.
  • Keep an eye on cash flow. When you stretch the time between paying for raw materials and collecting payment for your final product or service, cash flow can become an unexpected issue. Talk to your lender and commercial relationship manager about options for opening or adjusting the terms for a Line of Credit to neutralize the effects of a longer payment cycle.

By getting back to the basics of best practices in business, we can not only weather the current storm, but also set your business up for more predictable success for years to come.

Innovation Nation

Unexpected changes in the way we do things can be difficult to navigate, but societal changes also offer an opportunity for innovation on a grand scale.

Think about what drives consumer decision-making at the moment. How might your business benefit from a mindset shift away from prioritizing cost to valuing reliable availability? Is there a way to eliminate a problem with the supply chain by moving operations closer together or choosing to manufacture critical pieces in the USA rather than abroad?

While it is important to take steps to operate within the reality of our circumstances, it may be equally important to think about your business or your industry as a whole from a new perspective of innovation and opportunity.

If you would like help identifying ways to improve your business systems and practices or have an idea to capitalize on current conditions, have a conversation with your commercial relationship manager at State Bank of Cross Plains today. 

Author:

Dave Wyttenbach

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