Wasn’t this the year everything was supposed to get better? According to some, supply chain issues were merely temporary bumps on the road that would quickly vanish. Other prognosticators predicted that this was the year things would finally get better. Unfortunately, neither scenario is correct as nothing has really improved. It is hard to believe, but supply chain issues might worsen deeper into 2022. The pandemic isn’t over and is now significantly impacting China, energy prices are through the roof, there are rumors of a pending diesel shortage, and an unexpected war is raging in Europe. All can play significant roles in keeping the supply chain an absolute mess for the foreseeable future.
Waiting for the supply chain to sort itself out can cost your business serious money. It is hard to make a profit without anything to sell. And it is becoming increasingly difficult to predict with any clarity when this whole mess will end. The only solution is to follow the unofficial slogan of the U.S. Marine Corps and improvise, adapt and overcome. What follows are six of our top tips for navigating supply chain issues in 2022. We won’t claim that any of them are easy, but they might make the difference between making a profit or having no business at all. Let’s dive in.
WHERE WILL IT END?
This is the million-dollar question that every business is asking. A recent and in-depth article by the New York Times takes a hard look at the many serious challenges the supply chain currently faces. If you don’t have time to read it, the answer to when things might possibly get better is 2023 at the earliest. And predictions get fuzzier the further out they go. This year has shown us there are a lot of unpredictable factors at play that can rear their ugly heads unexpectedly. Predicting what might happen a year from now is a guess at best.
Multiple factors affect the supply chain, but some of the largest ones are not easy to solve. The infrastructure revolving around the supply chain in the United States is seriously outdated. Shipping, ports, warehousing, trucking and even roads need updating to operate at peak efficiency. But all of that will require vast amounts of investment and capital to bring up to speed. Besides the federal government, most private companies are unwilling to invest in building future capacity they might not need. Many are waiting to see if shifts in consumer behavior caused by the pandemic are temporary or permanent. This wait-and-see approach can drag the current supply chain snafu out even further.
UP YOUR CUSTOMER SERVICE GAME
Most customers are somewhat understanding of the current situation and know to expect delays. But nobody likes being misled, strung along or left waiting for a product that is constantly delayed or never shows up. While the temptation to make a sale can be strong, it won’t help your bottom line if a customer eventually cancels an order. And that customer is likely never to return, costing you any future business. Patience and understanding only go so far, and it is not wise to test either of them.
In the current supply chain mess, customer service should be a priority. Clear communication about what products are actually in stock, or realistic delivery times for those that are not, is essential. E-commerce sites need to do the same with real-time inventory updates. If a product is back-ordered with no known estimated arrival time, be upfront with customers about it. Don’t rely on product ETAs from vendors that constantly miss them. Delays happen even with more reliable vendors, but any holdup should be immediately relayed to a customer. And be prepared to help customers find alternatives for items out of stock or delayed. Honesty and helpfulness go a long way in keeping customers happy and loyal.
DIVERSIFY YOUR SUPPLY CHAIN
You probably haven’t slept much lately if all your products come from one vendor in China. Shipping out of China has been a mess since the early days of the pandemic. And now there is a good chance that your products might not even get made. China continues its “zero-Covid” policy, locking down large cities over minuscule Covid cases. In January, China locked down a city of 1.2 million people after three people tested positive. Many surmised that China was overly strict in the run-up to the Winter Olympics. But the lockdowns have continued with even the financial center of Shanghai currently shut down for over a month. For a deeper dive into why the situation in China is expected to get a lot worse, check out GeoPop’s YouTube video with an excellent analysis by the Hoover Institution’s Niall Ferguson.
Regardless of where your products are made, the current situation in China shows it is always a good idea to diversify your supply chain. Solely relying on a single vendor can lead to having no products to sell. And going with whatever supplier is the cheapest isn’t always the best route. Instead, look at the whole picture taking into account shipping times, costs, product availability and reliability. A supplier might not have the lowest product prices, but they are a better option if their shipping costs are lower and they can regularly deliver. Diversifying your supply chain isn’t a simple or immediate solution. But it is increasingly becoming a strategic necessity.
DEALING WITH REALITY
It is always better to see a problem coming from far away than to react to one as it happens in real-time. Like a weather report forecasting an upcoming storm a few days out, additional time allows for the preparation and planning to lessen any impact. The same is true of your supply line, and the farther out you can spot any potential problems, the better off you will be. Doing so requires careful and detailed forecasting that is also realistic. It may be time-consuming, but it is better than being surprised when you suddenly have no inventory to sell.
Many look at the more significant aspects of their supply chain, but proper forecasting involves looking at every part. Anything involved with getting a finished product into a customer’s hands needs to be looked at. Smaller items, like bolts and fasteners, are often overlooked but can cause significant delays. Make sure to involve all your suppliers in the process and get as accurate as possible forecasts. If a vendor can’t give realistic timeframes or is always delayed, it may be time to find a new one.
GET RID OF LINKS
The more links in your supply chain, the greater the potential for gridlock. As you take a close look at your supply chain during forecasting, you should also be finding ways to shorten it. Looking for suppliers that are intermediaries is a great place to start. They often deal with the same delays as you and can’t ship a product until they receive it. But instead of a product going directly to you, it goes through them first, creating longer shipping times. And, as the war in Ukraine shows, the location of intermediaries can also play a role in delays as geopolitics are increasingly becoming more of a factor. Eliminating wholesalers and intermediaries is a great way to shorten shipping times and simplify your supply chain.
Going straight to the source of your products isn’t always straightforward. It can often take a lot of research and detective work to find a manufacturer. And don’t expect any of your current wholesalers to help you in this quest. You may also have to make a significant investment in inventory as most will want to deal in bulk to provide any considerable pricing discounts. But going through this process can help shorten shipping times and get products into your hands (and your customers) faster and more reliably. Both are highly desirable for maintaining a profit and attracting new customers in a supply chain crunch.
CHANGE WHAT YOU CAN
Restaurants were faced with many stark choices during the pandemic’s peak. With lockdowns and restrictions in effect, many switched to a takeout-only model. Some restaurants even opened small stores to sell produce, meal kits, staple goods and whatever they could to keep revenue flowing. Most also had to constantly adjust their menus as it was almost impossible to find certain foods and ingredients. Constant adaptation was a must to have a hope of surviving.
Even with this lesson of survival and adaptation right in front of us, many businesses are still doing nothing and waiting for the supply chain to unscrew itself. But you can’t sell products you don’t have, and customers will only wait for so long before searching for alternatives. Stubbornly sticking to the same products with eternal backorders is a recipe for disaster. Instead, look for ways to adjust your product mix by focusing on what you can source. And don’t waste time and money marketing products that will take months to deliver. If your business consists of only a few essential items that are difficult to source, it might be time to figure out ancillary ones that you can get. Just like restaurants had to, the time to adapt is now.
Total reliance on overseas production lowered prices and maximized profit for many companies. But it also created a very fragile supply chain readily susceptible to disruption. The early days of the pandemic laid this bare as personal protective equipment (PPE) became almost impossible to find in the U.S. Most PPE was manufactured in China, and the country stopped exporting it to bolster its supply. The war in Ukraine has also shown how supply chains can be disrupted or even weaponized with large-scale sanctions and more minor actions like dockworkers refusing to unload products all taking a toll. It is not surprising that the Office of Science and Technology Policy at the White House has prioritized protecting advanced U.S. manufacturing from the exploitation of supply chain vulnerabilities.
While your products might not be of vital interest to national security, they are essential to your company’s bottom line. One way to minimize supply chain interruptions is to bring your manufacturing back to the U.S. or even in-house. Reshoring was once thought to be overly complicated and cost-prohibitive. But as shipping prices have sky-rocketed and overseas labor costs are constantly increasing, it has become a more attractive option. The uncertainty of China’s future and geopolitical tensions in other parts of the world also have many looking more closely at reshoring. Some states in the U.S. are actively encouraging it with reduced interest financing, tax breaks and other incentives. For a detailed look at reshoring in the U.S., check out this report from the Brookings Institution. Like many of the solutions presented in the article, it is not a simple solution or one that can be achieved overnight. But it gives drastically more control of your supply chain and production process, which should be part of any company’s current long-term strategy.