When things are going smoothly in a business – goods are neatly arranged in the store, shipments arrive at the stipulated time, deliveries are made on time, customers get what they want, etc., it’s because there is a smooth flow in the supply chain system, functioning like a well-oiled machine, without any disruptions.
However, when there’s a disturbance to this flow at any point along the supply chain, this well-oiled machine ceases to function optimally and customer needs are not met, leading to bad business. The effects of supply chain disruptions on businesses if not planned for or handled effectively can be very disastrous. Thus, businesses need to plan for these periods and ensure they are well-equipped to handle them when they arise.
You can use various means and strategies to ensure the prevention of supply chain disruptions, effectively tackle them, and ensure that the business is not affected by them and remains profitable during the period. But before we look at these strategies, let’s first look at the various types of disruptions.
Types of disruptions
Disruption is any sudden change or crisis that hurts the business supply chain. Some of these are natural e.g. natural disasters, while others are due to man’s activities e.g. seasons and holidays. Also, these disruptions can be localized or global, as in the case of the COVID-19 pandemic. Some examples of these disruptions are
Natural disasters such as earthquakes or hurricanes can cause disruptions in the supply chain by bringing about destructions, power outages, human emergencies, etc. These can cause disturbances to the flow of goods from the manufacturer to the supplier, preventing the smooth flow of the supply chain.
This can be due to an unstable or poor economy in the region, change in suppliers, resources, etc. These fluctuations can lead to delays in the supply or purchase of goods, affecting their availability. Increased prices can also lead to increased customer prices and customer loss.
This is usually seasonal and can be due to weather such as storms or increased road traffic. Delays can also result from peak seasons, with many persons making purchases during these periods. For instance, a shipping company in Ajman would have an increased number of clients during peak seasons. If they’re not able to handle this increase, they are likely to delay in transporting goods to their clients.
This is a fraudulent attempt to access a company’s info and resources through the internet. These attacks can result to break down in internal systems and breaches, leading to the exit of customers. Therefore, companies need to invest in cyber protection.
Pandemics such as the recent COVID-19 pandemic can lead to serious disruptions in the supply chain by breaking down the flow of goods. This can be due to movement restrictions, business shutdowns, incapacitated workers, shortage of labor, etc. Pandemics can also affect customer behavior, demand, purchasing power, etc.
Disruptions can further be categorized into external and internal disruptions. External disruptions are due to risks from outside your company, while internal disruptions arise from supply chain issues within the company that you can control.
How to handle disruptions and prepare for them
Disruptions can be very difficult to manage. Therefore, the best way to tackle it would be to devise strategies to plan for or mitigate the occurrence of these events. However, some of them are beyond our control and need to be planned for. Some ways businesses can prepare for disruptions or handle them are
Preparing for them
Always have safety stock
This is a reserved amount of inventory left in storage to prevent stock-outs in the case of a rise in demand or any other kind of delay in the supply chain. You’ll need to decide how much inventory you want as safety stock to prepare for these periods. Safety stock or backup inventory is very vital to ensure the continuity of the supply chain during times of disruptions.
Also, having a good knowledge of the number of goods in stock, reserved, and in transit will help you make better decisions in case of delays or disruptions.
Rely on 3PL companies
These companies are better equipped to handle disruptions in the supply chain. Thus, the need to partner with them to handle disruption effectively when it occurs. Partnering with these companies to handle supply chain operations will remove the burden of handling both foreseen and unforeseen disruptions and better helps your company remain viable and profitable during these periods.
Do not rely on one supplier
Relying on one single supplier can leave you constrained and scrambling for solutions in times of disruption. This was evident during the pandemic when various businesses could not cope due to inventory that could not be supplied. However, diversifying your supplier would give you other options when one of them fails in times of disruption.
Also, diversifying your supplier could help you reduce operational costs in times of emergency by providing alternative options, thereby maintaining profits.
Have a contingency plan
You need a backup plan for your business for emergencies such as supply chain disruptions. Running a business without a contingency plan is like going into battle without bulletproofing. Because these emergencies are inevitable, you need to plan for them. Having a budget set aside for emergency cases is a good way to prepare for them.
Communicate with customers
Transparency is an attribute that most customers look for in business transactions. Communicating any disruption and the reasons for it early enough would increase their chances of understanding the situation. Also, communicate disruptions with other team members and distribution partners.
Access buyer behaviors
Changing buyer behavior is one of the causes of supply chain disruptions. Therefore, you need to study their behavior, what they are buying, and how they are buying it. This will help you react appropriately to the disruption. A very good option would be pivoting your products to match the changing consumer demand.
Identify Logistics Flexibilities
Desperate times call for desperate measures. Hence periods of disruption are times to bend and become flexible in your operations. Identify areas where you can afford to be flexible. For instance, you can decide to accept slower deliveries or other transportation methods from your suppliers. However, be careful not to be flexible to the extent of affecting the quality of your products, as this would adversely affect customer experience. Also, ensure to carry the involved persons along in this change.
These, along with various other strategies can be employed in ensuring that the business remains functional and profitable in times of supply chain disruption.