How Do Businesses Survive with Uncertain Supply Chains? NewAge Products COO Frank Spano weighs in
For the past three years, the pandemic has devastated global supply chains due to a variety of factors. Varying country-wide lockdowns, rerouted shipping vessels, global ports working beyond capacity, vessels parked for weeks on end and an on-going driver shortage have caused headaches for shippers across the world. Moving into 2023, new issues have arisen such as warehousing space shortages, inflation and fluctuating demand, which are hampering the global supply chain’s ability to bounce back. These issues affect most retail businesses and are predicted to last until at least 2024. With these setbacks in mind, supply chain professionals are challenged with the question of deciding how to survive the global supply chain uncertainty.
We asked Frank Spano, Chief Operating Officer and co-founder of New Age Products to share some insights into working through these challenges. NewAge distributes large, bulky home furniture products to consumers across North America, selling directly to consumers and through online furniture retailers. With most manufacturing coming from overseas, NewAge has experienced a myriad of supply chain issues in the past three years.
Surviving Supply Chain Shocks
A supply shock is an unexpected event that causes changes in the supply of a product or service, and which can result in a sharp change in price. A positive supply shock can increase output, causing prices to decrease, while a negative supply shock decreases output, causing prices to increase. Let’s look at some of the ways that one could increase the chances of a positive supply shock experience instead of a negative one.
By working with a variety of suppliers, businesses can spread out their risk, both in manufacturing and shipping. This can allow for varying delivery dates based on differing lead times and keeps prices competitive as you can shop different manufacturers and shipping partners for the best rates. It’s also important to have a contingency plan in place for unexpected disruptions, such as identifying alternative suppliers or exploring new supply chain routes.
“We had a supplier shut down because they couldn’t find manufacturing labor,” says Spano. “With two additional suppliers located in different countries, we were able to keep production running and inventory levels intact. With a single source supply chain, we would have been out of stock for a long time.”
Working collaboratively with suppliers
Being transparent with suppliers can help with pricing and capacity concessions, especially when raw material prices and exchange rates are fluctuating rapidly. By building strong relationships with suppliers, businesses can create a foundation of collaboration, instead of competition, which can ultimately benefit both parties in the long run.
“It’s not all about beating up your suppliers on price, you should have a clear understanding of how pricing changes as their input prices change.” says Spano, “being transparent about your expectations allows your suppliers to plan their production well in advance, and stabilize pricing and capacity discussions. Keep them up-to-date with weekly calls, or even better, visits to their facility for 1:1 interactions.”
Knowing what to Buy
A critical step in an efficient supply chain is understanding what you’ll be selling for the year. Implementing the right inventory management systems can help businesses better manage their suppliers and ensure they have the right amount of stock on hand to meet demand.
“Getting inventory management right is critical to avoid stock-outs and overstocking. It starts with ensuring alignment internally, between your sales planning teams and your purchasing teams,” Spano explains. “If you’re clear with your purchase plan, you’ll know which manufacturers and shipping lanes to focus on, and where you should be spending time negotiating and building up capacity.”
While it’s important to invest in technology to support supply chain management, it’s equally important to do your research and make an informed decision. Choosing the right technology can help businesses remove inefficiencies and reduce the potential for human error.
Choosing the wrong technology can be expensive, cumbersome and slow down your inventory flow. “Companies need to analyze if it makes sense to purchase supply chain management software, custom build their own solution, or continue to do things manually. Each software solution has their own pros/cons today, which is why it’s important to keep in mind what’s scale-able as your business grows.”
Keep your team happy and healthy
In any business, employee satisfaction is critical to retaining a strong team. By creating a work culture that fosters accountability, pride of ownership, and prioritizing work-life balance, businesses can reduce turnover and ensure they have a stable team in place to handle supply chain challenges.
By looking out for these few things, you can be assured that you’re well on your way to building a supply chain that supports your growing business!