For the first time, “supply chain” has entered our collective vocabulary. Lots of people are discussing supply chain disruptions not just in boardrooms but also in their living rooms.
While the global disruptions in supply chains are not pleasant or convenient, they may be a blessing in disguise, as they give us the vocabulary to talk about ways to address supply chain issues. Our solutions can make supply chains not only more resilient but also more environmentally sustainable.
If you feel like you are behind with strategy around your supply chain, you are not alone. Only 22% of companies have a proactive supply chain network. Proactive supply chain management means that the end-user is always able to address shifts in supply or demand before they become critical.
In this article, we will discuss the ways that the Covid-19 pandemic has disrupted global supply chains. We’ll then present a few ways that your company can make its supply chain more resilient.
Types Of Supply Chain Issues
As a businessperson, you know that it is essential to respond quickly when your business is struggling to deliver a product to customers. And the first step to responding is determining what the supply chain issue is your business is facing. Different issues will require slightly different types of responses.
Be aware that often supply chain issues are a combination of multiple factors, and it can be difficult to tell which issue is most pressing. In these cases, it is useful to bring in a virtual CFO to help you with your research so that you can tell which supply chain issue you should address first. A virtual CFO is often familiar with the economics of the different options available to small business owners. Further, they can discuss and forecast out different alternatives.
Shipping Issues
This is the most typical supply chain issue. With shipping issues, your company is losing time during the process of materials being shipped to factories or during the process of products being shipped to customers.
For example, during Covid-19, international shipments have often been delayed. Especially imports from China or other Asian countries. Often a quick shipment from your supplier only ends up getting caught in customs for months. I have two such clients where products have been sitting on boats for 6 or 8 weeks longer than usual.
The best solution is to make your business more local, meaning that you should try to get the constituent parts of your product as locally as possible. Setting up local supply chains often used to be more costly. However, now as prices for all products rise worldwide, local solutions should be re-examined. Even if the price is still higher, there can be more reliability or quick delivery with some of these options.
An unforeseen cost with shipping issues is the money companies are spending on unused or inefficient labor. These are real costs that companies are incurring. By fixing supply chain issues, even with higher costs, there can be an offset with more efficient labor.
Human Factor Issues
Issues in human relations can also disrupt supply chains. Workers striking or vendors not able to find labor are often factors that cause supply chain disruptions. It is becoming more common to have supply chain disruptions when there are simply not enough workers qualified to work in an industry.
This is a fairly easy issue to identify, although it can sometimes be tough to tell why there are not more workers in an industry.
When you have a supplier who is experiencing these issues, a solution can be hard to find. However, one of our clients had success in helping find a solution upstream from their supplier. Their primary vendor could guarantee faster delivery times if the materials they received were more prepared for their manufacturing process. As a result, my client helped source a different raw material from a supplier that was willing to take on a part of the manufacturing process themselves.
Human resource issues can be hard to find solutions for. It often takes communication with your vendor to figure out a solution that would work for all parties. Understanding the whole manufacturing lifecycle is critical when brainstorming solutions.
Logistics Supply Chain Issues
Sometimes, supply chain issues are purely a result of swiftly changing supply and demand. The Covid-19 pandemic presented myriad challenges to the supply chain, which all compounded each other, leading to unprecedented shortages.
Companies struggled to maintain their supply chains because their employees were developing Covid-19 at alarming rates. The pandemic necessitated that certain products were required at different levels than were historically needed. For instance, all raw materials around the vaccine were in short supply (and still are).
Covid also completely changed the supply and demand dynamics of the world. Suddenly, families were heading to the grocery store only once every two weeks and overbuying many products. In North America, toilet paper was the most significant shortage; however, other countries experienced other supply shortages that were equally devastating.
So how can you avoid this issue? One of the biggest factors is determining whether a higher demand you are observing will be temporary or permanent. If you believe that higher demand will be longer-term, you need to investigate alternatives.
A Real-Life Logistics Solution
A client of mine is a manufacturer of a plastic product. Their access to their main product, resin, was limited due to the distribution of the vaccine. The certain type of resin they required was also required in the manufacturing process for the vials of the vaccine. Further, the resin they could access was at significantly higher prices.
We mentioned above that supply chain issues are rarely caused by one item. The main ingredient in resin is oil. If you are at least 16 years old, you know what has happened with oil prices since December 2021. As a result, this company was facing both a lack of supply and soaring prices.
After trying to work through this issue for several months, they had to find an alternative supply solution. They went back to their team and determined that with tweaks to their manufacturing process, a different type of raw material may be able to be used. This specific raw material was much more abundantly available. Further, it was available from many more suppliers, meaning costs were going to be more competitive.
It was the brainstorming process and truly knowing their product that led to a solution. The more a company is willing to break the mold, not do things as they always have, they will find solutions.
Krieger Analytics Can Help
All of these factors can combine to feel quite confusing for businesspeople. When you are analyzing supply chain issues, it can be good to have a professional at your side. Our CPAs at Krieger Analytics are trained in analyzing markets to determine which steps you should take to address supply chain issues. Whether you need an accountant to get your business off the ground in terms of designing a supply chain or if you need an accountant to help you get back on track after a disruption, Krieger Analytics has someone for you.
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