Surviving supply chain disruption

Using technology for supply chain management

Supply chains get disrupted all the time, and when they do, it can seem as if the wheels of commerce have seized up. Check out our tips to help you minimise the impact on your business.

Using technology for supply chain management
<h3>The shock of disrupted supply</h3> <p>You're on your way to work and decide to grab a cup of coffee. So you pop into your local café, and you see a large sign saying they've run out of coffee. Or cups. Or water. Whatever it is, as a regular consumer of coffee, you're surprised a key ingredient is missing.</p> <p>This can happen as behind most companies is a 'supply chain'. For example, the head of the supply chain operations for the café could be the grower, who relies on employees to harvest and ships to deliver. Next is the wholesaler, who needs fresh beans each week. Following is the roaster that requires the wholesaler to deliver just in time. And finally, the café, which relies on the local delivery van and customers turning up.</p> <p>A crisis anywhere within the network of supply chain operations can be disruptive:</p> <ul> <li>A pandemic could stop customers from getting to your business, but so could a fire, roadworks or a shop refit. It doesn't have to be a major disaster to impact your business operations.</li> <li>Weather events, natural disasters, an international crisis, or a shipping delay can cause havoc across industries.</li> <li>Talent gaps or shortages of staff (especially seasonal workers in agriculture or tourism).</li> <li>Political issues in another country (even war or diplomatic wrangling like Brexit) can impact the manufacturing supply chain, resulting in a lack of raw materials or components.</li> <li>Cyberattacks and security breaches.</li> <li>Industry strikes, changing border regulations or accessibility issues.</li> </ul> <p>Even human error can disrupt supply chain operations. COVID caused the most significant supply chain shock recently, exposing the vulnerabilities in production and supply for a wide range of industries. An increase in demand for certain products saw shelves sitting empty as manufacturing companies struggled to keep pace with consumer demand.</p> <h3>Managing supply chain disruption<br> </h3> <p>While events are generally unavoidable, having processes in place to reduce the likelihood of a shock to the supply chain helps to reduce its impact on your company and can help mitigate disruption to operations and cash flow.</p> <p>Supply chain management is the management of supply chain activities which includes the flow of goods and services while maximising the customer value to achieve a maintainable competitive advantage. When we talk about supply chain activities, we mean every step along the supply chain-goods and services, sourcing, production, logistics, as well as the information systems for coordinating these activities. Every New Zealand company needs an efficient supply chain management system due to our growing export-oriented economy.</p> <p>When changing or implementing a supply chain management system, your goal is to gain a robust and secure supply chain while balancing cost-efficiency demands.</p> <p>Start by developing scenarios that could impact your business at each step of your existing supply chain. To do this, list the moving parts that rely on some outside delivery or service related to your business. Then, prioritise these from mission-critical (your business will close without supply) to important (you could survive for a time without them).&nbsp;</p> <p>Next to each, build out what you'd do to manage this risk, for example:</p> <ul> <li>Search for and set up alternative providers so if one fails, you have a backup. If you rely on one major supplier, it could be time to start buying smaller amounts from others to build up a track record and relationship.</li> <li>Use your industry contacts to find similar businesses that may agree to reciprocal sharing arrangements when the time comes.</li> <li>Review the continuation of particularly vulnerable product lines and consider whether the risk is too high for your business without guaranteed delivery frameworks. In effect, deleting some items for sale.</li> <li>Consider changing your production process to include more secure or local suppliers to reduce the risk of disruption from a distance. Your costs may increase a little, but replacing low-cost components for a local supplier may make sense.</li> <li>Increase the amount of stock you hold, particularly for products with a higher risk of disruption and are vital to your business operations.</li> </ul> <p>Regardless of your supply chain management processes and what actions you take to survive this type of disaster, have a communication plan that you and all employees can access. Your SCM plan should allow you to quickly, proactively and transparently manage supplier and distributor relationships.</p> <h3>Using technology for supply chain management</h3> <p>When a customer buys a tracked item from an e-commerce site, they can often search for its live location along the way. Therefore, utilising different technologies should give you tighter control over every link in the chain, with carefully monitored shipping, tracking and invoicing notifications for real-time updates.</p> <p>Digital supply chain management software handles materials and assists all personnel involved in your company's supply chain operations-from product or service creation, customer order fulfilment, and supply-related information.</p> <p>Supply chain management systems also provide greater transparency over stock levels, allowing you to track and monitor surges and troughs in demand and sustainably adjust your supply or distribution requirements to suit. Furthermore, SCM analytics give you early insight into product vulnerabilities, so you can proactively introduce safeguards to reduce any disruption before it happens.</p> <p>Consider employing a supply chain manager to help minimise shortages and costs. The job of the SCM manager is more than logistics and inventory management. Supply chain managers also add value to companies by making recommendations to operations management, such as improving productivity, quality, and efficiency.</p> <h3>Summary</h3> <p>Disruptions to supply chains are inevitable. The result for your business operations may mean lost revenue and even lost customers, production downtime, inefficient use of resources, wastage, as well as increased storage requirements (and associated safety hazards).</p> <p>However, your process for handling them-your supply chain management system-is something you can control. By evaluating risks before they occur, planning your response and diversifying your suppliers, you'll be in a better position to minimise and even avoid disruptions to your business operations.&nbsp;</p> <h3>Next steps for implementing supply chain management</h3> <ul> <li>Conduct a supply chain audit and diversify your chain to increase resiliency if necessary.</li> <li>Increase inventory you hold (if essential) to give yourself a buffer. These may be finished goods, critical components or raw materials.</li> <li>Make sure your information systems are up-to-date with industry tracking technology. This technology will allow you to set up early detection systems to monitor for red flags that could signal imminent disruption to your operations.</li> <li>Set up contingency plans for each step of your supply chain and establish transparent processes to action in the event of a supply chain shock.</li> </ul> <p>Want to know more about supply chain management? Are you in need of finance? Do you want to talk about accessing online payment services for a new business enterprise? Need further assistance? Contact your banker,&nbsp;<a href="/content/asb/small-business-banking/en/small-business-banking/small-business-banking-options.html#contact-us">enquire online, visit a branch</a>,&nbsp;or call ASB at 0800 272 222. We're here to help.</p>