Your supply chain starts when you acquire materials to create your goods for sale. It includes the production of your products and services. And it doesn’t end until the customer receives the product or service you offer, as well as any help required for them to consume your product. 

Whether your business is still being affected by supply chain delays and shortages in 2023 or not, it’s a good idea to take steps to make your supply chain as resilient as possible. In this article, we share a process you can add to your standard operating procedures to evaluate your supply chain and ensure it remains resilient.

Start with an Inventory of Your Suppliers

To evaluate your supply chain, start by making a list of your vendors. An easy way to get this vendor list is from your QuickBooks account. Organize your vendors and their contact information as follows:

• Primary vendors that are crucial to your business. This includes vendors from which you purchase goods for resale, and can also be vendors such as your online shopping cart because if it goes down, you lose sales. These are your mission-critical vendors. 
• Secondary vendors that provide support indirectly, such as maintenance to machines you use or vendors that provide human resource benefits. Your business won’t be terribly disrupted if something happens to these vendors.  

Once you’ve organized your vendor information, it’s best to focus on your primary vendors first. If this list is large, you may want to further prioritize your vendors by sorting them by most dependable.  

Contingency Planning

For each vendor on your primary list, do some research to find alternatives. You want to develop a deep bench of suppliers who can support your business. If one supplier has trouble meeting your orders, you will be more prepared and can consider switching. It’s a good idea to develop relationships with these alternate vendors, and perhaps even use them a time or two to test the relationship before your supply chain strains demand it.  

Many factors can go into selecting alternate vendors: price, quality, service, delivery time, shipping costs and methods, country of origin, location of warehouses, troubleshooting effectiveness, and much more. You know your industry and business’s needs best, so you can develop a table of criteria to evaluate potential new vendors. The ultimate goal is to have backup plans all along your supply chain.

Once you’ve gone through your primary list, you can move on to completing this process for your secondary vendors.  

Purchasing Department

Large companies have entire purchasing departments to do this kind of work. Even if your business is small, you may be still able to delegate portions of the list to trusted and well-trained employees. Know that this type of work can take a long time. It will also evolve over time, as new vendors spring up and older vendors retire or go out of business.  

Internal Operations Including Selling and Distribution  

Now that you’ve taken care of your suppliers, the next big step in supply chain efficiency is to standardize your operations. Take a look at your internal operational processes to ensure they are as efficient as possible. Create policies and procedures to ensure quality and customer satisfaction. 

This includes reviewing the production process as well as selling and distribution, all the way to customer service. You may have covered this while you assessed your vendor list, but if not, you can do it now.   

One example is how you get your product or service to your customers. Be sure there is an alternate method in case your primary distribution method breaks down. 

Again, this is a marathon, not a sprint. Take your time to do this project right, and it will benefit you for years to come. 

Risk versus Reward

In some cases, it may not be cost-effective to have a fully developed contingency solution; instead, there may be times when taking a loss is the more cost-effective solution. You’ll want to evaluate the circumstances and determine the right solution for your business.  

Taking the time to improve your supply chain resilience now, rather than in a moment of crisis, will create a more resilient, valuable, and profitable business.

As accountants, we understand the significant impact that employee turnover can have on a business’s bottom line. While high employee turnover is certainly an inconvenience, this pattern also comes with financial consequences. High turnover rates can lead to increased costs, decreased productivity, and even long-term damage to a company’s reputation. Keep reading to learn more about the financial implications of having high employee turnover in your business, and what you can do to help mitigate the issue.

The Costs of High Employee Turnover

To control the costs, we need to identify them first. Here’s a list of the most common costs associated with employee turnover.  

1. Costs of replacing an employee through the hiring process
   • Job listings on Indeed, retaining a headhunter, etc.
   • Time spent screening resumes, scheduling interviews, and interviewing candidates
   • Paying to run a background check
   • Signing bonus, if applicable
   • Time spent onboarding a new employee, including setting them up in payroll, IT, HR, setting up equipment, purchasing business cards and name tags, and more.
2.  Training costs
   • Time spent training the new employee
   • Costs of any required training courses on safety, sexual harassment, timesheet, and other required onboarding training, etc.
   • Costs of mistakes made by new employees
   • Productivity losses while new employees learn the ropes
   • Extra supervisory costs monitoring new employee
3.  Vacancy losses
   • Costs of overtime while remaining employees cover vacant shifts
   • Productivity losses while the job is vacant
   • Disruption of peers, including fears of them being next if it was an involuntary termination

How to Reduce Turnover Costs

It’s clear that replacing an employee comes with financial costs. In fact, a recent study performed by Gallup suggests that replacing an employee costs a business one-half to two times the employee’s annual salary. So, what can you do to reduce this loss in profitability?

1. First, analyze your company culture. Would you describe it as more positive, or are there toxic elements to it? Has the culture changed in the past year? Two years? Are employees citing burnout as a reason for their departure? Lack of opportunity for advancement? Ineffective management? Find out your weak links, and determine a plan to correct them. And remember: a pizza party won’t fix your company culture.
2. Review your pay package. Consider paying slightly more than your competitors or providing above-average benefits for your employees. These don’t have to be expensive; we have an entire blog post on benefits that are less expensive yet more valuable to employees that you can find here.
3. Consider overstaffing to release some of the pressure employees may be feeling. 
4. Automate and streamline your hiring process. Having a more efficient process can keep hiring costs down when you do need to hire.  
5. Hire slow, fire fast. If you do have a team member who is dragging the rest of the team down, you may not be the right fit for each other. 
6. Train your first-line supervisors and managers to be excellent bosses. People skills and supervisory skills do not normally come naturally but can–and absolutely should–be learned. Many voluntary terminations occur because people dislike their boss.
7. Be consistent with raises and performance reviews. Employees expect annual raises in most industries, even if it’s just a cost-of-living adjustment. Let employees know how they are doing on a regular basis, and formalize the process at least annually.  
8. Conduct exit interviews. Find out why people are leaving by conducting exit interviews. You may have to dig deep to find out the real reason, as most people don’t want to burn their references. Take action if it’s something in your control.  
9. Communicate purpose. Help employees understand the importance of the job they do, and help them connect to the deeper meaning of their job and its place in the world.  

Many of these ideas have costs associated with them, but your accountant can help you do a cost-benefit analysis to determine which of these approaches seems best for your business situation. You can spend money to improve employee retention, or you can spend money hiring a replacement.