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.