Seven Strategies to Offset Supply Chain Disruptions

If concerns over labor availability, supply chain disruptions, reduced availability of materials, and soaring costs are impacting your business, you are not alone. We’ve all been living through the greatest workplace and supply chain disruption in generations. The unprecedented times brought shortages in company warehouses, unstocked shelves in supermarkets and difficulty finding consistent delivery drivers. To this end, a new international survey, an Interos Annual Global Supply Chain Report, revealed that $184M is now the average annual revenue loss companies face from supply chain disruption. Loss of sales and revenue from shortages in both materials and labor pose financial risk for companies in every industry sector.

How Can Financial Leadership Create Value Out of Supply Chain Woes?
As it often is in business, CFOs should be your go-to for all your financial, fiscal decisions, discussions and guidance. A deeply experienced financial leader is here to help you optimize supply chain initiatives that are long-term, cost-efficient and ultimately sustainable. It’s all about looking at the big picture of the business, seeing where the unmet needs and gaps are so that meaningful change that generates value can be made throughout your company.

7 Strategies for Successful Supply Chain Management
The Supply Chain is one of the largest cost centers in many organizations, but it is also one of the biggest value drivers. Consider these seven strategies to successfully navigate supply chain issues while optimizing profitability.

Strategy #1: Ensuring Diverse Back-Up Supply
Are you changing your procurement and inventory policies to accommodate current or anticipated material shortages? Do you have a backup supplier so that in case of shortages in both material or labor, your products will go out in time? A robust inventory management program can help. As many companies wrestle with supply chain vulnerabilities and the need to satisfy consumer and production needs, companies rely on extra inventory (referred to as safety stock) to absorb the effects of supply shocks. By ensuring diverse backup suppliers and manufacturers as well as tracking inventory to hold more than forecasted, you can reduce many of the supply chain woes many companies are facing.

Strategy #2: Increasing Product Price to Match Growing Supply Cost
With inflation on the rise, this rule of thumb is especially important—whether it’s the increase in the cost of delivery drivers or delivery service, the packaging material for your products, the labor or length of time it takes to make your product, you have to keep track of the change so you can adjust your price to consumers.

Strategy #3: Defining Segmentation to Prioritize Demand
Targeted and direct approaches to dividing up demand needs are always the most efficient. Carefully define the micro-segments of your consumers and their needs and how that affects your supply chain. Segmentation is a data-driven analysis of what drives demand and what makes certain products and customers more profitable. Through this analysis, companies have the information necessary to customize service agreements and policies for supply chain management. The goal is to raise a portfolio’s profitability without compromising reliable service. 2   Demand and profitability dynamics change frequently in today’s business landscape. Therefore, companies that use this method of segmentation should make it a standardized practice.

Strategy #4: Evaluating Supply Chain Scenarios with Simulations
Scenario planning is a cornerstone of supply chain management, allowing you to predict when and where excesses and shortages are likely to occur as well as running end-to-end scenarios to get actionable insights that will optimize operational metrics. Play out scenarios by asking “what-if” questions such as, “If I change the delivery date of this purchase order, what is the impact on my ability to meet customer demand?”  For example, your teams should be prepared for circumstances where your customer demand is lower than forecasted and vice versa… or when the products shipped are all reported as damaged… or what to do when products aren’t hitting the shelves and you’re dealing with empty stores. What backup products or services can you offer in the meantime?

Strategy #5: Reduce Resource Concentration
When there are fewer moving parts in a  process, the execution is smoother and far more productive. Pooling various inventory and processes together by ensuring that the various parts needed to make your product aren’t all coming from one supplier allows companies to lessen disruptive risks. If your company is relying on one supplier or one delivery driver, for example, you are increasing the risk for damage. Another great way to lessen risk is regionalizing your supply chain. By keeping supply chains (the facility, the warehouse and the shipping) in one region, you lessen the chance for shipping delays, scheduling miscommunication and delivery wait-time.

Strategy #6: Investing in the Right Technology
Within your secure and up-to-date digital network, you need integrated data from customers, sales, suppliers, and producers through “state of the art” inventory management systems that connect you to your suppliers, production facilities, warehouses and sales organization. Investing in inventory management software can provide real-time, detailed visibility into inventory control including stock on order and supplier on-time performance while simultaneously avoiding supply chain volatility.

Strategy #7: Boosting Cash Flow While Forecasting Demand
How effective is your company’s cash-flow forecasting? For example, how long can you last if there is a disruption, and you cannot move your product? Is “just in time” inventory of materials and parts still a dependable theory? By negotiating with suppliers and customers, your financial leadership can help your business obtain favorable credit terms and renegotiate vendor and client contracts to align them with prevailing industry trends. This helps ensure sufficient cash flow is available to keep the business running smoothly. Financial Guidance In Challenging Times Leaning on a financial expert who is always there to help with the financial health of your
company is important—especially during these challenging times.

B2B CFO® is here to help you with supply chain disruptions so your sales and profitability are not negatively impacted. Working with a B2B CFO®, you can grow your consumer base, continue to build trust in the market and face the reality of labor shortages, inflation and supply chain disruptions with sound, quality expertise. Don’t wait too long to create an action plan to get your company back on track—contact PeggyHead@B2BCFO.com today for a complimentary discussion!

Sources:

1 Globe Newsire. New Study Shows Global Supply Chain Disruptions Cost Companies an Average $184 Million Annually. June 24,
2021
2 Segmentation in the Consumer Supply Chain: One Size Does Not Fit All. BCG Blog