Supply Chain Strain: How to Navigate Disruption
Now that we’ve been in a pandemic for more than two years, it’s funny to look back at our optimism at the beginning. We expected brief supply chain interruptions and thought that things would be back to normal in a few short months. Then we realized it could drag on for a year or more. But almost three years?
In many ways, we are starting to see the light at the end of the tunnel. But when it comes to the supply chain and logistics, it’s still pretty dark. Transportation issues and staffing concerns make it difficult for retailers to predict when product will be shipped or delivered. Ocean freight and trucking are not the only things we should keep an eye on; we also need to monitor raw materials.
Here are some factors to consider when mitigating supply chain disruptions:
Know the materials’ source. To understand the supply chain is to also understand the social and economic challenges in the countries where you source your products.
For example, about half of the world’s neon gas, which is critical in making computer chips, comes from two Ukrainian companies. Both ceased operations because of Russian attacks. On the spot market, computer chip prices increased as much as 50 times pre-pandemic prices. Manufacturers that use these chips have to make tough production decisions. Putting $300 chips into $400 products eats at profits, which leaves some product categories and price bands empty or with little supply.
One example Sweetwater deals with is the tubes used in amplifiers. After a factory in China burned down, much of the production shifted to Russia. It is now difficult to get those tubes because of Russia’s invasion of Ukraine.
Stay close to your suppliers. When you encounter bottlenecks, you must understand who is managing the congestion most efficiently. The key is having connections at all levels of the company. It is not enough to have just your logistics or product people talking to their counterparts. Relationships with all key functions in the supply chain—product developers, salespeople, transportation, purchasing, and even the CEO—is critical. Each may provide different insight to help make decisions.
Forecast carefully and order early. In a normal year, you may place orders two or three months ahead. In today’s climate, lead times can change quickly and changes in logistics can play havoc with estimated arrival times.
Inform your sales force before they communicate with customers. It is nearly impossible to over-communicate disruptions and their causes. It is a good idea to build processes that allow you to keep your sales staff informed in as real time as possible. Then, make sure the sales team shares the right message with customers, who deserve—and expect—more than simple excuses such as, “It’s due to COVID” or “Ocean freight takes a long time.” Customers are most understanding when you are honest and transparent.
Navigating the future may not be easy, but knowing the source of your materials, staying close to suppliers, using more than traditional data in forecasting, and communicating with everyone makes the challenges more manageable. The keys are flexibility and adaptability, since the supply chain will likely experience disruptions for some time.