Supply chain management and effective logistical planning have always played a significant role in business success. Right now we are experiencing one of the most turbulent times in supply chain management and it is playing a significant role in stalling business progress – supply shortages, transportation resource issues and increasing costs are all adding to the difficulties.
So, current times aside, how can a business protect itself against being held hostage to supply chain resources:
• Financial projections – when you prepare your annual income and cost forecasts, do some additional modelling to take into account increases in supply chain costs and the impact on your bottom line. You can then identify when incremental cost changes will start to bite.
• Robust contracts – a well prepared contract that covers you in all eventualities will protect your business against unforeseen events and disruption. It should enable you to maintain customer service within your cost frame calculations.
• Strike a balance between cost and customer service – it’s not always possible to compete with a cut price competitor. An exercise in reviewing the cost/benefit of each customer will enable you to identify where you need to cut prices to retain an account and where you can afford to increase them.
• Monitor the position – costs for logistics and product supplies can change by a large amount and this can happen quickly. Make sure that the person in charge of your supply chain management is reporting variances on a regular basis. This will ensure that there are no nasty shocks and that you can act quickly to mitigate any cost or supply issues.
We may be experiencing very unusual times for supply chain management, but these principles will help protect your cashflow and profit at any time.