Managing Your Supply Chain: Why Asking Questions Now Can Help Avoid Disturbance Later

Originally posted on October 9, 2017

Author: Geoff Williams

Photo: Getty Images

If you are a worrier, you probably sometimes worry about your supply chain. And for good reason: Natural disasters can interfere with supply chains. A shipping port, airline, train or truckers' strike could cause problems. New and onerous regulations from a country you do business with might stall your company's progress. The price of a commodity could suddenly become cost-prohibitive. One of your suppliers could even make some bad financial decisions and go out of business.

When a supply chain is working well, it can be a wonder to behold. When it suddenly doesn't work well, you may feel as if your business is shackled in chains.

No business is likely going to make its supply chain 100 percent problem-proof. Still, that is the elusive goal, without driving up your costs too much, and so if you haven't scrutinized your supply chain lately, you might want to ask yourself the following questions. The right answers may lead to a stronger, if not indestructible, supply chain.

Has your supply chain evolved in recent years? It probably should be. Even if everything is going according to plan, your competitors are likely becoming faster and more efficient. Alexander Malaket, president of OPUS Advisory Services International, a Toronto-based consultancy that focuses on international business, trade and investment, points out that the supply chain is in the midst of a major transformation.

“The nature of supply chains, both domestic and global, is being reshaped materially by numerous developments in the physical supply chain, including the advent of 3-D printing, drone-based delivery, use of RFID technology, and now even floating warehouses," Malaket says.

Floating warehouses are a concept in which there would be blimp-like machines in the air; drones would then deliver products to each house.

“Digital technologies are fundamentally changing how we manage supply chains," says Matthew Lekstutis, a managing partner at Tata Consultancy Services, a global supply chain consulting practice with offices around the world and which has its headquarters in Mumbai, India.

Lekstutis says that supply chain management should really be thought of as “network" management.

“We are competing against time and that requires highly responsive, adaptable and flexible supply networks," he says. "Chains are gone, we are in a demand-supply ecosystem comprised of a network of physical and digital nodes and links."

Who is monitoring your supply chain? You're doing more than emailing or occasionally phoning, right? Even a couple times a year of dropping in isn't enough, according to Mark Dohnalek, the president and CEO of Pivot International, a global product development and manufacturing firm based in Lenexa, Kansas. Some of the products the company manufactures include a variety of medical devices, an electronic gadget that helps golfers locate hard-to-find golf balls and an electric fish skinner.

He says that it's important to have someone representing your business—whether it's you, an employee or someone local that you've hired—who can regularly drop in on the various vendors in your supply chain, especially if parts of your chain are located halfway around the world.

It isn't that your vendors are necessarily going to try to cut corners on quality, “or that they're trying to make junk, but they may define quality differently," Dohnalek says.

Is your supply chain too dependent on one part of the world? It may be. Haresh Gurnani, professor of business at the Wake Forest University School of Business, in Winston-Salem, North Carolina, says, “Things happen in parts of the world that will impact supply chains. In Thailand, several years ago, a massive flood impacted the manufacture of computer hard drives resulting in major shortages in the computer industry. In Japan, the [2016] earthquake severely impacted the supply of Japanese automobiles."

If you can avoid it, he recommends having more geographic diversity in your supply chain. Your expenses may go up, Gurnani concedes, but he adds: “Your overall risk is lower."

Do you have any secondary supply chain relationships? As your company and supply chain grows, you should have alternative partners you're working with, in case something happens to one of your primary partners.

“The secondary supply chain vendor program should be in place in case the primary gets behind or demand unexpectedly surges," Dohnalek says.

He recommends having 70 percent of your product handled by the primary with the secondary supply chain alternatives managing the remaining 30 percent.

Do you have good relationships with the people in your supply chain? In other words, do you have a pretty good rapport with the people who work at companies that are critical to your success? Or do you just know these people as an email address?

“Things happen. Weather, geopolitical problems, more weather," Dohnalek says. “Relationships are really important. Sometimes you need special favors, and so the more networking you can do, the better."

It also may put you at a disadvantage if you have no relationships in a certain part of the world— and a vendor you work with does.

Dohnalek recalls once trying to help a business owner, now a cautionary tale, who was working with a supplier in China. Things didn't go well.

“He was dealt a bad band at first, where he was given a shoddy product," Dohnalek says. “But he handled his interaction with the client badly, and he burned a couple of bridges and built a bad reputation for himself. Pretty soon, all the suppliers in this particular industry knew about his reputation, because they all talk to each other. And he couldn't get anyone to work with him. He ended up losing his company."

If you are a worrier, none of this should keep you up at night. Every supply chain has some vulnerability; that's simply how it goes. But if you don't like to fret, start asking those hard questions now. It's always wiser, and far more enjoyable, problem solving when there isn't a problem.