Is Your Supply Chain Causing Product Availability Problems?

Small businesses power themselves to profitability by superior service and immediate gratification that give them the edge over bigger competitors.  Not meeting product availability is rated one of the highest causes of customer defection, according to experts.

Yet, forty-four percent of small businesses reported temporary shortages or other supply–chain problems in March, according to a recent survey highlighted in The Wall Street Journal.

You know how critical it is to get customers what they want, when they want it.  As a business owner or manager, you need to accomplish this task in the lowest cost, most efficient way possible, without sacrificing on quality.  That is why supply chain management is critical to the success of your business.  Yet two-thirds of small business owners and managers do not have full visibility into their supply chains, which is how you get your parts and products from point to point.

When building your supply chain consider:

• Supplier relationships – search for suppliers that are cost-efficient, reliable (have product available when you want it), and easy to work with; monitor their performance; and build a partnership with them.

• Ethics – before forming a partnership with your suppliers talk about ethics, human rights, sustainability and other issues that are important to you, your employees, and company.  Make sure you and your supplier align; this positioning can help to strengthen the relationship and help to set up a long-lasting partnership.

• Risk management – proactively manage supply chain risk, be ready when supplier disruptions happen.  Keep up-to-date on what is happening in the marketplace due to weather, economics, social, political and other changes; these can and often do impact your business and its supply chain.  Also, consider your risk due to events such as industrial unrest, product recalls, safety scares, etc.

To strengthen your supply chain, consider:

• Doubling or tripling where you source your critical components and offerings; if one supplier or avenue of delivery has trouble delivering, you have a back-up or two.

• Sourcing products from the US, or same hemisphere as it is often to easier to move goods north and south as opposed to east and west.

• Bartering with others to get the components or offerings you critically need.  Have business partners in addition to your suppliers; other businesses to stay informed, have other resources, and perhaps obtain supplies and products you need.

• Putting in place penalties to keep your supply chain going with suppliers; if the suppliers does not deliver or is late it is going to cost you money, time and even customers, so ask for assurances backed with non-performance clauses.  On the flip side, you might put in incentivizes for your suppliers that deliver during times of strife. 

• Digitizing your supply chain to have maximize insight into where your components or offerings are in real time and when they are expected to arrive will make your life as a business owner or manager a bit easier.

With your small business advantage imperiled by a supply chain disruption, it may be time to pre-plan responses when customer expectations are not met.

Here are some pre-planning strategies to consider:

• Learn as early as possible if your product shipments will be late or even cancelled.  Knowing a problem could exist enables you to have alternatives available.  For retailers, the anticipated busy fall season makes them extremely vulnerable.  Already, some apparel shops are reporting delayed shipments.  Remember, suppliers are going to make every effort to keep their biggest clients happy, not their smaller customers.

• As soon as you know products will be late, notify your customers.  If you have taken deposits, offer to return them or preferably provide a credit.  Experts believe a majority of clients will leave their deposits in place.  If you have used the deposits to fund your own purchases, keep a running score and notify your factoring agent and/or bank.  Secure an additional line of credit to insure you have enough capital to weather the supply disruption.

• Develop alternative product fixes for clients.  One way is to offer to lend them refurbished product until their new products arrive.  Another is to do what New Jersey bridal shop owner did.  When the distribution disruption delayed delivery of wedding gowns, she lent bridesmaids dresses she used as display models and refunded the deposits.

• No matter how angry or abusive your customer becomes, always have a smile on your face.  Be sympathetic to their plight and concentrate on their problem not yours.  Remember, the customer has needs and at the moment he or she really doesn’t care about your problems.  Above all, do not minimize their plight.  You will never know the full details, so remain in concert with the customer trying to solve the problem created by your failure to deliver what you promised.

• Provide a business credit to your customer(s), if possible instead of a refund; the former will more likely get the customer to come back perhaps sooner and spend money with you, with the latter you may never see your customer again.

• A sales agreement represents the promise by one person to do or provide to another person something of value.  Despite all the legalese in the sales document, this transaction represents explicit trust on both sides.  With fewer customers, small businesses need to keep that trust for as many buyers as possible.  Doing this when events happen out of their control, they must act to keep that trust.  Having a plan in place is the first step.

Supply chain disruption happen in all size businesses.  Your best bet is to prepare for them, active swiftly when they happen, and keep your customers.