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Global supply chain disruptions related to the COVID-19 pandemic have forced many companies to re-examine the manner in which they do business. About 75% of businesses across the country are now affected by supply chain problems, with 57% of those experiencing increased lead times for orders. The problem, however, is that there isn’t a one-size-fits-all approach across industries and the globe to fix the current issues and make changes so it doesn’t happen again.
The crisis started in March 2020 when much of the world went into lockdown because of the COVID-19 pandemic. Offices and stores abruptly closed, and warehouses stopped production leading to mass furloughs and layoffs. But the pandemic didn’t destroy demand like many initially thought it would. It instead shifted the demand and drastically increased the number of purchases being made online. So goods were still in demand but there were not enough workers to produce, ship and deliver them.
Even today, ports around the globe are overwhelmed, and it’s probably not going to be solved without more manpower, warehouse space and ships, among other needs. A feature article recently published in The New York Times predicted that this will not abate in 2022.
This disruption has not spared industries we are involved in. Compounded Rubber formulations, for example, are made up of up to 20 different raw materials. If just one of them gets disrupted because of the pandemic, it affects the whole industry.
Recently, disruptions in the allocation of silicone polymers have greatly affected the compounding, processing and production of Silicone rubber articles.
A recent survey conducted by the Association for Rubber Products Manufacturers showed that 91% of respondents agree that the availability of raw material is impacting the supply of rubber products Additionally, only 30% of the respondents said their businesses were fully staffed.
In the chemical industry, a survey from the National Association of Chemical Distributors found that 84.5% of respondents say their company is out of stock of at least some imported products. About 96% of respondents reported increased shipping costs.
At H.M. Royal, our critical supply chain shortages started with the Texas deep freeze in February 2021. Since then, we have dealt with many shipping, port and trucking issues, as well as force majeure declarations, basic raw material shortages, floods, fires… just about everything.
In spite of that, we and our supplier partners are committed to build reliable, redundant supply chains. As issues arise with planning and inventory reserves, we will make every effort to smooth out supply disruptions.
There is no easy fix to this problem, but there are ways to help mitigate risks for the future.
Below are six tips businesses can implement right now to ease pressure and decrease the risk of similar challenges happening again in the future.
Account for Delays
There may be delays in products in short supply or stuck in transit. Because of this, regular orders could be delayed. Work with your team to develop an action plan to navigate the delay and keep an open stream of dialogue with your suppliers so you can adjust your plans as changes arise.
Conduct Vulnerability Assessment
If you haven’t already done so, it’s time to assess where there are potential weaknesses in your supply chain process. This isn’t always an easy task, but the first thing you can do is find out and map where your supplies go and what happens with them at every point before they reach you.
Once you do this, you can create contingency plans in case a disruption happens in the future. Some of these plans include more precise monetary projections of what happens if there is a disruption, how long your supplies may last without affecting service to your customers, what products are hardest to get, and how much you should save in an emergency budget.
Practicing flexibility goes beyond accounting for delays. You may have to think outside the box or consider alternative options to help mitigate some of these supply chain issues. If a client or employee has an idea on how to help, you should listen and take it into consideration. These problems could change rapidly, so you’re going to need help and a lot of different ideas on how to solve them.
Build Up Extra Supplies
This may not be possible for all businesses depending on industry, material availability and storage requirements. However, if you are able to build up extra supplies, you should take steps to do that. Doing this will require extra warehouse space. However, if you build up supplies for a months-long crisis, you will keep your current customers and potentially add new ones when the next crisis hits.
Manage Customer Demand
Just as you count on your suppliers to deliver for you, your customers are counting on you to deliver to them. If you’re still able to receive supplies to keep production moving, you’ll have to plan ahead for how to handle customer demand when your output is less than usual. There are several options including:
- Allocation—Assigning stock to multiple products or customers so that product continues to roll out in limited batches. You will need to consider customer hierarchy, financial contributions, fairness and true customer need to determine who gets the stock and how much of it.
- Auction—Some companies may choose to auction off their stock to the highest bidder; however, this is not always fair or ethical when you deal with companies of various sizes and financial means. It can also lead to allegations of profiteering and may turn off valuable customers.
- Dilution—Some companies may choose to dilute their products or add in easier-to-acquire additives in order to stretch the supply further. Some additives can enhance the product, making it a win-win for both you and your customer. However, dilution can also reduce product quality, which may turn off customers in the long run.
Substitution—Offering your customers other product options while supplies run short can help them navigate through challenging times. Sweetening the deal by offering price incentives during shortages can often help shape customer demand and build a rapport with your loyal customers.
4. Plan for Recovery
While the ongoing supply chain challenges may be something we have to deal with for the foreseeable future, there is cause for hope that current shortages won’t last forever. Use this time to evaluate stock levels, customer demand and other logistics to create a long-term plan for your company and operations. Disruption is an ideal time to make high-level decisions like sunsetting underperforming products, organizing supply and more.
At H.M. Royal, when there are obstacles we can’t control or overcome, we will continue to communicate truthfully with our customers and provide our best analysis of when materials will be available. Today’s climate makes it impossible to meet our normal standard of guaranteeing 100% full- and on-time service. But we can give our customers the information they need to make informed decisions to manage their business.
We know that we’re living in unprecedented times and hope that through partnership and understanding we can navigate these challenges together with our customers. For questions or supply inquiries, contact an H.M. Royal sales specialist.