Supply Chain Disruption
no product, many sales

Supply Chain Issues

Over the course of the pandemic there have been all sorts of issues with the supply chain. These have ranged from items simply being hard to come by all the way through to items becoming unavailable for purchase.

A simple example should illustrate the point. Computers and especially laptops were in high demand during the early part of the pandemic and availability was good. Most businesses had little difficulty getting the laptop or new computer they wanted. This was despite the lockdowns, the quarantines, and other protective measures. Then during 2021, when the vaccine was available and things were beginning to look up, that is reopen. That was when the supply chain issues really began to hit home. Then computers and laptops became hard to come by. Retail, channel supplies and deliveries from manufacturers became scarce. Suppliers promised stock but their suppliers didn’t deliver. For our discussions the reason why, the supplies didn’t materialise are unimportant. Although we might author another article on that later. No, what concerns us today, is what impact does that have on businesses and what we can do about it?

Let’s assume that your business is dependent upon others. This is almost always true to a greater or lesser extent. If you primarily sell products purchased from another company, this will be especially true. If you are a services company, then this will be less true. However, all businesses depend on another business to some degree, the only difference is the extent.

On the face of it, this looks like a logistics problem. But, if we dig a little deeper, it becomes a sales problem, then a little deeper still and it reveals itself to be a whole company problem. As soon as supple chains start to break down, it becomes difficult to predict where the next issue will appear and what the consequences of that will become.

To make what is a huge problem more tractable, consider only the outward facing products that a company sells. Using our laptops example from before, we will choose the laptop. So, being a good partner to your clients or customers, you offer laptops with a particular specification at a particular price.

The first question – do you already own the laptops? Are they sitting in boxes in a warehouse or a spare room. That is, have you already bought them and are they “on hand”. In most cases, particularly with a just-in-time ordering system, the answer will be No. In this case, we have a risk.

Your client orders the laptop and having none in stock, which is your business mode, you need to go to the supplier and order one. In the old days, the laptop would be dispatched same day and be delivered tomorrow. Nice, job done. The client gets their laptop, and you make your sale.

But, with the supply chain issues, there is no laptop at the supplier and none of your other suppliers have any either. The only place they are available is from those who bought early and are now selling into a seller’s market and their prices are much higher than your customer paid you.

Now what do you do? Other than call Your Sales Department of course! Well, you could buy the laptop on the open market and make a loss, but that doesn’t sit well. Perhaps a conversation with the client or customer, who you hope will understand and be happy to pay more. Or most likely, they will cancel the order and look for alternatives elsewhere. In this case, you haven’t just lost the sale, but potentially lost a customer going forward. They are most likely to buy again from someone they already bought from and at was not from you. But it was your competitor.

So, the efficiency of holding no stock particularly with a product that changes all the time and depreciates as it sits in the warehouse, has proven to be false when coupled with the risk.

The risk is not really for the lost sale, as much as that might hurt. It is the reputational damage done to your company and to the brand by letting your client or customer down. If you are selling only commodity products and everyone else has the same problem, then this damage is minimal. However, if it affects you more than others, then the long-term effects of this misjudgement might be profound. Of course, in this case, many customers or clients will be flexible by necessity, but that doesn’t change the underlying problem or the inherent risk.

This means, we are back to Under Promise and Over Deliver. Doing anything else, can be hazardous to your business, brand and reputation.

While supply chain issues might be short-term, the effects of the disruption will not be. It is vital that you navigate this difficult space carefully and with your eyes wide open. In what is uncharted territory for most businesses, this is going to mean that many businesses make mistakes and the same mistakes. Ultimately, it is going to be bad for the bottom line.