7 Smart Strategies to Tackle Your Supply Chain Challenges
As 2021’s supply chain crisis dramatically proved, our business success depends on the effectiveness of the supply chain.
Suppliers, vendors, manufacturers, and subcontractors (“suppliers”) enable us to provide goods and services to our customers successfully.
We are often only as strong as the weakest link in our supply chain.
- 75% of companies were affected by external supply chain disruptions in 2021.
- 56% of companies experienced more supply chain disruption in 2021 than in 2020.
- 63% have taken measures to avoid future supply chain disruptions.
- 6% of companies reported full visibility of their supply chain.
Far from simple fixtures of a stable business, supply chains exist as complex webs of interdependence. When the web breaks down, we experience supply chain issues. But we do not need to feel hopeless.
Outside organizations are not within our control, but our relationships with them are. We must cultivate strong and trusting supply chain relationships. With these mutually beneficial relationships in place, we can innovate workarounds and create new efficiencies.
Supply Chain Management: Risk Mitigation
Risk mitigation is critical to supply chain management. To the same degree that suppliers can enable our success, they can also disable it.
Risk assessment and planning enable agility. We mitigate supply chain risk by exercising best practices in supplier selection, establishing redundancy, and innovating alternatives. Beyond that, wise leaders will familiarize themselves with their suppliers’ needs and vulnerabilities to “know well the condition of [their] flocks” (like this C12 member).
Collaborative contingency planning and forecasting (e.g., revising sales predictions) allow us to band together with our suppliers and charge confidently into the storm. Ideally, high supplier engagement will be a hallmark of the business relationships in our supply chains. A high level of engagement will allow us to see a storm coming at the same time our suppliers do.
- We measure the effectiveness of each link in our supply chain by its contribution to our customers’ values.
- We measure the strength of each link by understanding its propensity to break.
- And we measure the stability of each link by how disruptive a break would be to our business.
Supply Chain Management: God-Honoring Relationships
Business relationships are just that: relationships. Nobody wants to be treated like a commodity or a number. Our suppliers are human beings made in the image of God with unique needs, fears, and aspirations. Every exchange, review, and collaboration in business, regardless of which direction money flows, represents an opportunity to obey Jesus’s command to “love [our] neighbor.”
For some Christian business leaders, touchpoints with suppliers will actually exceed those with customers. Suppliers represent a significant ministry caring opportunity for our businesses due to the ongoing nature of the relationships.
In a world that views supplier relationships as transactional, Christian business leaders stand out by demonstrating meaningful supplier engagement. We are stewards, responsible to honor and appreciate the business relationships in our supply chains. These relationships should be marked by a level of care that exceeds their experience with other customers.
Our fair payment should be the least memorable thing about how we treat people in our supply chain.
The fruits of the Spirit should distinguish Christians and Christian-led businesses, as we cultivate relationships beyond fair and timely payment.
Supply Chain Management: 7 Smart Supply Strategies
We can mitigate supply chain risks before breakdowns occur by exercising these seven supply chain stabilization strategies.
- Establish redundancy – According to Loren Smith of the Skyline Policy Risk Group, having multiple similar suppliers on tap in case one goes offline is a good start. Even with additional suppliers in place, our backup supplier may face the same constraint as our preferred supplier in an industry-wide disruption. True redundancy mitigates risk by diversifying alternative modes of supply, not just alternative suppliers.
- Example: An importer might start by diversifying east/west supply routes via a few strategic ports, then additionally open north/south imports via highway routes.
- Innovate alternatives – Innovation, in this case, refers to seeking alternative resources altogether to become less dependent on at-risk supply. The best solutions may lie at two extremes:
- Vertical integration: assume greater control of resources used in production, either by acquisition or gradual growth, reducing upstream supply partnerships.
- Alternative supply: innovate products that are less dependent on specific construction, utility, or components to ensure against shortages.
- Form alliances for advocacy – Bottlenecks, shortages, and waste linger when regulations artificially constrain buyers’ options or suppliers’ ability to produce and deliver. Uniting with others in our industry to advocate for change could win targeted relief for the whole supply chain.
- Example: The Ports of Long Beach and Los Angeles intake 40% of US imports. After advocacy from the Agriculture Transportation Coalition, Long Beach amended regulations, allowing empty shipping containers to be stacked six high instead of two high. This change freed up capacity being wasted on storage to receive new loads from ports.
- Consider upstream relationships – Effective communication and positive fulfillment experiences can improve the quality of direct supply chain relationships.
- Example: Ensuring our suppliers profit adequately from each service they provide us reduces the risk of their turning off those services when under strain.
- Re-evaluate alternative modalities – In periods of constrained distribution, efficiency scales invert. A transportation mode’s efficiency can plummet in a chain reaction from unexpected sources.
- Example: When trucking companies are paying more for labor and fuel, air transportation may become more economical than sea-based or highway-based transportation (especially when factoring in savings in speed and time).
- Prioritize sourcing proximity – In normal circumstances, obtaining supply at the lowest unit or transportation price is an obvious stewardship play. But in some instances, a higher unit price is worth it to work with an ethical supplier or reduce the vulnerability to disruption.
- Example: Transportation costs fluctuate according to distance, gas prices, driver wages, inflation, and government mandates. As the transportation breakdown from 2020 through 2022 has shown, low unit prices profit us nothing if the units cannot travel great distances on time/budget.
- Honor the people in your supply chain – For Christian business leaders, our seventh strategy involves looking beyond the business dynamics to honor the companies and individuals whose labor fuels our success.
Using the seven smart strategies for supply chain management will help businesses mitigate risks and strengthen relationships. C12 members David Simms and Jon Halverson are partners and leaders of impact investment firm Talanton. As we see in this East Africa feature, Talanton believes their stewardship responsibility involves serving people throughout the supply chain—particularly those often overlooked or abused—so they flourish economically and spiritually.
Amid the supply chain crisis, fear and greed can drive customers to mistreat, disrespect, and even threaten others in their supply chain. By contrast, as Christians, we can encourage and empower our team members to do “good works” as a God-honoring witness to our suppliers.
Supply Chain Heat Map
To identify potential risks in your supply chain, consider using a heat map tool. By positioning vendors, suppliers, and subcontractors according to the probability of fulfillment disruption (e.g., due to their location, economic vulnerability, debt load), we can visualize the degree to which their potential disruption would impact our businesses. Our most urgent focus is to stabilize the supply chain relationships that fall in the top-right zone.
Where do vulnerable supply chain relationships threaten your mission?
What is the most critical relationship you need to invest in to stabilize your immediate future?
Download our Supplier Risk Evaluation tool to expose weaknesses, risks, and priorities.
August 18, 2022