Whether your company is relying on shipments of raw material inputs, parts, sub-assembled items, or finished good for resale, you face an ongoing challenge to minimize inventory, while also ensuring inventory is on hand when it’s needed. Just-in-time delivery is the ideal, but if you cut these scheduling margins too closely, your operations can quickly grind to halt.

Company owners like you should keep in mind these basic supply chain strategies.

Understand Important Distinctions

Not all disruption events are equivalent. Experts distinguish between “catastrophic” and “shock” events based on their predictability, impact, and duration.[1] If you don’t make this same distinction, you risk over-preparing (with higher ongoing costs) or under-preparing (to the point of possible business failure).

Conduct Ongoing Quality Audits of Key Suppliers

The quality of inputs should be a major priority. Develop a detailed set of criteria related to error tolerances of your own products and then work backward to determine how much tolerance for error you can accept in the key components from your own materials suppliers.

Know Where Your Supplies are Coming From

As you cultivate appropriately redundant supplier sources, avoid:

  • Over-relying on multiple suppliers who are in the same geographic area.
  • Choosing a group of suppliers who are interdependent on each other or who might all be subject to the same shocks within their own supply chains.

Know How Your Supplies are Reaching You

Be sure to familiarize yourself with the processes your suppliers are using to get their products to you.

The blockage of the Suez Canal in 2021 was an extreme but enlightening example of the fragility of the world’s commercial transportation systems. Major commercial transportation hubs can be chokepoints that pose risk – not just a blocked cross-continent canal, but perhaps a major port shut down due to union activity, a washed-out railroad bridge, a regional warehouse destroyed by fire, or even a key interstate highway closed for multiple days by weather.

Key Takeaway

The best approach to ensure availability of high-quality supplies and the continuity of production is to have contingency plans for obtaining various supplies on short notice. This is done by diversifying suppliers as described above in ways that account for quality, location, and shipping modes.

[1] https://www.mckinsey.com/business-functions/operations/our-insights/risk-resilience-and-rebalancing-in-global-value-chains

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