Managing Supply Chain Disruptions: A Guide for Businesses

Managing Supply Chain Disruptions: A Guide for Businesses
Supply chain disruption can occur in any industry. Learn how to manage your supply chain to minimise problems for your business
by Square Jun 17, 2022 — 4 min read
Managing Supply Chain Disruptions: A Guide for Businesses

Let’s be honest, the past few years were a tough time for most businesses (unless you happened to be a hand sanitiser manufacturer.) Like many, you’ll have soldiered on through successive lockdowns and Australia’s strict COVID-19 quarantine conditions, and struggled to get the usual supplies.

Just when you think it’s safe to get back to normal, you’re hit with a cost of living crisis and geopolitical conflicts, which have forced up the price of raw materials and led to soaring inflation.
You might well wonder, what could possibly be next?

That’s the trouble with business – you never know what’s around the corner. But while we can’t give you a crystal ball, what we can do is help you plan. Here we look at how SMEs can improve their efficiency and leverage technology to ride out the worst of those supply chain disruptions.

What does a supply chain look like?

No matter what business you’re in, there are three distinct parts to any supply chain – the flow of materials (raw materials used to make products), the flow of information (customer data and orders) and the flow of funds (money to purchase raw materials and payment from customers for finished products).
Within that chain there are manufacturers, suppliers, distributors and consumers. A small hiccup in any part of the supply chain can have a big impact down the line and more importantly, on your customers.

Factors which affect your supply chain

We’ve seen how the COVID-19 pandemic caused huge disruption to global supply chains. Multiple national lockdowns slowed or even stopped the flow of raw materials and finished goods. But while COVID-19 was (hopefully) a once-in-a-lifetime event, there are plenty of evergreen issues which can affect the flow of goods and services. Making a contingency plan to mitigate their impact is crucial.

Common factors which can affect your supply chain include:

 

How to prevent supply chain disruption

As they say, prevention is better than cure, and proactively managing your supply chain is always going to be better for business than playing catch-up when something has already happened. Whilst it’s impossible to plan for every eventuality, you can prepare for quite a few and then adapt as you’re faced with each subsequent challenge:

Create a business continuity plan

A business continuity plan (BCP) can really benefit your SME by making you think about the unexpected. Without one, you can find your business activities brought to a halt and some very dissatisfied customers knocking at your door.

A BCP involves identifying potential risks and how you’d deal with them. For example, if one supplier runs out of a key ingredient for your restaurant’s signature dish, make sure you’ve several others lined up who can quickly fill the gap.

A BCP doesn’t just protect you from supply chain disruption, it can also cushion you from the worst effects of environmental disasters, fires and floods on your premises and cyber attacks. As they say, hope for the best but plan for the worst.

Manage your inventory proactively

There’s nothing worse than selling something to a customer then realising you’re out of stock – it not only looks unprofessional but can also negatively affect your reputation and brand too. If you know when you’re running low, replenish sooner and keep your customers happy.

An inventory management system helps you keep on top of your stock levels and make sure you never run out. If you sign up for Square’s Point of Sale, you have access to a free inventory management solution.

Consider diversifying

We saw a lot of diversification during COVID-19 – businesses rapidly shifting to an online model, bricks and mortar shops switching to contactless delivery, click and collect, physical classes being done on Zoom and so on. But diversification shouldn’t be something you only consider when you’re up against it. Adding more strings to your revenue bow means you hedge your bets, spreading your liability, reducing economic risk and promoting business growth, even when times are challenging.

Manage existing supply chain disruption

Concentrate on your big sellers

Whether you sell a dozen products or hundreds, you have a good idea which ones make you the most money. While having a diverse range is attractive to customers, focussing on keeping these big sellers in stock when supply chain disruptions are a regular occurrence is simply good business practice.

Inventory management software can keep you up to speed and make sure you restock before you ever run out.

Don’t be afraid to ration

Remember how Aussie supermarkets were stripped bare of toilet rolls during the height of the pandemic, forcing chains to implement rationing? Why toilet roll was stockpiled, no one quite knows, but rationing enabled all customers to at least buy some rather than supermarkets turning away customers empty-handed.

Don’t be afraid to ration high-volume products if you’re concerned about supply chain issues – it’s always better for your reputation if customers can secure something rather than nothing.

Talk to your customers

When times get tough it’s all too easy to hunker down and play ostrich, but that’s probably one of the worst things you can do. Ignore your customers at your peril, for they will talk and will trash your reputation if you let them down.

It’s far better to keep them in the loop about delivery dates, product restocks and the like – most people are pretty reasonable, understand your challenges and are far less likely to defect to your competitor if they think you’re doing everything possible to help them. Besides, keeping in touch with regular email marketing has never been easier to do.

Make your supply chain more circular

Waste across any business is a big issue, so look at ways you can reuse or repurpose your internal resources. The less you rely on external suppliers, the less you’re at the mercy of supply chain disruptions. The fashion industry is a great example of circular supply chain management – there has been a huge shift towards recycling garments instead of buying new.

Events, both good and bad, are always going to happen in business but it’s how you handle them that counts. Proactive supply chain management can mitigate the worst of the effects and minimise any disruption your business faces.

Square
The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.

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