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Supply chain shortages could harm your business: how to avoid them

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This guide outlines strategies for businesses of all sizes to avoid the disruption of supply chain shortages and keep revenue coming in.

The COVID-19 pandemic has been tremendously problematic for businesses all over the world. One study found that more than 200,000 businesses failed purely due to the pandemic. Unfortunately, even as more people in the developed world become vaccinated, the problems the pandemic has caused are not going away.

One of the most significant issues has been supply chain shortages. Companies have had difficulty getting a lot of inventory, even if they didn’t have scarcity in the earlier months of the pandemic. As a result, even large corporations like Starbucks have run low on certain types of coffee and tea in recent weeks.

Smaller companies can have even more significant problems as the pandemic continues to cause challenges, because they have less buying power. They are going to have to take stringent precautions to minimize the difficulties of growing supply chain shortages. They might be able to use solutions like All Forward, the new all-in-one platform for finding forwarding partners.

How to avoid supply chain shortages

Here are some guidelines for companies that need to be more resilient in the wake of supply chain shortages.

Consider non-traditional supplier options

The largest suppliers seem to have experienced the worst suppply chain shortages strain during the recent crisis. As a result, they are under more significant pressure to meet growing demand during the rebounding economy, even though they tend to have the worst issues finding workers to meet those needs. You can’t afford to be too dependent on these types of suppliers. So, it would help if you considered every possible option to find new inventory.

You might find smaller, regional wholesalers that get their inventory from local manufacturers. You could also consider buying directly from manufacturers if they are willing to work with you.

In some instances, you might be able to buy certain goods directly from individuals that would like to relinquish them. This won’t be a sustainable solution to structural suppply chain shortages, but it might be a stopgap for immediate inventory needs for niche products with less demand. It could also be a feasible option for companies that need new equipment.

Be transparent about a lack of inventory

Transparency is always essential for any business. Companies need to be incredibly transparent about any suppply chain shortages that they have encountered during the pandemic. Your company should be as apologetic as possible about any supply chain shortages. However, an apology alone will not be sufficient.

You must also give customers a realistic timeline about restoring your inventory. It would help if you were as accurate as possible. You don’t want to claim that your stock will be replenished too soon, because customers will be upset if you can’t make that timetable. On the other hand, you are going to want to avoid playing it too safe and projecting your inventory will be replenished long after you’re able to do so because your customers might end up permanently moving on.

Consider temporarily paying more for supplies

The laws of supply and demand govern every market. Unfortunately, some businesses have apparently forgotten this basic economic premise during the pandemic. Since supply chain shortages have become a bigger concern, companies might need to be willing to pay more. It is almost certain that many manufacturers and wholesalers are already marking up their prices. However, businesses could voluntarily offer to pay more to get priority deliveries.

Of course, this might not be entirely feasible when you are purchasing from national suppliers. Their logistics are too complicated to give priority to a company that paid a higher premium if they have to transport it halfway across the country. However, it can be a very reasonable option if you are buying from local distributors.

Look for products not as impacted by suppply chain shortages

It might not be possible to completely negate some of the inventory challenges of supply chain shortages that you are facing. In this situation, you’re going to have to find creative ways to make do. You should try thinking of ways to scale your revenue from other products that are not as affected by the suppply chain shortages. You can offer exciting deals and find new ways to present them.

This approach might not be as practical when you were selling necessities, such as if you operated hardware or agricultural store. However, it can be an excellent idea for restaurants and other businesses that sell discretionary products and services.

Come up with insightful ways to deal with supply chain shortages

Every business owner understands that the pandemic has made supply chain shortages a lot worse. Fortunately, there are still ways that companies can deal with them, as outlined above, but…

Be aware the situation could worsen before it gets better

Supply chain shortages are expected to continue in the coming months. Dissonance between supply and demand and structural problems explain a situation that threatens the world economic recovery.

Prices rise quickly, some products are hard to find and take time to restock. The crisis in the supply chains is affecting the world and leaving almost everyone “on the verge of a nervous breakdown”.

The supply chain shortages problem is complex, but it boils down to this: there is a mismatch between supply and demand, largely due to the confinements of 2020 and the rapid increase in consumption in 2021. There are difficulties across the board, in the extraction of raw materials to the manufacturing industry, through storage and distribution, but the lack of containers for maritime transport is playing a decisive role.

Elisabete Soares, a university professor and manager specializing in governance, social sustainability and development, points out that many of the supply chain shortages problems already existed before the pandemic. “The scarcity or lack of ships and containers was cyclical and felt in some areas. Scholars in the logistics sector had already identified this problem. The economic downturn in 2020 and the confinement meant that many containers were left in various ports, without being able to follow their normal course”, he illustrates.

At the end of October, the director general of the World Trade Organization highlighted the lack of preparation of shipping companies. “They reduced the availability of containers, which were left in the wrong places. Now there is a shortage of containers,” said Ngozi Okonjo-Iweala.

“With covid-19, this logistical chain ended up being quite disrupted, either by the measures adopted by the countries, in terms of cross-border transit of people and goods, or by the closure of factories and operations. Recovery is more difficult and takes longer than suspension or reduction,” he comments.

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