Supply Chain Agility Matters

With the global supply chain challenges of COVID-19 weighing on everyone's minds, we wanted to share our thoughts on how we build agility in supply chains as a critical component of running a successful business. Many of us take for granted how efficiently we can move goods around the world, raw materials from suppliers could be delivered quickly which has led to the rise of lean manufacturing principles in a diverse set of industries. Additionally, finished goods could simply be boxed up and then be picked up from your door and your product could be delivered halfway around the world in a matter of days. With experiences such as these being the norm you can be forgiven for not deeply researching your secondary supplier needs. The disruption that COVID-19 has caused on our ability to do business globally, as well as regionally, should not be understated and we can all take this opportunity to think more about how we build adaptive supply chains that can flex with ever changing global conditions.

Let's talk about supply chain agility for a moment, what does it even mean to have an agile supply chain in the first place? Global supply chain agility is best described as the concept of obtaining the lowest cost and most efficient inputs for a business. This holds true whether you are a multinational firm such as Walmart that sources goods from large suppliers all over the world or if you are a local pottery shop who is looking for high quality clay from small suppliers within your geographic region. We all understand the importance of not being overly reliant on a single supplier for critical raw materials but we can often find ourselves bogged down in more pressing matters when dealing with the day to day management of a growing firm. Besides, the supplier you use has always been there and has been a dependable partner, so why should you worry about finding a replacement? How could you even go about finding the right alternative suppliers? We feel we have some solutions to those questions and would love to share our thoughts.

Why bother even looking for another supplier in the first place? This is a very common discussion we have with clients as they remember the struggle of finding that first supplier and how much time they had to commit to bringing them onboard. The endless quality checks, the legal contracts, and the pricing negotiations seemed so arduous that they feel there is little incentive to restart the search. Especially when everything is going great, afterall if it isn't broken why fix it? We have often been brought in to help onboard new suppliers only when there is an unexpected shift, such as the suppliers' quality decreases or the supplier goes out of business. Rarely are we brought in proactively to plan for such supply transitions so we wanted to share some of the basics so that in this time of extraordinary supply chain strain you may have the tools needed to start the search for additional suppliers.

Looking for ways to build an agile supply chain there are several key things to keep in mind. Geographic risk, quality standards, brand image, and (of course) price. Each aspect should be carefully inspected to ensure maximal protection of your supply chain and, in turn, your business. At the end of the day, it is vital to realize that your suppliers are an extension of your firm. As such, we believe the same level of care should be taken in evaluating your suppliers as is taken in determining which products you will launch next.

Geographic Risk Mitigation

As a business society, we increasingly pride ourselves on having local suppliers. Whether

this means farm to fork restaurants or locally crafted furniture customers are demanding local products made with local inputs. We at Bright Orca always recommend using a primary supplier that is local as this will increase collaboration, decrease your carbon footprint, and more readily allow for just in time manufacturing. However, a major risk with

this is that if a natural or economic disaster strikes your area there is the risk that your supplier will fail and you will have to scramble to find a new one. Supplier evaluations need to be done from a position of strength as this allows for more fruitful negotiations and a better ability to evaluate quality. To ensure continuity of supply we always recommend our clients look for secondary suppliers that are significantly outside their region. Depending on the business, this may mean an American Midwest restaurant has its primary meat supplier based on Michigan but it's secondary supplier is based in California or it could be a West Coast manufacturing firm has a primary supplier in Oregon but a secondary supplier based in Europe. This will allow for agility, flexibility, and protection against local calamities that will disrupt your supply flow.

Quality Standards

We have seen many firms rush into agreements with secondary suppliers because they needed an immediate solution to keep the metaphorical wheels on the bus. Unfortunately, this often carries the risk of lowering your quality standards to bring in the new supplier and fill that hole in your supply chain. The major benefit of searching for these secondary suppliers early is that it allows us to deeply analyze their quality standards. By doing multiple test shipments and, ideally, a site quality visit you can be sure this secondary supplier will be able to maintain the expectations you have set with your customers regarding input materials.

Brand Image

The plethora of social media activity mixed with the increase in consumer awareness of company ethics has made it incredibly important that the right secondary supplier is chosen. Suppliers are a reflection of your brand and you can not afford to onboard a supplier that may tarnish your brand reputation. By building in flexibility early you can ensure that the suppliers you choose align with your brand image. This is often overlooked but firms who do often must pay dearly in brand equity when consumers find out. Bright Orca believes that maintaining the brand image you have built is critical and you must choose suppliers who support your brand.

Price

We all know price is critical when negotiating a deal with a secondary supplier. Firms often build their profit model and price structure based on the costs from a single supplier which leads to trouble when that supplier is unable to meet your demands. Negotiating a price for

raw materials is best done when you do not truly need the supply, we have seen many firms end up in a desperate position to fill a supply shortfall only to find their profits evaporated due to higher input costs. The fog of war or the feeling that this supply agreement will be temporary is often to blame for these higher input costs. Negotiating secondary supplier prices in advance, and from a position of strength, is the best way to minimize this risk.

We want to be clear, if you have not already found a suitable secondary supplier that is ok. While yes, these are challenging times for supply chains, you are still in a position to negotiate favorable terms with a quality supplier. As Bright Orca looks to the future we see a continued emphasis on locally sourced products but also a growing need for globally flexible supply chains that adapt to changing environments. Small businesses looking to thrive in the post-COVID economy will be well served to bring on secondary suppliers for all of their critical needs.