Supply chain volatility is one of the top challenges retailers have faced in the last 12 months. I’m sure no retailer needs reminding of how the past two years of the pandemic have led to an unprecedented strain on supply chains and accelerated a major shift in consumer shopping behaviors.
As a business owner, you must be ready for all situations, even the unexpected ones. And while planning for an unknown crisis might feel impossible, there are many ways you can proactively crisis-proof your business to ensure resilience in the face of any challenge. That’s why you need a contingency plan.
Here are four tactics to incorporate into your business’s contingency plan so you can be ready to face any supply chain challenge in the year to come:
1. Prep Your Inventory
Sales are great. The more the merrier, but only if you have the inventory to fulfill them.
The fact is, surges in sales happen. Unexpected Amazon Buy Box wins, retail holidays, weather changes, even seasonal peaks — they all drive demand for products. And while having safety stock can help to offset some of these impacts, businesses should factor in these shifts as part of their annual plans.
The easiest way to do this is through demand forecasting, which utilizes predictive analytics to enable businesses to understand and predict demand so that they can optimize inventory and ensure they always carry the correct amount of stock. Understanding how a company’s demand fluctuates prevents issues like overstocking and stock outs, both of which can be a financial drain for your business. Critical business decisions, such as annual turnover, profit margins, and cash flow, are also all highly dependent on accurate demand forecasting.
Engaging with demand forecasting techniques allows businesses to optimize inventory management and stock control much more effectively. As a result, it’s likely that inventory turnover rates will increase, and any associated carrying costs will decrease due to ensuring the right amount of stock at all times.
2. Automate, Automate, Automate
Automation is undoubtedly a critical component to running a successful business. Not only can automation free up precious time to focus on higher-value work, it also grants companies flexibility to react to a crisis quickly.
Order management automation is a no-brainer here. By automating the entire customer journey, companies will increase efficiency, save time, and identify and address any bottlenecks in their workflow. But another major area that businesses should consider automating is their marketing.
While companies may try to expand their customer base to counteract a crisis, getting existing customers to repurchase is more cost-effective than trying and converting new customers.
By connecting the company website analytics system with its email management tool, businesses can target the right people at the right time based on their specific behavior and previous purchases. From a post-order follow up to an abandoned cart sequence, automated email sequences will be sure to increase company sales with little effort.
3. Maximize Your Warehouse Space
Knowing to stock more inventory is only half the battle. What happens if a company has limited warehouse space?
Selling conditions during the pandemic led many retailers to pivot their operations to keep up with demand. In fact, four out of five retailers indicated that their business repurposed physical store space to help with ecommerce fulfillment, according to Linnworks’ report “The Great eCommerce Acceleration.” And only a third have reverted the facilities back to physical stores.
But optimizing warehouse space may only get you so far. As an alternative, companies should consider options like a third-party logistics provider (3PL), an end-to-end fulfillment solution. A 3PL provides benefits including reducing operating expenses and freeing up more time for retailers so they can focus on growing their business.
Companies should consider fulfillment options as well. Instead of spending time and money fulfilling your orders yourself, businesses could outsource and often get cheaper rates — not to mention the time saved. Depending on the fulfillment company, they may even be able to store their products in their warehouses, allowing you to downsize your premises and save even more money.
4. Develop Strong Relationships with Your Supplier
Suppliers sometimes run out of a product or, even worse, discontinue it entirely — and it’s often out of the business’s control. So how does a company navigate these challenges? Prioritize supplier relationship management (SRM).
SRM has one broad goal: to streamline and improve the processes between a buyer and its suppliers. In essence, developing relationships with suppliers consists of any set of activities that is completed by an online business to identify, measure, and improve the performance of suppliers and support the continuous improvement of its products or services.
Just like customer relationship management (CRM) tactics, an effective SRM process helps companies to build mutually beneficial relationships with suppliers and create strategic growth. According to the Chartered Institute of Procurement and Supply (CIPS), when businesses are aligned with suppliers and treat them as partners, “both businesses will experience higher success rates, decreased risks and enhanced collaboration and innovation.” In turn, companies are less likely to be blindsided when products are no longer available.
By combining these tactics, businesses have the foundation of a strong contingency plan to help them navigate even the worst of supply chain woes this year.
Callum Campbell is the CEO of Linnworks, a leading SaaS commerce platform that works with brands like Ford, Casio, Belkin, and Ten Thousand. As CEO, Callum is responsible for ensuring Linnworks empowers brands to grow their business online. Before becoming CEO of Linnworks in 2017, Callum founded Autonative, a global automotive ecommerce software and services business, where he currently sits as a board member. For more information and tactics to incorporate into a business contingency plan, check out the Resource Hub from Linnworks.
This article originally appeared in the March/April, 2022 issue of PARCEL.