The COVID-19 pandemic. Russia-Ukraine War. Semiconductor shortage. And these are just the events that have had a global impact. Supply chain disruption may occur at the regional, federal, state, city, or company level. It emerged as a top-four concern for small businesses surveyed in the 2023 Q1 Small Business Index.
The potential repercussions of supply chain disruption on e-commerce fulfillment are vast — everything from failed/delayed orders to low-quality products. You cannot escape the prospect of disruption but can prepare your fulfillment strategy to overcome it when it does occur. How? Let’s find out.
A single supplier or service provider is a single point of failure. If a substantial disruption makes that supplier unable to keep up with your orders, that will have a cascading effect. It will eventually cause customer dissatisfaction that will be difficult to recover from. A staggering 96% of customers will leave you because of bad service. Fifty percent will do so after just one bad experience.
Diversify your supplier base. That would usually happen in one of two ways.
● Source some of your products from more than one supplier in tandem. It does not have to be equal allocation to each supplier. You could do 80% from your first choice supplier and the remaining capacity goes to one or two other suppliers.
● Source from a single supplier but have one or more backup suppliers on standby that are ready to step in on short notice. Choose the right backup supplier by establishing their product quality, pricing, production capacity/scalability, flexibility, speed, location, and financial stability.
What aspects of your supply chain and to what depth can you and other key stakeholders see? Many small businesses fail to recognize the inefficiency losses caused by an opaque supply chain. To realize this, information technology is indispensable. Tap into inventory management and order tracking software for optimal, precise transparency.
Improved visibility means that you have a better understanding of how much inventory you have. It allows you to see in real-time where customer orders are and their estimated time of arrival (ETA). Know what person or service provider is currently handling what process. The software makes it easier to quickly identify areas of potential cost savings and find opportunities to improve customer satisfaction.
Technology’s ability to improve visibility depends on successful implementation and integration. Implementation/integration success is more likely when you:
● assemble stakeholders
● determine requirements
● define goals/KPIs
● eliminate organizational silos
● experiment with different implementation/integration options
Improved communication is a byproduct of improved visibility. However, it is not always a given that process visibility will be accompanied by better communication. You must deliberately develop a communication plan and define channels that keep everyone abreast of happenings. This should encompass employees, suppliers, shippers, and customers.
To develop an effective communication plan you need to:
● establish communication goals
● define and/or profile distinct audiences
● decide appropriate communication channels
● develop the message
● create an outreach plan
● develop a communication timeline
● monitor results and feedback
Third-party shipping companies have subject matter expertise typically only found in the largest businesses. These companies have vast and diverse experience in complex industries. Studies have shown that 71% of shippers have reported that partnering with a 3PL led to customer service improvements.
The value of 3PLs’ expertise is most apparent in times of supply chain disruption. The experience, industry contacts, and breadth of logistics options can provide much-needed resilience to your fulfillment process. For example, they can offer alternative warehouses or routes. They could tap into long-standing relationships with backup suppliers.
Of course, there are risks of working with 3PLs including poor control, rising costs, data breaches, over-dependence, low standards, poor communication, and a failure to understand your business. That’s why the process of choosing one is important. Before you settle for a particular 3PL, pay attention to their capacity, capabilities, stability, reputation, customization, error rate, and customer service.
Excessive inventory is costly for small enterprises. They badly need that cash for growth. One survey found cash flow was the third biggest challenge for small businesses only behind labor and inflation. Other potential risks of overstocking include expiration, obsolescence, theft, and diminishing returns.
Ideally, you want your inventory to be in lock-step with order flow — only as much as you need and nothing more. Unfortunately, that can be problematic during major disruption. It comes down to striking the right balance between cash and availability.
For example, you may need to negotiate better payment terms with suppliers or explore financing options to manage cash flow while maintaining adequate inventory levels. And this is not a one-off exercise. Continuously review stock levels and adjust in line with current/expected growth in order volume.
You cannot predict disruption but you can take a look at the past and see the type of events that led to supply chain upheaval. History tends to repeat itself even if not in the same fashion.
Evaluate each stage of your supply chain and fulfillment process. Envisage the different disruption scenarios that could potentially affect each stage. Think through what you would do to maintain near-normal fulfillment operations. Develop comprehensive contingency plans that document your path of action. Test and refine your plans through walk-throughs, tabletop exercises, simulations, and checklists.
Involve key stakeholders in your scenario and contingency planning. By working collaboratively with subject matter experts, you can better identify potential weak points and develop more effective contingency plans.
Expect the best but brace for the worst. The world of business would have been perfect if it were possible to wish away disruption forever. Unfortunately, your supply chain will get disrupted. It’s only a matter of time. Business managers who had any doubt about this principle probably had a change of heart given the happenings of the past four years.Disruptions are usually unpredictable, unforeseen, and beyond your control. Apply these strategies to stay a couple of steps ahead of supply chain disruption. Perform regular audits of the process to determine if you need to make any tweaks to make your fulfillment more resilient.
Will Schneider is the founder of InsightQuote, a match-making service for B2B services, and writes informative posts about fulfillment services at Warehousing And Fulfillment. He is passionate about helping businesses find the right solutions to improve their operations.