Five tips to overcome the ongoing supply chain disruptions
The way we purchase has changed over the last 18 months.
That was until COVID-19 hit early last year, of course.
What we’ve been left with is supply lines clogged up and a broad range of materials that are scarce across multiple industries. We mustn’t forget that factories closed for a long period of time due to the pandemic.
When you factor in all of that with the issues caused by Brexit, it has meant catching up has proven difficult during 2021. We also saw a recent study that suggested the construction industry would not see a complete recovery back to the pre-crisis levels of 2019 until approximately 2023.
I’m sure many businesses, and particularly buyers, in the construction and manufacturing industries will recognise how difficult it has been over the last eight months.
We’ve witnessed numerous products increase both in price and demand, forcing many businesses with a decision to make on whether to purchase a product for an inflated price in big volumes, in the hope that it sells through before prices could fall again.
Here at Protrade, we have been no different, but we have pivoted accordingly and in this article, we explore some of the best tips like-minded businesses can adopt to ease their supply chain issues and, importantly, get product back on the shelves.
1. Forecast further ahead
We learned that we have to forecast far further ahead than we have had to before, especially with our larger suppliers. We’re placing orders for the next year or 18 months, scheduling the products so we know when we’re going to receive them.
Rather than placing weekly £10,000 orders to top-up stock levels, we’re now having to place £500,000 to £600,000 orders to ensure we’re covered over a set period of time. That does mitigate the issue but it certainly doesn’t solve it, because there are still some products and materials that we cannot get into our depots until Q1 or even Q2 of 2022.
2. Be prepared to put your money where your mouth is
While forecasting is important, it is also necessary to recognise the financial implications of taking such an approach.
In short, business leaders in the construction and manufacturing sectors need to be able to confidently put their money where their mouth is if they are to avoid being left behind.
When the pandemic arrived, a lot of businesses were, naturally, cautious in their approach. There was a reluctance to speculate and place orders of big volumes because no one was really sure what was around the corner.
We took a leap of faith and secured significant volumes of stock. By doing so, we have managed to maintain supplies across the majority of our product portfolio. We’re merchants within the construction and manufacturing industries, and if we haven’t got stock on the shelf, we have a big problem.
3. Be flexible with your stockholding
At Protrade, our stockholding, prior to the pandemic, was £1.8 million.
As was revealed in an article recently, that has since doubled to to £3.5 million as we continue to manage the supply chain disruption we’re facing.
Simply put, our approach is if we can get a product through the door, we will get it in and manage the holding accordingly.
Although we have almost doubled our investment in stock, which invariably impacts cash flow, it has stood us in great stead especially as prices continue to rise in the marketplace.
It’s not as simple as just stocking up though; many scarce products that have experienced significant price increases over the last few months could potentially settle in the near future, possibly leading to costs going in the other direction. Certainly, within the construction industry, there’s a reliance on having the materials on-site when they’re required, so having it on the shelves and readily available is paramount. The biggest impact taking this approach has had on our business is that we have got plenty of stock for immediate delivery.
4. Reviewing your packaging can improve your orders
You’re reading this now wondering how on Earth packaging can possibly impact your order, but just bear with me.
As an example, Protrade imports multiple containers of professional wood screws per year. By changing the box dimensions slightly, we have managed to fit another 18% worth of product inside a single container.
With a global shortage of shipping containers, this has not only eased pressure on the supply chain but has also helped mitigate the spiralling cost of shipping.
5. Pause projects where necessary
Let’s talk about freight for a moment.
We have been liaising with a business recently about producing our own brand for a particular product. However, the freight cost to be able to get the items shipped to us has multiplied by six. This resulted in a 41% increase on the cost of the product.
We have made a decision to kick the idea into the long grass for now, until freight costs settle down again. In the meantime, we will continue to purchase an alternative existing brand that has products available, further down the supply chain.
The supply chain issues this year have caused havoc, yes, but it isn’t to the point that it can’t be navigated or managed.
However, it does require business leaders to show a degree of bravery and make decisions and changes that have never had to be made before. Take the bull by the horns, so to speak. By throwing caution to the wind with purchasing, forecasting ahead, and increasing stockholding, we have been able to mitigate – not overcome – the series of issues that have reared their heads during 2021.
If a balance can be struck, both in terms of short and long-term capital thinking, businesses can still continue to thrive and release some of the heavy pressure that is weighing down on the shoulders of buyers up and down the country.
Image credit: Shutterstock
Craig Sanders – Joint Managing Director