The pandemic and the war between Russia and Ukraine caused a global supply crisis that resulted in shipment delays and bottlenecks, which has affected almost every industry. Here are 5 tips to identify and solve problems caused by the global market.
One of the challenges faced by small and medium-sized companies is the interruption in the supply chain, even with greater impact than large companies; in addition to other problems ranging from exorbitant prices to short and medium-term losses due to increased transportation costs; a situation that undoubtedly affects the delivery of the product to the end customer.
This is why risk must be managed by assuming different perspectives to increase resilience and respond to customers.
According to the National Institute of Standards and Technology (NIST) the disruptions show in many ways how small manufacturers are more critical than ever, as large companies will always have a competitive advantage as they not only source from other parts of the world, but also take advantage of domestic industry sourcing.
For this reason, says NIST, “a key aspect of being a reliable supplier and providing sustainable solutions is to be resilient.” Resilient manufacturers operate with situational awareness in all aspects of their business environment, from their supply chain inputs, to their factory processes, to their customers and market outcomes.'
Anticipating risk is essential at every business stage: inbound, process and outbound. Being fully aware of this with robust planning, including through a management system, will enable you to understand the challenges not only in the supply chain, but in the factory, with your customers and taking on new markets. The important thing is to anticipate these challenges before they become significant problems.
One of the tools we are going to recommend is Total Cost of Ownership (TCO), which allows you to deduce the total cost of a product after identifying all possible, hidden and obvious costs, i.e. those related to freight costs, tariffs and time. Implementing true costing through this approach can help to better evaluate sourcing and add value to the product or service.
Supporting national industry
Sourcing from domestic industry, proposes to be one of the most reliable ways to overcome supply chain disruption, as there are several substantial benefits, among which are:
Working with overseas suppliers means incurring additional costs such as tariffs and freight costs. Importing is subject to politics, global economies and natural disasters with consequences in distant locations.
It is easier to establish a relationship with suppliers in common languages, cultures and proximity. These relationships are key to understanding how a supplier can grow and innovate along with the product or service.
3. Business ethics
One of the concerns when internationalizing business in the U.S. and establishing a business dynamic is contracting with suppliers with intellectual property (IP), however, NIST assures that the U.S. has some of the strongest IP protections in the world, so working with a domestic supplier reduces the chances of IP theft.
We have already seen that shifting the focus from a reactive to a proactive one is essential for effective mobilization, problem detection, timely analysis, intervention and risk operation. These are the questions to ask in a problem-solving scenario:
- Can we replace it?
- Can we build it?
- Can we retrofit or have someone else make it to produce it?
Benefits for manufacturers sourcing within the U.S.
- There is more transparency and control in supply chains, this can improve quality control, flexibility, and time to market; while reducing the risk of falling foul of a customer, as foreign supplies can present problems.
- Producing close to the consumer frequently reduces total costs, as shortening supply chains and contributing to an efficient and agile strategy results in less waste and optimized processes.
- Leverage a large network of local and regional supply chain stakeholders, from trade organizations to those specializing in economic development and workforce development, to local and regional government agencies that could provide incentives
Mapping your supply chain network
Mapping the manufacturers that can be part of your supply chain will help you gain better visibility into opportunities, not only in price, but in product improvement. The most common approach to doing this mapping is to use the "bill of materials" to drill down to the top five products to find component suppliers and raw material suppliers.
As we have seen, taking into account all these factors will be decisive to optimize your supply chains in the United States, since entering a new market offers not only these conditions, but also advantages in terms of infrastructure, cost of doing business and economy. A topic that we explain in the following blog: The best US states to do business in 2022.