Avoid Supply Chain Distress with These Tips

When something goes wrong with a supplier, it can be disastrous for your own company’s bottom line and reputation.

Like it or not, the public may not draw a distinction between your supply chain problems and you. For an example, you only have to look at the problems faced by Honda, Toyota, Mazda and Ford over the faulty airbags produced by their supplier, Takata.

So, what can you do to ease your concerns? Consider these three tips:

1. Vet your suppliers carefully

Transparency is a very important part of an effective supply chain. You need to be certain about who is on the other end of your supply contracts. These days, you want to be sure of everything that goes into the materials you receive, where they were sourced and what labor went into their creation.

2. Aim for end-to-end visibility

The more important a supplier is to your business, the more you need total visibility with issues like the prices of raw materials, shipping logistics, production times and quality controls. Modern technology makes this possible — but only when suppliers and companies are on the same digital page.

3. Boost your resilience and flexibility

When you operate “lean,” you don’t have the ability to weather small disruptions in your supply chain — and that can leave you with empty shelves. To be resilient, you have to balance the cost of extra stock against the potential losses you would see if you ran out of something critical.

Flexibility, however, is about being proactive about demand spikes and dips so that your supplier can adjust their productions accordingly. It may also mean making use of more than one supplier — just in case one part of the supply chain experiences unusual problems.

Despite your best efforts, you can still end up suffering economic or reputational harm if a supplier fails to live up to their contract. If that happens, it’s always wisest to speak with an experienced attorney as soon as possible about your legal options.