You don’t have to think very hard to find examples of what can go wrong when supply chains are disrupted. Car giant Toyota's quarterly profits fell by 77% after a 2011 tsunami wiped out parts suppliers in Japan1.
Closer to home, maintenance work at factories producing CO2 threatened the UK's supply of crumpets last year, while KFC ran out of chicken in a logistics fiasco that meant more than half of its 900 UK branches had to close2.
If the uncertainty around Brexit wasn’t reason enough to be focusing on supply chains, there’s also a UK government warning that climate change now makes damaging events like flooding more likely and more severe.
Clearly, this is no time to take supply chains for granted. Professor Richard Wilding, Chair of Supply Chain Strategy at Cranfield School Of Management says: “For any business, internal factors like how it manages its own processes can create vulnerability in its supply chain. And contingency planning will make a big difference, too."
He continues: “External factors include changing customer demand and supply side problems like the 2013 horse meat crisis when supermarkets lost track of how some of their suppliers were operating. There’s also the environmental context risk, not just weather, but changes in regulation.”
So, Richard’s key supply chain tips begin with a simple one: make sure you actually know who your suppliers and customers are and where they are located. Secondly, ask yourself if you have a supply chain strategy – and if it’s working. “What are your processes, and what infrastructure, if any, do you have responsibility for? What IT systems are you using? And what about the people involved?”
Always bear in mind how business decisions will affect the risk profile of the supply chain: “What will be the impact of using a supplier in East Anglia rather than Scotland, or India rather than China?” asks Richard.
Ensure your supply chain is transparent and continuously monitor it. Richard says: “BMW, for example, is really on board with this, using global news and weather feeds, and even social media, to get warning of anything from storms to strikes so that they can be proactive rather than reactive in managing the impact on supply chains.”
However, Richard believes building collaborative relationships with essential suppliers is “critical” to a resilient supply chain. “Try to understand the businesses that you're working with. And when you’re thinking about contracts, try to negotiate for flexibility. Do all this well and it will improve the overall supply chain performance.”
Entrepreneur Sonal Keay, whose online company, This is Silk, sells silk products direct to consumers, couldn’t agree more about the importance of relationships. She says: “We spend so much time on customer service, but supplier service is worth investing in too.
“Creating a relationship with some empathy and interest means that suppliers will be invested in you as well as your business. For me personally, this has meant flying over to China and meeting the supplier and their family, and spending time with them, and cultivating that relationship."
She adds: “Of course, you also need to do due diligence. Do your research on quotes, cross-border trading issues, product quality and service level agreements – then double-check everything. And don't be scared of negotiating as hard as possible – but keep it friendly.
"Ultimately, you need a supply chain that works for your business. For example, I chose convenience over cost with my main logistics company. It’s not the cheapest but it's an all-in-one service with a network that extends to China. That leaves me free to focus on sales and marketing."
1 www.bbc.com, 11 May 2011
2 www.bbc.com, 19 February 2018
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.