FIGHT BACK AGAINST DISRUPTION! 5 STEPS TO BOLSTER YOUR SUPPLY CHAIN FOR UNCERTAIN MARKETS

This is exactly what Kim Olesen did in response to the global disruption that followed in the wake of COVID-19. As Director of Supply Chain for Vallen Canada, an industry leader in industrial supplies and safety equipment, Kim oversaw the company’s response to the pandemic. Slimstock helped Vallen stay nimble and responsive to unprecedented market uncertainty. Here’s what we learned while working with them though the pandemic’s onset, and what you can do to bolster your supply chain against future disruption.

#1 Know What Items Matter Most

Vallen stocks 30k+ SKUs, and Supply Chain Director Kim Olesen said that their biggest challenge was making sure they had the right ones in stock to keep inventory healthy. You might not have as many SKUs to keep track of, but during a disruptive event you need to know which items matter most to you.

• Decide on criteria for identifying your most important items, e.g. high volume, high margin, or a combination of factors like turns, supplier reliability, etc.
• After criteria are in place, make a list of the items that matter most to you.
• Make sure everyone on your team knows what’s on the list. Communicate (communicate, communicate)!

#2 Have At Least Two Ways to Get the Items That Matter Most  

Once your most important items have been identified, make a plan for how to keep availability high. And after that’s done, make sure to have a backup vendor in place, too.

Kim and her team at Vallen had this point reinforced when they learned that global market disruption meant they no longer had access to many of the of their A-class items. This meant they had to find, vet, and order from secondary suppliers.

While looking for a secondary vendor, the key points to know are –

• Your customers and sales team need to be a part of the process
Even during nationwide shortages ad drastically increased lead times, your customers will still like what they like. If you aren’t sure that your customers will approve a new product you have access too, ask them! It’s sounds simple, but too often it’s these conversations that are left out when people are stressed and fill rates are dropping.

• Know how much risk you’re comfortable with
Knowing what risks you are or aren’t willing to take will help you make quicker decisions while evaluating new inventory and vendors.  When making your own policy, look for things like up-front payments, lead time, production tolerances, material quality, etc.

To mitigate risk, look at financial and economic indicators and see if they’re turning negative or are at risk of doing so. If you’re buying non-core items, watch out for price. If you buy high and then prices drop, you can get hit with losses on a lot of stock.

3. Find a local supplier you trust

Even if you find a secondary vendor for your most important items, the variability of international shipping can keep them on the water or in customs past delivery dates. These aren’t problems that a local vendor has.

Working with local a local supplier allows you to avoid bottlenecks and single points of failure. Placing occasional orders with them can cost a little more money when times are good, but they will be irreplaceable during a global pandemic or the next Black Swan Event.

4. Remove the items most affected items from baseline forecasts and KPI

In order to stay nimble, Vallen moved between products and suppliers as needed. They were able to do this by separating out the SKUs most affected by disruption from their regular forecast and using safety stock to maintain fill rates. Separating out these items also prevents them from affecting your KPI, which is a plus for supply chain and management. Kim said that Slimstock helped her team accomplish this by giving them relevant, up to date item information based on demand fluctuation and the tools to segment and order only what was needed.

If you’re currently ordering safety stock ad hoc, you won’t be able to withstand disruption. Developing a safety stock plan means working with your customers to figure out what they need, and what their priority items are. With the right safety stock strategy, you can keep fill rates high for your most important customers without making drastic changes to your base forecast. The wrong strategy can lead to upset customers and costly excess stock.

If you do decide to make long-term changes to your forecast, you should take a snapshot of it before any adjustments are made. Slimstock’s dashboard makes it easy to export your current forecast and have a backup ready in case you need to rollback to previous data.

5. COMMUNICATE, COMMUNICATE, COMMUNICATE! 

Kim Olesen doesn’t mince words – “Don’t hide behind emails!” It’s easier to get information (and ask favors) from people you know. So instead of swapping endless emails from your phone, use it to make a call or schedule a video chat and remember to keep building relationships.

Keep a dialog going with vendors to let them know what your needs are and ask if they expect shortages. Knowing those needs requires frequent communication with your sales team and your customers. And this is all dependent on constantly talking to your supply chain team about how they’re executing on the list of your most important items.

But the communication doesn’t stop there!

Disruptions affect everyone differently, and Kim learned that one of the best ways to keep her team engaged was to have “coffee break meetings” where they talked about everything other than their jobs. With many employees working from home, having less in-person interaction can make people start to feel distant. Providing a low-stress, personable environment for people to socialize and connect has meaningful mental health benefits and positive benefits for meeting company goals too.