A cure for supply chain disruptions

illustration © Golden Sikorka | Adobe Stock

Whether you’re delivering products to your customers or relying on deliveries and inventories of those goods, supply chain disruptions and skyrocketing costs are impacting every green-industry business. Regardless of where they lay in the supply chain, disruptions are taking a heavy toll on growers and independent retailers, many of which have few resources to absorb or push back on price increases, and even less leverage to pass those higher costs on to customers.

A whopping 44% of small businesses recently reported temporary shortages or other supply chain problems, according to a survey of approximately 800 companies by Vistage Worldwide Inc., a coaching and advisory organization for small businesses. Fortunately, even this far into the disruptions, planning, increased supply chain management, adding potential suppliers and increased technology can help growers cope with, or even profit from, rising prices and the supply chain disarray.

Coping with a volatile supply chain

Green-industry firms develop supply chains so they can reduce their costs and remain competitive. An efficient, optimized supply chain is extremely important in the fulfillment of customer orders. However, it can also result in lower costs and a more efficient production or sales cycle when managed correctly.

Supply chain management, or SCM, is the umbrella term that covers product development, sourcing, production, procurement, logistics and more. Without SCM, a grower runs the risk of losing customers and its competitive edge.

SCM isn’t just about creating an efficient process; it’s also crucial to mitigating risk and ensuring everything runs smoothly. After all, many elements make up the supply chain, from manufacturing sites to warehouses to transportation, inventory management and order fulfillment. So it should come as no surprise that managing the supply chain, along with agile and efficient adoption of technologies, is creating a new way of operating.

Without an optimized SCM process in place, the chain can fall apart from the very beginning. A dynamic approach to managing supply chains exists and provides everything a grower needs to create a more robust supply chain. Apply agile strategies toward real-time disruptions, use powerful analytics that address and resolve root causes, and find management practices that pave the way for long-term growth.

Flexibility vs. resilience

When it comes to coping with disruptions and changes, flexibility and resilience are critical traits for success with a volatile supply chain. A resilient supply chain can weather the storm if one of its suppliers has to shut down production. And a flexible supply chain can adapt to market trends and conditions in the blink of an eye.

With the rate of disruptions continuing and, in many cases, increasing, change management is required. It is important to focus specifically on dealing with disruptions and, if at all possible, avoiding them (via flexibility). This will be a largely operational hurdle involving establishing strategies for particular events or changes — often with the help of digital technology.

Just in time

While there is no single best way to create a winning supply chain strategy, a popular option among those with inventories is the so-called “just-in-time” management for inventories of raw materials, supplies, goods and products. Just-in-time management cuts final producers’ costs while redistributing some of those costs to intermediate producers, who wind up either holding extra stock or finding other ways to cope with demand-side fluctuations.

Unfortunately, the major problem of relying too heavily on just-in-time is glaringly evident in the industry credited with inventing it. Automakers have been crippled by a shortage of computer chips — vital car components produced mostly in Asia. Without enough chips on hand, automobile plants around the world have been forced to halt assembly lines.

Still, today’s shortages raise the question of whether some green-industry companies have been too aggressively reaping savings by slashing inventory. Despite their role in the supply chain, however, many key players say they don’t want to replace just-in-time entirely because the savings are too great.

Alternate suppliers

Many businesses have been using alternate suppliers to combat rising inflation, supply chain disruptions and labor shortages. Relying on backup suppliers to battle shortages or shipping delays is rapidly becoming the “new norm” for many growers.

Shifting suppliers allows a business to “optimize costs.” An alternate supplier allows a grower to quickly respond to supply chain disruptions, minimizing the impact on their bottom lines. Few growers are completely immune to supply chain disruption, but price hikes may help them stay ahead of rising inflation.

What’s more, maintaining multiple potential suppliers, however, requires planning — and a great amount of work. Of course, every business relying on numerous suppliers has a certain amount of flexibility when supply chain breakdowns occur. That has allowed them to better shield themselves from the impacts of COVID-19 outbreaks, extreme weather events and other supply chain disruptions.

illustration © Golden Sikorka | Adobe Stock

Spot bidding

It’s no secret that supply shortages and disruptions have led to a record number of canceled contracts and the rise of “spot bidding.” When supply and capacity are strained, previously negotiated contracts and agreements are all-too-frequently thrown out the window, leaving little alternative to the incredibly inefficient spot bidding.

Spot bidding requires many of the same, time-consuming, repetitive steps as the original process to reach out to potential carriers or suppliers, collect data and make new award declarations.

Some within the industry failed to anticipate the sheer volume of canceled contracts or the rise of spot bidding, among other economic challenges. Complicating matters today, when an outsourcing need arises, many are turning to what is familiar and ignoring the impact of new problems with old, outdated processes and technology.

Since it is often conducted outside of a formal sourcing process, spot bidding often introduces bias, where the business favors certain suppliers in the interest of speed, reducing the competitive tension that might have resulted in better offers.

Understanding that in order to remain competitive and guard against disruptions, integrating new suppliers — and identifying which supply lines no longer hold value — is imperative. A grower that overlooks emerging suppliers to preserve incumbent relationships does so at the expense of innovation and resiliency.

According to many experts, a lack of a cohesive strategy and technology are the biggest hurdles to building future-ready supply chains. Fortunately, in an effort to upgrade these methods, many businesses are overhauling their old systems and attempting to streamline processes using optimization and automation technology for a more modernized supply chain.

Optimization

A fundamental way of achieving preparedness is to optimize processes wherever possible — especially in the procurement function. Optimization makes it possible to balance cost and speed objectives, give suppliers flexible bidding options and eliminate “lowest price wins” awards.

With the right solution, growers have the capability to handle everything from spot bids to large-scale RFPs, with a supplier-friendly interface that improves the operation’s direct materials, supplies or service award decisions. One such solution involves automation.

Automation

A computerized sourcing process can establish spot bidding and mini-tender events within minutes, managing and automating everything from inviting carriers and collecting bid data to generating award recommendations based on a set of criteria. A computerized system goes beyond cost savings by creating more efficiency.

By reducing time-consuming, monotonous tasks, optimization and automation technologies allow a grower's key personnel to do what they do best — focus on supplier relationships, accomplish broader goals for the operation and drive innovation.

A problem without an answer

With price hikes already common, inflation expectations are posing potential problems for some in the green industry. Pandemic buying and supply shortages exposed flaws in many supply chains that will continue to be exploited in the months ahead.

Although many firms learned how to cope with on-the-fly solutions (duct tape and chewing gum?), most postponed long-term investments while grappling with more immediate issues.

Today, growers can utilize past lessons and move forward. For some, that will mean stockpiling more inventory and forging relationships with additional suppliers. Unfortunately, for some greenhouse owners and managers, the pursuit of cost savings will once again trump other considerations.

Disruptions in the supply chain aren’t going away any time soon. The bottom line is that there is no single best way to create a winning supply chain strategy. However, by leveraging optimization and automation to create a future-ready supply chain, growers can leave antiquated approaches behind and progress to modernity.

This article originally appeared in the December 2021 issue of Garden Center Magazine (bit.ly/gc-supply) and has been edited for clarity. The author is a business writer based in Pennsylvania. His tax and financial features have appeared in business magazines and trade journals for more than 25 years. Reach him at MEBatt12@Earthlink.net