How Small Businesses Are Managing Supply Chain Disruptions
Smart businesses are breaking free of supply chain issues with systems that promise liberty in the long term.
Once a subset of business management and strategy, supply chain planning has risen from the deep in recent years. Missing transport links due to COVID, tangled in geopolitical tensions and bogged down by complacency, supply chains began groaning for attention as inputs ground to a halt and customers were deprived of products they wanted.
Teresa Cutter, co-founder and creative director of The Healthy Chef, a multimillion- dollar 10-person company supplying supplements and ingredients to health-conscious buyers, says the disruptions are “diverse and numerous”. War in Ukraine, for example, has radically reduced supply of sunflower lecithin, an allergy-friendly, natural emulsifier in hot demand. Extreme weather events have also had an effect.
Since the pandemic struck, the time taken for Cutter’s imported ingredients to arrive in Australia “has increased in lead time; what took two months now takes four or five”. Her immediate response was to order big, despite the risk to cash flow.
A boom in people’s attention to healthy living meant the strategy paid off in her ability to meet higher demand. Plus, she says, “I’m working with our production team to find alternative solutions and products that are better or work just as well.”
Gillian Summers, managing director of Brain Industries, which engineers, makes and supplies equipment, such as conveyor pulleys and airloader pumps, to landbased mining and offshore oil and gas clients, says the cost of sourcing specialised parts and materials has surged, sometimes two-fold, in the past few years. But in an upside to rising prices and overseas supply chain interruptions, Summers has been able to turn her passion for boosting skills in NSW’s Hunter Valley region – where the company is based – into action.
Pre-COVID, Brain Industries typically sourced steel pressings from China twice a year but “when the cost of an import sea-freight container quadrupled and transport time doubled, it made the Chinese materials’ price prohibitive”.
Mid-2021, the company switched to a local supplier at a cost that was lineball with the total cost of importing. “Product arrived much faster,” which helped to meet customer needs in a more opportune way. Brain Industries’ ability to deliver led to orders for airloader pumps in new markets, including Nigeria and Norway.
Fresh strategies, such as taking on minimal debt, have made Brain Industries more “nimble”, says Summers, enabling the business to work around supply chain issues, like paying for airfreight, as they arise. It has also forged alliances with non-competitive suppliers, including labour-force providers, to share industry intel. One company gives Brain Industries advance notice of maintenance shutdowns at mines so it can be poised to supply them rather than wait for an order.
Both Cutter and Summers are optimistic that the supply climate will soon normalise. But some of the innovative workarounds they’ve developed to solve supply chain issues are here to stay.
How to protect your processes
Tim McLean, managing director of global manufacturing and supply chain consultants TXM Lean Solutions, says supply chain disruptions are more frequent than many realise. He outlines three key strategies to help you ride out almost any storm.
1. Focus less on the unit price and more on how much it could cost you in gross margins if you’re out of stock of a particular input for a month and can’t manufacture your product.
2. Longer intervals between orders increase the risk of supply chain failure. More frequent ordering can add to your freight costs but this might be moderated by having a lower inventory.
3. Nurture relationships with your suppliers – develop ordering routines that make it simpler for them to supply your business and collaborate with them to change product design and make delivery easier.
