Shortages can have a severe impact on companies from all walks of life. And especially in this day and age, customers are quick to jump ship and move to another supplier if they cannot acquire key commodities. This trend ripples into manufacturing. But how can this development be interrupted?
Today’s domestic consumer is used to getting the things they need – even things they didn’t know they needed – when they need them. Amazon Prime customers or anyone who has opened the door to a Getir or Gorillas driver will know exactly what we mean. On-demand commodities have become the norm and it seems traditional retail is suffering as a result. Our cities are expanded, but without any brick and mortar in sight.
On the other hand, ongoing supply chain disruptions created by shifts in demand, labor shortages, and other structural factors (not to mention ongoing geopolitical campaigns or obstructive container ships) have seeped through to our supermarkets. Many resort to excessive stockpiling. Some are simply unable to get the things they once took for granted. And for the situation to repair itself overnight would be nothing short of a miracle.
Disruption Runs Deep
Let’s look at this from a different angle. Unfortunately for many companies, especially manufacturing firms with massive procurement operations, disjointed supply chains are becoming increasingly difficult to navigate. Companies have landed in a vulnerable position unable to bring in the vital manufacturing components they need to stay competitive – productive even. Some have had to shut down complex global operations entirely, purely because they were unable to get their hands on one small component.
Should I Stay or Should I Go?
Because customers these days don’t hang around for long. Similar to the domestic shopping situation, if a procurement officer isn’t able to get the things they need, they will likely turn to another supplier in the market – a competitor. Therefore, future contracts will be awarded to companies that can “promise” invincibility when the going gets tough, when supply chains tangle. This could include firms with greater warehousing capabilities, firms that are flexible, or that manufacture their own components. As a result, companies that rely heavily on imports seem to be facing a decline in interest.
If companies want to remain the go-to choice for their customers, transparency and sincerity will play a huge role. This was highlighted in a recent Gartner study on how communication impacts the customer experience. The study advises keeping customers in the loop whether the cause of the issue is under control or out of control, revealing clearly the short- and long-term strategy. Customers simply need to know where they stand.
The probability of selling to an existing customer is 60 to 70%, while the probability of selling to a new prospect is only 5 to 20%.
Source: MARKINBLOG, 2021
While honesty is always the best policy, on its own, it won’t keep business afloat in trying times. That’s why, if companies want to be the masters of their own fate, it could be time to model new processes. Mapping out the flow of information, ideally in a digital space with comprehensive master data, contextualizes business operations. Once a process model is defined, stakeholders can use this as a single source of truth to identify where bottlenecks are and precisely what is holding up execution. This governance can then lend itself to smarter, more efficient, and more sustainable practices. Yet, multi-tier supply chains are increasingly difficult to navigate and staying in the know regarding shortages is tricky business.
This recent interview with Deres Eshete details how intelligent sourcing in this way is helping SI Electronics’ customers navigate the semiconductor shortage.
Better Togehter
Going forward, companies should aim to partner with reliable providers that transform complex sourcing and procurement processes into transparent practices. By leveraging a combination of soft, digital, management, and analytical skills, companies can provide the right solutions at the right time. This is exactly where SI Trading looks to support companies. By outsourcing procurement analyses, companies also get an unbiased market perspective.
And given the market’s notoriously fluctuating capacity, now is the time to act.