Prepare a Plan to Limit the Impact of Supply Chain Disruptions

Posted: July 10, 2023
Category: Spotlight on Business

Retailers know disruptions within the supply chain come with the territory and are often tied to events beyond one person’s control. The best thing store owners can do is prepare to take action to minimize the impact on their customers and day-to-day business operations. What happened within the supply chain because of the pandemic resulted in a systemic breakdown of epic proportions. Every essential process was disrupted from beginning to end—sourcing, transportation, warehousing, and fulfillment. Maintaining the flow of goods to businesses and consumers was virtually impossible.

Shifts in the supply chain can lead to product shortages that can cause cash flow problems and increased competition for available goods. Depending on what caused the fluctuation in the market, store owners may need to substitute merchandise or pay higher purchasing costs to ensure customers are satisfied. Whether the problem is too much or too little inventory, retailers will need to ensure that the solution put in place does not have lasting consequences.

Potential Disruptions that can Occur
Transportation and Shipping Delays. Product Merchants are familiar with the havoc caused when imported products fail to arrive on schedule. While it’s never good for shipments to be delayed to retailers, seasonal products with a short selling season are especially problematic. When the Ever Given, a container ship, was stuck in the Suez Canal for six days, it resulted in a $54 billion trade loss.

Merchandise stopped moving across the country, and store shelves were empty when more trucks were equipped to transport goods than drivers. Retailers, wholesalers, and manufacturers are keenly aware of truckers’ critical role in the distribution process. While customers may be understanding when retailers say, “The shipment is delayed and is on the way,” most people will purchase the item at a competing store.

Labor Shortages. When organizations within the supply chain have a shortage of laborers, it creates a domino effect that increases production costs, reduces efficiency, and limits the ability to respond effectively to customer demand. Fewer workers may lead to cutbacks in critical functions like quality control and customer service. Consumers who receive defective merchandise and cannot resolve the problem may decide to sever relationships with the retail establishment, the most visible link in the supply chain.

Rising Costs of Goods. Everyone pays the price when the country is dealing with high inflation rates. When the costs of goods rise, small businesses can’t profit by selling at current prices; they may be forced to raise prices or reduce profit margins. Additionally, consumers are under pressure to budget and get the best deals for their money. Manufacturers are also feeling the pinch and are dealing with double-digit increases in the cost of raw materials imported from overseas or sourced locally.

How to Prepare a Plan
Although there’s no way for retailers to prevent most disruptions within the supply chains—they can be prepared to minimize the impact on their business.

Track Inventory Levels
Leverage the readily available data in the store’s POS system to monitor inventory levels in real-time. Understanding the current inventory state will help the person responsible for buying to project future demand accurately. This enables the retailer to contact the supplier or order from the warehouse before merchandise is in limited supply or out-of-stock. Proactive reduces potential delays and allows time to resolve existing supply chain disruptions.

  • Monitor and forecast sales data to identify customer buying habits
  • Use data to adjust selling strategy and respond to shifts in the marketplace

Communicate with Customers
Retailers aware of ongoing product shortages should communicate supply chain issues to their customers. This step is especially true for shoppers who have purchased merchandise and expect it to arrive by a specific date. It’s essential to have policies to resolve the problems and the concerns or complaints customers may have about the delay.

The time retailers invest in preparing for a potential supply chain disruption will be well spent. The business will be more successful because customers will have a better shopping experience. Shoppers get upset when merchandise is out-of-stock or shelves are empty. It’s wise to find creative ways to build more robust supply chain connections to meet the needs of your business and customers.