Over the last decade, we got used to having a fast, reliable global supply chain at our fingertips. But the global pandemic changed all that. Now, delays are common, which can put a strain on your customer relationships when supply can’t keep up with demand. If not managed well, such supply problems could turn into a customer complaint or insurance claim.
Even though the worst of the pandemic appears to be over, these new challenges continue to pose supply chain problems that could impact your business. Managing supply chain disruptions and customer expectations is key for remaining competitive and profitable while also lowering the risk to your business and assets.
Understanding Disruption Impacts
If you experienced a supply chain disruption in the past 18 months, you’re not alone.
- According to Accenture, 94% of Fortune 1000 companies experienced a supply chain disruption due to COVID-19, and 75% of companies reported negative impacts to their businesses.
- An Institute for Supply Management (ISM) survey also found 60% of North American manufacturers had their domestic operations affected by the global pandemic.
The current disruptions have also impacted different parts of the supply chain, making it more likely for inventory dealers to face challenges. Tier 3 suppliers of metal and plastics, intermediary Tier 2 suppliers, and primary Tier 1 suppliers all faced disruptions to operations during the pandemic.
Beyond the current pandemic disruptions, suppliers may also face increasing disruptions in the future from:
- Natural disasters
- Transportation issues
- Price fluctuations
- Product issues
- Cyber attacks
Because it’s hard to predict how long COVID-19 disruptions will continue and what other issues may lie ahead, it’s becoming increasingly important to get out in front of potential supply disruptions.
Managing Supply Chain Disruption Risks
Supply chain disruptions create risks for all kinds of businesses, including inventory dealers. Concerns range from competitiveness and profitability, to reputation and legal issues. The best way to manage the risk of supply chain disruptions is to be proactive in your approach.
It’s important to think about where to focus your attention for the greatest risk management benefits. Consider these steps:
- Create a supply chain emergency plan. Go through the process of documenting risks, objectives and goals, identify and involve stakeholders, and plan for how to handle likely scenarios.
- Conduct a supply chain vulnerability audit. Identify hidden risks and weak links in your supply chains by conducting a full risk analysis, from suppliers to transportation and distribution.
- Identify potential backup suppliers. Recognize that other suppliers may be able to help during a disruption. Identify potential backups and begin building new relationships.
- Diversify your supply base. Consider diversifying your supply base so you have the potential to receive inventory from suppliers with operations in an unaffected location.
- Hold intermediate inventory or safety stock. Look into the feasibility of stockpiling product, parts, components or even raw materials in the event of a disruption.
- Take advantage of new innovations. Think about how implementing new innovations in efficiency, logistics and technology may be able to help you better weather a disruption.
- Reevaluate product offerings. Consider the trade-off of product variety and flexible capacity of your operations. Offering fewer options may reduce disruptions to your supply chain.
- Train sales and customer service personnel. Make sure your frontline personnel are prepared to set realistic expectations with customers and be responsive and proactive if delays occur.
Managing Customer Expectations
As a dealer, you must strike a delicate balance between customer demands and product supply. This balance is made harder when there are issues on the supply side that can lead to a host of problems.
Product may be out of stock, backordered, or delayed, frustrating customers. Or you may have new stock delivered just as customer interest has waned, leaving your business in a difficult position.
Managing customer expectations, especially during any supply chain disruptions, becomes important for an inventory business. Communication is key, with particular importance in terms of:
- Timelines—From manufacturing, to shipping, transit and final delivery timelines, it’s important to set realistic expectations, emphasize flexibility and communicate updates when something changes.
- Product—Product can be impacted by a supply chain disruption in many ways, including product quality, workmanship, materials, features and options. Repair and replacement options can also be impacted. Open communication can help minimize complaints.
- Guarantees—Written and verbal guarantees in your sales brochures, contracts, or warranties can be hard to live up to during a supply chain disruption, but communication of the problem can help diffuse tension.
If a customer does lodge a complaint, a proactive approach may help resolve the issue without escalation to legal claims or reputational harm. Remember these 4 points:
- Take time to listen. The timing of complaints is often inconvenient but giving complaints your undivided attention is important. It demonstrates you are motivated to understand what happened and find a resolution.
- Acknowledge the situation. Listen and acknowledge the customer’s frustration or disappointment. Avoid arguing about details or brushing off the complaint. An apology for a misunderstanding goes a long way to easing tensions.
- Seek to remedy the situation. Train personnel about what to do and who to contact when a complaint is voiced. When agreement is reached on a resolution, act quickly to remedy the situation.
- Follow up with the customer. Follow up on any complaints to ensure the resolution occurs. If a complaint cannot be resolved, document the incident.
During these supply chain disruptions, it’s important to take an active role managing your inventory business through the disruption and communicating well with customers about expectations and delays. The right steps can help minimize risk to your business and your reputation.
For more tips on managing supply chain disruptions and customer expectations, contact Lockton Affinity, administrator of the Lockton Affinity Inventory Insurance Program.