Nothing is more frustrating than when your line comes to a grinding halt, or your retail outlet runs out of product because of a breakdown or other supply issues. I’ve seen all ends of the problem through my years at different positions in different supply chains.
I’ve felt the pressure from all angles when a company is losing money, and there is not much I could do about it.
I worked in shipping for a number of years for a B2B middleman supplier of products who drop-shipped directly to our customer’s retail locations. We’d get product directly from the manufacturers, warehouse them, them fill and deliver orders to each of the customer’s retail locations. We offered distribution to outlets throughout Wisconsin, Northern Illinois and the Eastern Minnesota area.
We moved product between three warehouses of our own and distributed product to the retail locations using three different delivery channels.
Problems arose when one delivery channel went down. There were no systems in place to redivert to the other delivery methods. It became a mad scramble to patch together systems of distribution just to make our problems less painful to our customers.
Here are some questions to ask your suppliers to ensure your supply keeps showing up without a hitch.
Ask about their overlapping systems for manufacturing and distribution.
Like I illustrated in the example above, there was a significant breakdown in logistics if one of our delivery methods failed. With three delivery channels available there were options to get the product to the retailers still. The hangup was there was no system in place to make the switch to a different delivery channel easy.
Planning for problems should start at the order entry and processing level. Make sure these systems are in place at your suppliers. A well thought out distribution network should have these plans in place. Don’t let your supplier tell you it’s not an issue because they’ve never had a problem. Make sure they have backup plans and well-documented systems in place before making your final decision to go with any distributor.
Find out about their capacity to handle their stock inventory.
Just in time manufacturing and lean inventory was very popular in the nineties, leading into the two-thousands. Japanese companies used it in their industries to increase profitability. When I started analyzing what they were doing, it was not only their lean systems, but it went as far as their core beliefs on how to do business and manufacturing in general.
They would cut lead time on deliverables to within a few days. They could save money by reducing warehousing costs. To consider lean warehousing practices now, it all comes down to your companies threshold for risk. Ask questions of your supplier about the amount of inventory they have on hand and how often it turns. A good turn of inventory isn’t wrong if you are dealing in a perishable product. A fast turning inventory doesn’t work if the supplier on the back end has occasional issues. Make sure your supplier always has a quantity of stock on hand in which you are comfortable.
Ask about the origin of their raw materials or supplies.
The final big question on my list is finding out where my suppliers source their raw materials or bulk inventory. Logistics with customs for importers continually gets more complicated. Knowing where your supplier is getting their product from will help you make a solid decision as to whether to go with that company. I don’t suggest going with only local suppliers. I do recommend doing enough research to make you comfortable that your supply line doesn’t break down. Going with a company which has good systems and or enough inventory on hand to keep your product flowing is crucial.
The company I worked for did have some suppliers who were importers. These were always the companies we had problems getting product from because their inventory system was too small for the amount of product they sold. We were continually out of stock and in turn our customers suffered. Do a little research before you sign with a company as to the background of their inventory.
If you get reliable information by asking your suppliers or future suppliers these simple questions, you should be able to put together an opinion about whether to go with them or not. I don’t think any one thing is a deal killer as long as the overall aggregate of their answers put you in a comfortable place to use their supply solutions.