This series looks at manufacturing supply chain challenges and opportunities resulting from COVID-19. See the full list of topics covered at the bottom of this article.
In this part of the series, we dig deep into your manufacturing supply chains. Earlier articles discussed the importance of re-evaluating your forecasts and revisiting your bill of materials.
Build up your relationships with customers and suppliers
Right now, it’s critical to foster relationships with customers and suppliers and to be transparent. Some thoughts:
- In your marketing materials, be upfront with customers about any disruption. Find a way to help them continue to build their order book during the slowdown. Perhaps you can offer terms such as a 20% deposit with guaranteed early delivery when supplies are replenished, coupled with a significant price discount (e.g., 20% to 30% off)?
- Talk to customers about what the early indicators are that things are returning to normal. E.g., if your manufactured product is a component used inside another product that is sold in retail stores, understanding the timing around reopening can help drive your production and sales activities.
- Focus on building trust and cooperation with your customers and suppliers. We are all in this crisis together. By creating an open dialogue, you may find opportunities to compress timelines in your supply chain.
Keep communication open between founders, manufacturing and sales
Likely, the business effects of COVID will have permeated deeply through your organization and your supply chains. Founders and the manufacturing and sales teams communicate clearly with each other to ensure everyone grasps the changes to demands and capacity, and any reduced or increased lead times.
Realistically, the onus may fall on manufacturing to proactively initiate these conversations, as sales may be focused on delivering quickly to customers and the selling advantages (and incentives) that come with that. Because manufacturing has to manage the expectations of what they can actually deliver, it will be on them to:
- Ensure the sales team understands the changes in their ability to supply.
- Find out about revised customer/product needs coming down the pipe.
Tips to manage disruptions in your supply chain
- Inquire directly about current or foreseeable impacts related to COVID-19.
- Create a process to track ongoing updates from suppliers (e.g., parts/materials shortages, reduced operational capacity) so you can adapt your strategies accordingly.
- Build robustness and resiliency in your supply chain:
- Find alternate suppliers/sources: Maintain relationships with two or three suppliers so you have options if need be. Many startups initially work with a small supplier and then move their manufacturing overseas, but try to keep up these older relationships (as they could come in handy for developing prototypes, for example).
- Explore local versus global production strategies. Do you need to shift to a local supplier?
- Re-engineer as required with available resources to create the same functionality with available parts.
- Anticipate external shocks such as COVID-19: Embrace strategic foresight. Some companies saw these disruptions coming and advance-ordered (stockpiled) materials and accumulated some work in progress (WIP). (See the next point.)
- Scrutinize your supply chain and manufacturing steps. Consider building up WIP at stages where it can still be quickly completed in multiple formats for different customers or product varieties. Do you need to hold extra inventory of long lead-time items to help you respond faster? Will any regular lead-time items suddenly require a much longer lead time, or be unavailable, if they are now in high demand (e.g., face masks)? What kinds of challenges/delays will your transport delivery system (e.g., Canada Post, Amazon) face? Recognize that otherwise unaffected normal lead-time items may need long lead times if shipping is slowed. Lastly, could border/customs clearance problems, port closures, contaminations or strikes also cause delays?
- If some materials are not available from your regular suppliers, find out whether other manufacturers have the same components in excess inventory if their own sales have decreased. Depending on their situation, they may be happy to sell you some of their own stock, especially if it has an expiry or obsolescence date.
- Review (and improve?) your quality control processes and retention of critical certification records.
- Collect, maintain and ensure a single-source record of all your vendor information. Create a process to frequently update this information.
Read more in this series: