Which comes first, supply or demand? It’s a take on the proverbial question — but this one has an easy answer, right? Well, maybe not so easy after all. The supply chain disruptions impacting all of us are shifting the supply and demand equation entirely out of balance. If everything is in demand and everything is in short supply — what’s a business owner to do? Here we take a brief look at the supply chain challenges facing small and mid-sized manufacturers and distributors and how technology can help equalize the imbalance.
But first, let’s answer that question
Most of us would agree that demand has to come first since if there’s no desire for your product, well, there’s no viable business model. However, there are those in the “if you build it, they’ll come” camp that would argue that the right product (supply) can create its own demand. As a case in point, some of us are old enough to remember Pet Rocks from the mid-1970s. Certainly no one demanded those, yet they were a sensation — some 1.5 million were sold. (And believe it or not, an NFT of “pet rocks” recently sold for over $100,000.) Alright, we’re getting off track here.
Let’s agree that, for most businesses anyway, demand comes first. And without effective demand planning, companies cannot develop effective supply-side strategies.
Build redundancy to avoid disruption
Not so many years ago, companies were encouraged to consolidate suppliers down to the smallest possible number. The thinking was that fewer vendors means less paperwork and fewer contacts to manage. However, fewer vendors can leave you exposed when the chosen supplier can’t deliver.
Now, companies need more options in the form of additional vendors capable of providing you with the materials you need. Working with multiple suppliers adds redundancy, flexibility, and agility to your supply chain and mitigates vulnerabilities to best meet demand.
Just in time may be too late
Popular lean production strategies, such as just-in-time inventory, don’t work in today’s climate. It’s simply too risky. Now, businesses are encouraged to create supply redundancies. This could be in the form of additional safety stock, backup equipment, and spare parts. But simply having more resources won’t help if they aren’t the right resources.
Identifying what, when, and from whom to order is more important than ever. If you’re able to collate and analyze metrics, including vendor performance, sales/demand trends, production schedules, your organization will be better able to adjust, pivot, and adapt to change.
Coordinate your efforts
Manufacturers and distributors often find themselves relying on multiple, disparate applications to run their operations. For example, some still track inventory in spreadsheets and make forecasting and purchasing decisions based on hunches and experience, not facts and data. This method may work for them while they’re small, but it’s simply not scalable.
You can’t build supply-chain resilience without deep visibility into your supply chain. And disparate applications rob you of that visibility. When you can connect sales, purchasing, and production workflows through integrated tools like ERP, eCommerce, EDI, electronic procurement, and CRM, you can uncover trends, spot opportunities, and make strategic supply chain decisions.
Rock-solid strategies for success
Like the pet rock, rock-solid supply chains are a thing of the past. And like the pet rock, your supply chain’s future lies in the ether. What do we mean by that? We mean that the only effective way to accurately forecast demand and ensure adequate supply is to rely on technology — specifically ERP applications with inventory, purchasing, distribution, and sales forecasting capabilities. Armed with tools, workflows, and insights surrounding both supply and demand, your organization can better manage costs while maximizing revenue opportunities.
Caron works with manufacturers, distributors, and mining companies throughout North America, helping them leverage next-generation business management applications from Sage and Acumatica to build lasting success. Contact our team to learn more.