From the pandemic to unprecedented weather to changes across the economic landscape, a cacophony of events has impacted the global supply chain in recent years. Unfortunately, the kinks in the chain are taking a long time to unravel. This means companies that sell to consumers must strategically plan for the “certain uncertainty” of the near future.
The problem, of course, is that any plan requires the ability to pivot. As the world has seen, issues that might seem disconnected from business can impact operations greatly. Take the February 2021 ice storm in Texas, for example. Most people thought of it as a tragic but isolated happenstance. In reality, it prompted a series of downstream effects that hampered supply chains, brands, and buyers around the world.
How could one ice storm have such a “butterfly wing” cause-and-effect? The ice phenomenon immediately knocked out power and water service to a number of industries. This meant that fragrance houses, polyethylene producers, glass producers, oil and petroleum product producers, and other manufacturers were forced to halt production of everything from candles to storage bags. As a result, all the consumer goods companies that relied on those raw materials were left wondering what to do.
In the meantime, retailers were also waiting – for their supplies. As consumer demand for certain merchandise rose, retail businesses began to put pressure on consumer goods brands to figure out workarounds or risk losing valuable shelf space. Not surprisingly, the experience left a lot of finance, marketing and sales teams wondering how to mitigate similar problems during the next forest fire, drought, flood, hurricane, or other climate-related event.
Although we’re past that 2021 ice storm, we’re still facing some troublesome concerns. Inflation is taking a bite out of many corporations’ profit margins. According to The Wall Street Journal, nonfinancial organizations had to significantly increase the percentage of revenue they put toward operating costs in 2022. Eventually, that needle won’t be able to move much higher. So, brands have to get innovative right now.
Planning for a Future That’s Hard to Plan For
Currently, experts aren’t willing to stake their reputations on whether a recession is coming. One thing’s for certain, though: Consumers and companies are feeling a pinch. With that in mind, as well as the probability that other issues could affect the supply chain, organizations must come up with creative solutions to implement in case of emergencies.
At Jelmar, a consumer-facing household cleaning products company where I'm chief sales officer, we’ve built several contingencies into this year’s plans. Plenty of those contingencies are based on what’s worked for us in the past. Below are some that your business can use as a springboard to ensure you can adapt to whatever happens in 2023 and beyond:
1. Construct a list of raw material alternatives.
Nothing makes your heart sink faster than learning you can’t access the raw materials you need to run production. This happened to us recently. A 20-year supplier of one of the key ingredients in our largest product was unable to fulfill an order. We had two choices: stop production or find an alternative. We chose the latter and identified an alternate formula and ingredient that would deliver the same consumer experience.
Had our team not developed internal processes that allowed us to think outside the box, we wouldn’t have had an adequate and speedy response. Believe me when I say it’s worth building contingencies and even redundancies into your raw material supply chain. If you don’t, you could lose sales and potentially hurt your reputation with consumers.
2. Consider sourcing more materials that are domestic to North America.
When possible, look for raw material sources that are in North America. We’ve done that, and it helped our company weather the pandemic better than some others because we were not slowed down by ocean freight issues. We maintained high on-time in-full (or OTIF) rates even during the height of COVID-19 because we didn’t have to wait for freight to cross the sea.
It’s worth building contingencies and even redundancies into your raw material supply chain. If you don’t, you could lose sales and potentially hurt your reputation with consumers.
Remember: Ocean freight relies on a finite number of ships carrying a finite number of containers. When a single large ship blocks an international water thoroughfare, thousands of containers are backed up. This stops the movement of materials and goods, often for months. Accordingly, if you can find at least some sources that can be shipped via ground, you will be in a better position if ocean freighters can’t cross waters or dock their ships efficiently.
3. Focus on producing your top few SKUs.
During the pandemic, a lot of companies began to pare down the number of SKUs they produced. Rather than having dozens of low-performing SKUs, at Jelmar, we concentrated efforts on making sure our top-performing SKUs were always available. It was a wise decision because it kept revenue coming in and profit margins healthier. It also allowed us to avoid problems related to excess inventory sitting in warehouses and, even worse, on retail shelves.
As mentioned earlier, we were able to keep our top SKUs available because everything we have is sourced domestically. We work with suppliers and buy a lot of our components in advance to make sure we have enough raw materials to produce our products.
4. Pay attention to your people.
You can’t be innovative or plan well without engaged employees. Rather than losing people to the Great Resignation or the newer trend of quiet quitting, support your workers and provide them with what they need to keep your organization healthy and adaptable.
At Jelmar, we created a flexible environment by introducing a hybrid work model. Our model is working three days in the office and then two days from home. We noticed that this allows employees to have a better work-life balance and for people to bookend their weekends.
This year will be challenging financially and logistically for consumer goods brands. If you want to remain a market leader, flesh out a contingency plan right away. You can be ready for anything, including success.
Photo: Getty Images
