The structure of the economy is impressive when you think about it. There are companies that supply companies that supply companies and so on. In fact, the supply chain can be pretty long in advanced economies, with raw materials companies feeding products to manufacturing companies who then send their products to other manufacturing businesses in a long and complicated process.
These long supply chains bring incredible cost advantages and efficiency, but they also expose companies to a high degree of risk. What if vendors stop sending your business the supplies it needs to continue with its normal operation?
This isn’t something which just affects small women entrepreneurs and business owners, of course. It’s an issue that goes right to the heart of capitalism, affecting companies like Apple with $700 billion market caps. Just like any other company, Apple is reliant on its suppliers to deliver the goods so that it can transform them into consumer products that its customers actually want. If there’s a shutdown of a Foxconn electronics manufacturing plant in China, Apple may not be able to deliver products to its clients.
So what can women SME leaders learn from Apple about managing supply chain risk? Is there anything we can do to protect ourselves from vendors?
Widen Your Supply Relationships
One of the reasons companies get into trouble is that they have a very long and very narrow supply chain. When everything is working okay, then thin supply chains can be helpful – there’s less paperwork, and everybody knows where they stand. But the moment that one of the suppliers doesn’t ship the goods and services you need to keep your business in operation, it’s a disaster. For small, home-based businesses, this could be if a software provider you rely on goes out of business.
The trick here is to widen your supplier relationships. For every step of the supply chain, start developing a backup supplier – somebody who is able to take over from another supplier at a moment’s notice.
Stay On Top Of Your Vendors
If you’ve got a lot of suppliers, it can sometimes be hard to keep on top of them. Are they fulfilling their side of the deal?
That’s why so many businesses today are using management software to manage and track their supplier relationships. Not only does it save time, but it also ensures that they’re keeping up with their side of the deal. Tracking allows you to keep an eye on crucial factors, like delivery times and quality control which would otherwise be an administrative burden.
Segment Your Approach
Finally, it’s worth putting your suppliers into two broad groups: those that are critical to the strategic success of your business, and those who are not. Ultimately, it doesn’t matter if Apple’s stationery supplier goes out of business – a lack of pencils isn’t going to result in the company being unable to deliver its products to consumers. However, if a component manufacturer went out of business, that’d be another story entirely.
The lesson? Segment your vendors into strategic and nonstrategic based on whether you could continue to deliver services to customers without them. Then focus on building redundancies into your strategic relationships.