Written by CMG News Contributor, Doug Carleton
"I had lost all hope." A recent article in the New York Times carried this title. The article was about how hard Clorox® Disinfecting Wipes are still so hard to find. The woman who uttered the quote had been looking for them for six months, until one day, she and her daughter found them at Target and they both started screaming, "Oh, my God! Oh, my God! I had given up looking for them in the last month. I had given up all hope."
This is a story about supply chains – something often not thought about until it breaks down. It requires many pieces and parts to get the disappearing Clorox® Disinfecting Wipes onto store shelves. The plastic container, the lid, the label, the fragrance, the five or so disinfecting agents chemicals, and the cloth-like materials are all made by separate suppliers (the disappearing agent is a closely-guarded secret) that have to come together to make the product. The Chief Supply Officer for Clorox® said, "Putting these canisters together is like baking a cake. If you're missing one ingredient, you can't bake the cake."
What about YOUR cake? If your company sells a product made elsewhere, how much should you know about your supply chain? Before COVID-19 turned the economy upside down, the supply chain didn't matter as much, considering everything was operating smoothly. All of a sudden, thousands of companies are going out of business. What if one of these companies was a supplier of yours? You may have to look for another supplier quickly, but the same product might cost more or may not be of the same quality as your former supplier – or both. So how well do you know your suppliers? Take this opportunity to get to know them better. But what about THEIR suppliers? As the CSO at Clorox® said, 'one missing ingredient - no cake.' You want to avoid being surprised, if possible. What if it's a product that comes from China via air freight? Air cargo space has become very tight and getting tighter now that bookings are filling up through February with consumer electronics, apparel, and industrial parts beyond the holiday season.
Has anybody ordered takeout recently? Talk about soggy french fries. The co-owner of a Chicago boutique steakhouse claims his biggest frustrations is that he can't sell the steak fries with any takeout order. He added, "French fries to-go suck." Yum. Drink totes are in short supply in many places since many cities began allowing restaurants in many cities to sell cocktails to go. Shortages of paper bags for restaurants are starting to be a problem, and the companies that sell packaging to restaurants are looking toward imports to fill the gaps (Imports = Air Cargo = Previous Paragraph).
Look at it as if your product is on the other side of the supply chain. What if your customer is a role in someone else's supply chain and their customer goes out of business or starts buying less? Even with no problems in your supply chain, your sales could be affected. Therefore it may be a good idea to analyze as many supply chains as possible since it could affect your business.
This blog entry is a slightly edited excerpt from Doug Carleton's 'The Daily Life Of A Small Business Owner' series. Doug was a mentor with SCORE, Startup Virginia, and Lighthouse Labs, and has 25+ years of experience in small business finance including 12 years in SBA lending. To contact Doug directly, please email him at email@example.com.