Four Things Supply Chains Need to Succeed in 2021 (Hint: Be Adaptable)
The year 2020 wasn’t just a game-changer for businesses: It was a rule-breaker for supply chain networks.
Many of the tried-and-true business practices that we’ve always assumed would maximize efficiency and profit were turned upside down with the emergence of COVID-19. Suddenly, our supply chains were cut off at the knees. One company with an outbreak somewhere along the line could shred profit margins for myriad other businesses.
We’re operating under new rules in 2021 — ones that offer fewer rewards to risk-takers, and that prioritize safety over efficacy in the workplace.
Still, your business profits matter. That’s why companies who thrive in this new environment will quickly adapt to new rules, different procedures and altered goals. Consider four key factors when reviewing your supply chain efficacy this year:
1. Take a Hard Look at Your Distribution Network
In years past, companies operated enormous regional distribution centers. With millions of square feet, these sites would service a multi-state area.
It was a smart choice at the time because shipping costs were minimal compared to the expense of setting up multiple distribution sites. Staffing duplications were eliminated and overhead reduced.
Now, however, there’s significant risk to such large warehousing spaces. A COVID outbreak could shut down your facility — and potentially the revenue from a multi-state region — for weeks. Given that, it wouldn’t be unreasonable to expect trends to shift away from mega distribution centers once again.
Rather than a single, 2-million-square-foot warehouse for a four-state region, perhaps the smarter option is to build four 500,000-square-foot facilities. When one goes down, a smaller percentage of your market is affected. Likewise, the company would still have three other nearby facilities that could ramp up distribution to cover the fallen fourth state. An outbreak and subsequent shutdown changes from a catastrophic business event to a minor hiccup under that scenario.
2. Consider the Role of Outside Vendors
The range of options are endless. Depending on what you need, a third-party logistics (3PL) provider could have far greater flexibility and supply chain resources. Identify and contract with a third-party provider that can own a portion or all of your distribution needs.
We added 3PL to our menu of services during 2020 because the need for 3PL providers is far greater during this time of change. A 3PL company can pivot quickly, while bringing a wide range of logistics expertise to the table.
Particularly if your company is in growth mode, utilizing a 3PL is a perfect way to bridge any gap. These providers are designed to expand and contract with your business needs. Let them step in as you grow, then minimize the relationship as needed.
3. Boost Your Safety Protocols
Clearly, the most effective way to run your business is by being open, so take safety regulations and contact tracing very seriously.
Already, most companies are staggering shifts, sanitizing and conducting daily temperature checks. But particularly if you have experienced or narrowly missed a COVID outbreak, look for weak spots in your facility.
Install plexiglass dividers between workstations, offer mask breaks and limit visitors to the facility. Do whatever you can to keep your business fully operational, and if you must close, try to limit your down time by having effective tracing and sanitizing policies in place.
4. Outsource a Vendor to Hold Your Inventory
When all else fails, this is your insurance policy.
The businesses that succeed will make it through because of their creativity, their flexibility and their new approach to problem-solving.
An outside vendor can temporarily hold a portion of your inventory and, in the event that you have a forced shutdown, step in to distribute it. This doesn’t need to be a permanent arrangement and it can be set up to only be executed as a backup plan. It does, however, keep business running on schedule regardless of what is happening in just one plant.
As COVID continues on, American industry will undoubtedly see the effects of ongoing business struggles take hold. Borderline companies won’t survive. The businesses that do will make it through because of their creativity, their flexibility and their new approach to problem-solving.
The challenges companies face moving forward might seem contrary to the way things have always been done. But as always, American innovation will lead the way to bigger and stronger days ahead.
We hope to see you there.
Eric Voyles is executive vice president and chief economic development officer for TexAmericas Center.