What appears to have become more and more apparent in the 21st century is that we can expect significant supply chain disruptions, primarily due to natural disasters such as storms.
For instance, the flooding in Thailand that occurred in 2011 left the auto industry on its knees for months. One manufacturer that was particularly impacted was Toyota. Many of the parts used in some Toyota cars were stored in Thailand distribution centers. Because these distribution sites were flooded, Toyota had to cut back if not stop auto production in Japan, the United States, Canada, and other parts of the world for varying amounts of time. On top of that, Toyota’s second-quarter profits fell by 18.5 percent as a result of the flood.
The hurricanes earlier this year in Texas and Florida have also caused considerable supply chain disruption. According to a September 2017 report on CNBC, “many of the plastics and specialty chemicals that factories across the United States depend on are stuck on the Gulf Coast in the wake of Hurricane Harvey, threatening to create supply shortages and raise prices for U.S. manufacturers.”
While they may be different, similar supply chain disruptions occurred as a result of Hurricane Irma in Florida. According to a report published by Thomas Reuters, “devastation wreaked by Hurricane Irma and other recent storms shows the vulnerability of supply chains to disruption and commodity price volatility. How can businesses mitigate the risks?”
The Need for Resilience
Traditionally, when it comes to procurement, building managers and contract cleaners, especially large contract cleaners, have put most of their focus on efficiency. Efficiency deals with supply and demand. It means eliminating redundancies, working with fewer vendors to better manage supplies, and being able to store and then distribute products when needed/where needed quickly and inexpensively. The larger the organization and the more efficient the distribution system, the more it can enjoy cost savings.
But now we need resilience just as much efficiency, which is something else entirely. Its focus is risk reduction. Historically, most building managers and contract cleaners experienced supply distributions only when a product was temporarily out of stock (known as stock outs) or the manufacturer was backlogged with orders. The item, in these situations, would usually be available in a relatively short amount of time.
But the biggest concern we have today is supply disruptions due to natural disasters such as the hurricanes discussed above. In such scenarios, supplies may not be delivered in a short amount of time. In fact, it could take months. Because of this, managers and contractors must become much more resilient, being able to address supply chain disruptions and the risk of reoccurring disruptions.
The first thing we should realize is that no one strategy will help us avoid all possible risks to supply disruptions. In most cases, we can only minimize supply chain disruptions.
Many times building managers, cleaning contractors, and even their suppliers such as jansan distributors believe they can reduce the risk of supply disruptions by merely purchasing and storing larger numbers of products.
But what if a natural disaster occurs, destroying all those supplies? Now all those supplies may have been damaged or destroyed, resulting in a loss of potentially thousands of dollars.
While buying and storing more products to avoid supply disruptions is likely not the best strategy, there are at least a few approaches managers, contractors, and distributors as well can take that can help minimize supply chain disruptions. Some of these are the following:
- Draw Up Contingency Plans
One thing building managers and contractors should do is make sure they have a detailed list of all products purchased for a facility or their business operations and who distributes them. With this knowledge, they should also be aware of products that are similar to what they are currently purchasing as far as costs, performance, use, and application. There are software programs and free online dashboard systems that provide managers/contractors with this information.
- Work with National Suppliers
Let’s assume the Texas hurricane eliminated a building manager or cleaning contractors supply of paper products. Their local warehouses were destroyed by the storm. In such cases, if the supplier has multiple locations in other geographic areas, it is very likely those products can be delivered from another location.
- Monitor Suppliers
Because you will need to rely on them for help if disruptions arise, we must monitor our suppliers. How vulnerable are they do natural disasters? Will they have the financial strength to survive a natural disaster? If they are the only supplier we have, their loss could be our loss and prove harmful to our business operations. If the distributor is part of national organization, as just mentioned, this concern will likely be mitigated.
- Be Aware of Logistics
Managers and contractors rarely know precisely how their products are delivered to a distributor. Are they trucked in? Delivered by railroad? It makes sense to know how supplies are transported around the country. In some cases, major highways may be blocked for days, if not weeks. If the product can be delivered by rail, the disruption may be minimalized.
- Overestimate Risk
The situation we have now is that many building managers and cleaning contractors underestimate – and in many cases, do not even consider – risk to their supply chain. They believe it is something that happens somewhere else, but not here.
However, what we are realizing is that acts of God,”as well as many other risks to the supply chain, can happen anywhere, and in fact they already have. While the strategies and solutions taken may vary, managers and contractor need to plan for disruption. This not only helps keep business operations going but can significantly help reduce operating costs as well.