Stacked shipping containers

April 08, 2022

How Businesses Are Managing Supply Chain Issues

Global supply chain logjams sparked by the coronavirus pandemic have generated shortages for a wide range of companies from manufacturers to retailers, forcing managers to get creative in finding the products and materials they need.

Port delays, overseas factory closures, a major U.S. truck driver shortage and high consumer demand have rippled throughout supply chains over the past two years. Businesses have scrambled to find new solutions and develop new supply chain strategies.

But with the rise of inflation, companies are finding ways to address supply chain issues.

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Sourcing raw material and blank garment — wholesale clothing ready for branding — has been the greatest difficulty for Alex Phelan, CEO of Merchadise, a customized products printing and e-commerce fulfillment firm based in Portland, Ore.

"Finding blank garments feels like chasing cats nowadays. Suppliers haven't been able to offer any real solutions. So what we've done is build our own machine learning-driven sourcing tool that we use to find every possible blank garment and raw material that is available in the U.S., Mexico or Canada," Phelan said via email.

"We try to source everything on shore, within the continental U.S., or near-shore. This way, the process is still efficient since we don't put anything on a boat. We can use trucks to get the materials across the border," he explained. "Combining our tools with a human, professional sourcing team, that is connected to every source of product that exists, is crucial to make all this work."

One promotional products distributor contacted Phelan's company, which makes custom products from scratch in its own factory, "because the supply chain he was working with was out of control. He needed a solution not only to deliver to his clients but also to retain them," the Phelan said.

Merchadise supplied the black T-shirts the distributor wanted and is helping the family-owned business move into e-commerce, which has surged as people turned to shopping from home during the pandemic, he added.

Developing Relationships With Suppliers Is Key

Steve Bash, manager for International Banking and trade and supply chain finance at City National Bank, noted that global shipping obstacles affect buyers and suppliers alike. For shippers, he said, “Their issue is, 'I've got the supply, how do I get it to my customers in a time frame that works for them?'"

Building good relationships with suppliers is key to handling problems when a crisis hits, according to Bash. "The first step to me always — talk to your suppliers," he said.

If a company encounters problems getting its products through a backlogged port, Bash suggested asking suppliers if they're shipping to other U.S. cities. If so, they should ask about shipping times, added costs and ground freight options for getting goods across the country from a more distant port, he said.

Bash cited the example of a food products manufacturer awaiting numerous containers from overseas. The ship was stuck offshore waiting to access a bottlenecked Southern California port, so the company paid extra to redirect the vessel to a Northern California city more than 300 miles away and send its trucks to pick up the goods. The company had to absorb the added expense, which Bash said was over four times the original cost of the shipment, all-in.

“Yes, there are alternatives. Whether you are buying U.S. or you are paying for a ship to be redirected to another port, you're just going to pay more money," Bash said. Businesses need to consider how much in extra costs they can absorb of course, he added.

Bartering or other non-traditional methods of sourcing what your business needs might offer another possible option for companies facing a supply crunch, he said. Businesses might find U.S. companies that need something they have in excess and see if they can trade. "Are there components that are used in your product that other companies use and may have excess in inventory?" Bash said.

Getting Creative With Supply Chain Solutions

Businesses are finding various creative solutions to the logistics crisis, whether it be shifting marketing online during a paper shortage or stocking up on needed equipment ahead of time.

David Reid, California-based sales director at VEM Tooling, a global plastic injection mold company, said advanced planning helped his firm maintain suppliers and a steady flow of parts and materials.

"We found out how our supply chain operated through supplier mapping," looking at plant locations and the criticality of different components, "so we could build our product without it or had other suppliers of this part elsewhere," he said.

The supplier mapping process allowed VEM Tooling transparency into its supplier network "so that we could plan our course of action to fulfill our demands so production could continue uninterrupted," Reid said. The process relied on software developed to monitor supplier performance, he said.

Reid said that planning ahead for handling customer demand during supply chain disruptions has also helped VEM Tooling.

"If multiple products used the same part, which product got the part? We considered added financial contributions, client importance and other requirements," including which plants could go out of business, Reid explained.

The company aimed to observe a first-come, first-served policy but faced difficulty in filling demands in time.

"We often prioritized those customers who had a chance of switching to other vendors. Or, in extreme cases, were on the verge of ultimately going out of business without our product."

The company had also established an emergency management center, which allowed it to work on centralized information and decision-making, with most conversations happening virtually.

"While one team concentrated on the business atmosphere, taking care of clients and suppliers, the other team was focused on taking care of worker concerns, continued operations, dealing with family matters and other problems handled by human resources," Reid said.

City National's Bash noted the importance of expanding a company's supplier network.

“It's such a wide-ranging, complicated problem," he said. "It's all about relationships and talking with your suppliers and other partners in your trade ecosystem."

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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