With current events such as the rise in pulp and paper demand and the soon to be imposed steel and aluminum tariffs organizations are turning towards their supply chain for solutions. In today’s world supply chain resiliency is imperative. But how do you ensure that your supply chain is prepared for scenarios such as this? There are aspects of supplier relationship management (SRM) and supply chain best practices that can be incorporated to best prepare yourself.
It’s imperative to internally identify the components that are most critical to the operations of your organization as well as the raw materials that they are composed of. If there is a disruption within any aspects of these supply chains, top line revenue will be adversely effected. Through best practices you can minimize disruption’s effects. Let’s use the recent steel tariffs as an example.
Companies are scrambling to not only mitigate the price increases that they will face but also to identify alternate sources of supply because of the spike in domestic demand. This is why for all critical components you should ensure you have a qualified alternate source. Also if you fear that there is potential instability outside of capacity constraints like impending tariffs, you should be qualifying sources within other locations, both foreign and domestic.
Typically, the qualification process begins with market research to identify suppliers with the capabilities you are seeking. Once you have a list of prospective suppliers the best way to begin the qualification process is by conducting a Request for Information (RFI). The RFI should be developed in a way that you can properly assess the stability of the supplier, their ability to meet your requirements and their overall operations. Responses should be reviewed and qualified suppliers should be down selected. Now that you have been able to identify the qualified suppliers you can focus on price to determine who is both qualified and competitive. These are the preliminary steps to qualifying an alternate source. Later steps include things like site visits, audits and product testing which are common to ensure everything is in fact what the supplier has indicated and meets your organizations standard.
Organizations with resilient supply chains have done their due diligence and are prepared for the worst. They have secondary and tertiary sources in place to protect themselves from capacity issues and supply fluctuations. Since these companies already have their supply chain networks setup in advance they’re far ahead of their reactive counterparts. They can continue with business as usual while their competitors are scrambling to find alternative sources. This means that the laggards will either approach competitive sources that are already at capacity, be forced to go to utilize a non-competitive source and pay a higher cost or procure from a substandard supplier. Worst case scenario they are not be able to secure materials at all, causing significant disruption to operations. Best in class organizations are prepared for the unexpected and tend to thrive against their competitors when situations such as this happen. Their top line revenue either stays constant or increases as their competitors suffer.