Supply Chain Disruption: How to Avoid Stockouts and Boost Customer Service 

Supply Chain Disruption

Have you ever heard of the “Francis Scott Key Bridge”? Recently, a Singapore-registered container ship had engine trouble and was adrift in the Baltimore port. It eventually hit the Francis Scott Key Bridge, which collapsed, killing workmen and passengers in sunken cars. This accident immediately set up a blockage between the port and Chesapeake Bay, stopping ALL traffic in and out of the port, and bringing all product movements in and out of the port to a standstill.

The Baltimore port is the 5th largest container port on the U.S. East Coast and the busiest port in the region for handling roll-on/roll-off cargo such as cars, light trucks, construction, farm equipment, and more. The port also handles sugar, furniture, home appliances, coal, and other items. When this accident occurred, all cargo at the port had to be redirected to another port to continue their journey. All cargo due for delivery at the port was diverted to nearby ports such as New Jersey, Pennsylvania, and Virginia. There will be delays, congestion, and diversions as a result. 

These delays will most likely be relatively short-term as they are absorbed into nearby ports; however, they are another disruption in the global supply chain with both short-term and long-term implications.

This event is just one of several impacting global supply chain trade. There is the ongoing war in the Middle East and its impact on the Suez Canal, with the shipping lines redirecting their vessels around South Africa to avoid terrorists in the Bab-el-Mandeb Strait and the risk of being hit by friendly or unfriendly fire.

There are also the impacts of the drought on the Panama Canal and the resulting shipping backlog due to reduced throughput. These additional strains on material movement have not been factored into the inventory policy settings of most business systems that have material coming from Europe or the East Coast of the USA.

The lesson for you here is to review your inventory policy settings and adjust accordingly. Without making changes to your inventory policy setting, for certain one of two things will happen:

1. you will run out of stock.
2. you will be holding too much stock.

On the same theme, according to several research companies, supply chain shortages are the number one concern of manufacturers and distributors. We see this on several fronts, Ozempic being the most obvious one in the health sector, the recent availability of new cars in the motor vehicle industry, and the availability and cost of raw materials in the construction industry.

The importance of inventory policy and supply chain basics cannot be understated. Basics include constant maintenance of supply chain configuration settings and the process you use to maintain them. Inventory policy is but one cog in a more important process or discipline, that of S&OP – Sales & Operational Planning. S&OP is a fundamental discipline that aligns your demand and supply challenges. It improves your visibility of information around demand and supply, inventory levels, and capital deployed in your business and enhances your ability to service your customers.

The other shortage that isn’t discussed often is the shortage of qualified people. Almost every industry I know of is struggling to attract good people, even though the current federal government has allowed 500,000 additional migrants into the country. Unemployment is at all-time lows, although the latest figures released this week have shown a slight increase. Good people with sound supply chain skills are hard to find.

Inventory Optimisation Offer

We have a proprietary approach to an inventory policy audit, focusing on generating inventory policy improvements for our clients. The process involves extracting key data from your existing ERP system, analysing it, and providing a report recommending what changes need to be made to your existing configurations. We also provide an ongoing maintenance program where we assist you in keeping the settings at levels that maximise your customer service levels while keeping capital deployed in the business as low as possible.

The goal is to reduce stock-outs, dramatically improve capital utilisation by releasing cash back into the business, and dramatically improve customer service (DIFOT) levels.

We are reducing the cost of the audit process by 25% for work commenced or undertaken in September. If you want to understand what dramatic changes can be made in your business, reach out for a confidential chat.

© David Ogilvie