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While Americans celebrated Independence Day, Canada's business community struggled to cope with a dock workers’ strike that left an estimated $12 billion in trade temporarily stranded off the ports of Vancouver and Prince Rupert, two of the country’s busiest maritime gateways.

The resulting delays follow labor-related disruptions at U.S. West Coast ports, and are just the latest in a flurry of headwinds confronting supply-chain executives since the start of the pandemic. Demand shocks and stockouts have now given way to inflation, staffing shortages, mixed consumer spending signals, and mounting tensions with China. It should come as little surprise that over half of logistics managers at major companies say they don’t expect the supply chain to return to normal until 2024 or after.

So how can small-to-medium-size businesses (SMBs) navigate the uncertainty? The key is to see through the volatility and plan ahead to mitigate its impact – a critical objective for SMBs wrestling with bloated inventory, inefficient or disorganized warehouses, and suboptimal procurement contracts.

To get started, here are a few next steps to help supply chain executives accurately plan and forecast for an unpredictable future.

Hire Smart

Seasoned procurement and logistics managers understand the bigger picture. Yet SMB management often thinks they’ve got a pro heading up orders when in fact it’s just someone who has slowly moved up in the company over time – and may have little actual understanding of how the supply chain works.

That means they may miss opportunities to, for instance, leverage their organization’s buying power to get a better deal. Others may overemphasize cost over quality or don’t have their books in order. All that can make it hard to respond to volatility, complicating efforts to make your supply chain more resilient.

While there’s no easy fix – especially in today’s labor market – bringing in an experienced supply chain professional can lay the groundwork for success. Look for someone with the right certifications and industry qualifications, and make sure they understand that not everything will change at once. Empower them to prioritize key initiatives and set up the fundamental processes, controls, and discipline needed to drive effective supply chain planning.

Improve Demand Forecasting

With so much uncertainty, it can be hard to forecast demand six months out. We witnessed these difficulties firsthand in 2022 when retailers, anticipating more shortages and delays, placed large orders early in the year – only to be left with excess inventory as supply chains smoothed out and consumer demand dipped. The resulting warehouse space crunch drove up storage costs dramatically, with some organizations seeing a 400% price increase.

Developing accurate and timely demand forecasting involves analyzing a number of relevant factors to estimate future quantity and timing of product or service demand. These forecasts can be provided to procurers and inventory management teams to factor into purchasing and warehousing decisions.

The key to good forecasting is good data. This should involve information on areas like:

• Historical sales and materials consumption, including seasonal ebbs and flows in demand (e.g., what are summer highs tied to?).
• Logistics pricing trends (e.g., container costs, the impact of a logistics labor strike, other possible delays), which require an understanding of where and how you’re shipping goods.
• Projected availability and pricing of key components or materials.
• Shifts in client base, such as new or lost customers as well as the location of key clients.
• Recent or anticipated changes in regulations or geopolitics.
• Emerging innovations that could affect sales of your current offerings.
• Number of returns anticipated based on historical analysis (e.g., what are the costs of each return? How will it impact inventory?).
• Identification of slow-moving or obsolete inventory and the drivers behind it.
• Anticipated sales numbers via firm client commitments/agreements.
• Other critical industry trends.

Manage Your Inventory

Setting up a warehouse or inventory management system is a good start. Next, ensure that data is accessible across the organization, so that inventory in the system reflects what goods are actually on the warehouse or retail floor. This is critical to avoid unnecessary purchases or increases in inventory. For instance, warehouse managers should know when a load of new material is coming in and how quickly goods are moving out, so they can allocate space for the new shipment. Also, tracking how quickly items move in and out of inventory will impact how the warehouse should be organized to optimize operations.

Nordstrom’s actions last year are just one example of how inventory management can drive improvements. When the retailer saw reduced customer activity in June, they partnered with suppliers to right-size their inventory and cut costs in hopes of improving earnings. This entailed eliminating expensive store-based order fulfillment and bringing physical locations (stores and inventory hubs alike) closer to end markets.

Use the Right Supply Chain Technology

Technology plays an important role in this transformation. While larger organizations may be more focused on robotics and artificial intelligence, a useful place for SMBs to start might simply be combining your accounting system with good inventory management tools; integrating RFID tags that can be quickly scanned to track what goods are going in and out; and using data analytics to better project pricing and consumer demand.

A good technology platform can provide real-time, accurate, and easy-to-understand visibility into the status of inventory and supply chain functions for all supply chain personnel, as well as operations and executive management.

Remember, though, that such tools are only as good as the people who use them. Supply chain professionals will have to increasingly partner with their organizations’ IT teams to identify the right platforms, understand data needs, improve training, and regularly tune these tools to adapt to market changes.

Next Generation Supply Chain

The supply chain may never go back to “normal,” and the fallout is real: nearly 60% of SMBs report that they lost up to 15% or greater in revenue last year due to supply chain delays, according to a recent report from Anvyl.

Yet this challenge also opens the door for smart SMBs to gain a competitive advantage. By truly understanding how supply chain works, hiring the right people, deploying the right technologies, and undertaking effective planning, business leaders can stand out from their peers – and clearly see through shifting headwinds to better plan for what’s next.

Next Steps

Do you need help designing a system of controls that can significantly improve your ability to manage and monitor your vendors effectively? At CBIZ, our team of experts analyzes for red flags and conflicts of interest. Customized data analytics and risk scoring methodology gives our clients the insights to make supplier decisions that help protect against risks. For more information, contact us today.

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