By Justin Biel(opens in new tab), trends editor
⏰ 5-minute read
Research suggests that at least 75% of U.S. businesses have experienced supply chain disruptions due to COVID-19.
Physician’s Choice, a dietary supplements brand, proactively secured its global supply chain and has survived materials shortages, shipping delays and price increases.
The company has continued to operate by finding solutions with current partners, keeping backup suppliers on-hand and front-loading orders to avoid delays.
Of all the challenges facing businesses due to COVID-19, supply chain management is one of the most far-reaching. In a widely cited survey(opens in new tab) from the Institute of Supply Management, 75% of U.S. businesses reported supply chain disruptions(opens in new tab) — and that was in mid-March.
Physician’s Choice(opens in new tab), an e-commerce brand that makes and sells health and wellness supplements, is one of many businesses struggling to keep its supply chain intact despite COVID-19’s effects.
While it fortified its supply chain before the virus hit, Physician’s Choice also had to develop solutions and contingency plans on the fly to make sure the supply chain remained functional as the specific challenges of the coronavirus situation crystallized.
The company’s strategies offer some lessons for any business owner facing challenges due to COVID-19 or another unforeseen event.
Supply chain disruptions due to COVID-19
Like many modern companies, Colorado-based Physician’s Choice relies on a global network of material suppliers, manufacturers and shipping companies.
“We outsource all manufacturing to facilities in California, and we buy raw materials from around the world,” said CEO Logan Chierotti(opens in new tab). “We’re very reliant on other suppliers … and we can’t survive without inventory.”
“We’re very reliant on other suppliers … and we can’t survive without inventory.”
In normal times, the Physician’s Choice supply chain is reliable, but COVID-19 has produced a number of challenges.
“Each country has its own quarantine orders and timelines for when the countries will reopen,” said COO Paul Haverstick. “These deadlines are very much a moving target … and dates for when the country and ports will reopen have been moved back several times.”
Physician’s Choice also noticed some of its industry peers recently panic buying raw materials in an attempt to get ahead of increased demand and slower-than-average shipping times.
“Companies saw what was happening and tried to front-load their orders to get ahead of delays,” said Matt Mendez, supply chain manager. “Increased demand paired with a decrease in supply from the virus has resulted in massive lead times and stockouts(opens in new tab) for certain raw materials.”
Chierotti understands the mindset driving his panic-buying peers — he too placed his largest raw materials order ever following the outbreak.
“You have to take a proactive approach and prepare for the unexpected,” he said.
(opens in new tab)Physician's Choice relies on suppliers around the world to manufacture its wellness supplements.
A game plan for supply chain management in uncertainty
Fortuitously, Physician’s Choice spent the latter part of 2019 fortifying its supply chain against the exact types of issues we’ve been seeing due to COVID-19, like shipping delays and factory closures.
This February, when it realized that COVID-19 would soon affect its supply chain, the team “had several meetings with internal leadership and key employees within the supply chain team to develop a thorough plan of action,” Haverstick said.
The company’s journey offers some best practices for both before and after you encounter supply chain issues:
What to do before your supply chain is threatened:
Select trustworthy partners.
At the end of 2019, Physician’s Choice restructured to “contract manufacturers with strong systems and protocols in place to mitigate general supply chain disruptions,” Mendez said.
So, by the time COVID-19 broke out, the company had existing relationships with manufacturing partners it could depend on to work through problems. Contingency plans with these partners allowed the company to cut spending at the outset of COVID-19 to better manage cash flow(opens in new tab) and access “backup and off-site storage of raw materials and products that allowed it to continue operations, Mendez said.
A potential supply chain partner’s ability to communicate and handle obstacles should always be a primary consideration when choosing whom to work with, he added.
By selecting good partners upfront, you can confidently depend on your supply chain partners to work with you to find solutions during times of uncertainty.
Form relationships with multiple suppliers — including backup suppliers.
A supply chain can come to halt if a single component — the raw material needed to manufacture a Physician’s Choice dietary supplement, for example — is suddenly unavailable. Therefore, a good practice is to forge relationships with multiple suppliers of a single item.
“We work in tandem with our manufacturers to ensure we always have raw materials and components available from multiple different sources while maintaining competitive prices,” Mendez said.
Multiple suppliers offer a buffer when issues occur, both in terms of access to quality raw ingredients and the necessary quantities. Physician’s Choice nurtured relationships with those secondary partners as part of its aforementioned initiative in the second half of 2019.
“We lined up alternative processes and backup manufacturers for every product we have,” Chierotti said. “We had to get quotes, proofs and dies(opens in new tab) done from [separate label manufacturers] in the event that something happens.”
At the outset of COVID-19, that “something” happened: Raw shipments from India effectively closed down, Mendez explained. The company’s existing relationships with U.S. and other international suppliers filled the gap.
It takes a lot of work, but creating plans with backup suppliers before issues hit provides an invaluable safety net if regular suppliers fall through.
The company was able to continue production despite COVID-19 thanks to relationships with backup suppliers.
What to do after your supply chain is threatened:
Look for solutions with primary partners.
At the start of any event that could cause supply chain issues, Chierotti recommends reaching out to every partner in your supply chain(opens in new tab) and communicating openly about potential disruptions. Then, look for solutions.
“Try to figure out what capabilities your supply chain partners have in place,” Chierotti said. “For instance, do they have a backup workforce or warehouses in other states where the product can be stored?”
You might be surprised by the in-house solutions available.
“One of our manufacturers has three different facilities in the U.S.,” Chierotti said. “If the California plant [that manufacturers Physician’s Choice products] had to close, we could move materials to a separate plant and continue operations.”
In times of uncertainty, regular communication with supply chain partners can surface in-house solutions to otherwise daunting problems.
React to the situation at hand.
The aforementioned panic-buying has indeed led to a shortage of the raw materials Physician’s Choice uses, Chierotti said. At the trend’s onset, the company purchased bulk quantities of products at higher levels than ever before.
“We just bought 46 tons of collagen,” he added. “We’ve never placed an order that large, but it was important we cover our internal product needs.”
Make decisions based on the current state of your supply chain and industry as a whole, rather than relying on your company’s traditional operating procedures.
The bottom line
Physician’s Choice is hopeful that a gradual reduction of stay-at-home orders across the country will soon return business to normal, but the company is not taking its eye off the ball in terms of supply chain management.
The current plan is to “further build out supplier programs for raw materials and components” to meet consumer demand and prepare for “the possibility of another wave of shutdowns,” Mendez said.