Building supply chain redundancy into the business just seemed like common sense as NadaMoo!(opens in new tab), a non-dairy ice cream brand, grew and had the opportunity to diversify. It has two or three suppliers for the five to six basic ingredients used in every batch and has multiple co-packers that produce and package the ice cream.
Those backup options put NadaMoo! ahead of the curve when the coronavirus began disrupting supply chains around the globe earlier this year.
“When you’re in business, you depend on a lot of other people and other companies. We try to do as much as possible on the things that we can control,” said Javier Alarcia, the CFO and COO. “And then, with the ones that we can’t, it’s just trying to have as much communication as possible, as much transparency as possible with anyone that you do business with.”
However, once a business finds backup partners, it needs to actually use them on a regular basis. Suppliers or manufacturers will likely be reluctant to help partners in a time of need if they haven’t placed an order with them in two years. An open line of communication is critical. NadaMoo! started checking in on all its partners once or twice a week once the coronavirus began impacting the global supply chain to see if they foresaw any disruptions. That gave the business as much time as possible to plan and adapt if there was a problem.
Although there is obvious risk to relying on just one supplier for a critical material or a single manufacturer for production, many businesses operate this way. By the end of May, 97% of companies(opens in new tab) said they had been or will be affected by coronavirus-related disruptions to their supply networks. That’s why supply chain resilience has suddenly ascended the list of priorities – 55% of supply chain leaders expect to have a highly resilient network in 2-3 years, up from 21% that have that today, according to a recent Gartner survey(opens in new tab).
For NadaMoo!, the redundancies proved their value when one co-packing facility shut down for a few weeks. However, the pandemic still revealed a weakness in the business’ supply chain: although it had two suppliers for an ingredient used in its ice cream, both are located in Southeast Asia. That led to delays, even though those plants did not shut down, and illustrated the importance of having suppliers in different regions.
“See how much you can really differentiate your backup plans to make sure something bad doesn’t happen,” Alarcia suggested. “What’s the point of having redundancies in this situation when they’re both experiencing delays because they’re coming from the same region of the world?”
NadaMoo! quickly addressed that vulnerability by turning to an existing supplier in Mexico that offered to create a custom blend combining that ingredient with another ingredient it already supplies. The Austin, Texas-based business has yet to test the new product, but it seems promising.
Alarcia recommends companies approach the search for new partners like a research project. First, figure out where an ingredient or component comes from and try to go straight to the source. If that’s not possible, figure out who buys from those raw materials providers and contact them or explore an alternative supply in another region.
Other strategies for building resilience
Another way NadaMoo! has strengthened its supply chain is by signing long-term agreements with suppliers. The business places blanket product orders that cover everything it will need for the next six months and updates it every quarter as demand for certain ice creams increases or decreases. This benefits both parties – the vendor gets financial security and NadaMoo! has access to several months’ worth of supplies.
“A lot of the product we needed during the pandemic was already in our suppliers’ warehouse because we had already committed to it,” Alarcia said. “There’s still delays, and we still had to work around a few things and had a couple moments that made us sweat a little bit more. But we know if we hadn’t done any of these things, we would be in a much, much worse place.
Alarcia sees data as a critical piece of the resilience equation, as well. NetSuite allows NadaMoo! to see up to date inventory levels, open orders and current sales trends that help it accurately forecast future demand. It can then use those numbers to plan ingredient procurement and production that accounts for adequate safety stock without tying up too much cash in inventory.
“Fine-tuning these items, even if you’re not in a pandemic, will obviously help you be able to react and see changes and be more nimble whenever something like a pandemic happens,” Alarcia said.
Just as NadaMoo! is vetting a new partner in Mexico, the coronavirus has led some companies to look for new suppliers and manufacturers closer to home. This can help build supply chain resilience through shorter lead times, increased transparency and greater control. Almost two-thirds(opens in new tab) of U.S. manufacturers say they’re “likely” to bring a piece of their supply chain to their home continent in the wake of the coronavirus.
Localizing Your Supply Chain: A Cost-Benefit Analysis explains the advantages and challenges of moving sourcing and production to North America and the steps organizations should take if they want to make this transition. Get your copy of the white paper here(opens in new tab).