The recent supply chain issues have affected businesses and industries across the nation. Material shortages for many manufacturers have made it difficult for door, frame and hardware businesses to keep up with customer requests
Many of Software for Hardware’s door, frame and hardware distributor customers have been negatively impacted and unable to get materials back in their warehouse stock. In addition, distributors now suffer dramatic price increases for the products they do receive.. If an order usually takes 30 days, in today’s world expect the process to run up to 3 months.
Deloitte recently published a whitepaper, Managing cash flow during a period of crisis, which discusses how to effectively plan and address issues your company may be experiencing regarding cash flow. As receipt of products stretches from weeks to months, so does the time until the distributor gets paid.
Deloitte recommends having a robust process for managing supply chain complications. These economic uncertainties will cause less financially stable suppliers to become more unreliable. Analyzing the credit letters of manufacturers and other partners, will ensure that you are working with a reliable business. This idea stresses the importance of understanding your financial risks, if you are using questionably reliable vendors, you will probably suffer worse reliability during rocky economic times..
In addition, Deloitte also recommends, “management teams evaluate their cash flow requirements, develop appropriate actions under various scenarios, and assess potential risks in and to their customer base and supplier network”. Basically, hope for the best but plan for the worst.
The article also suggests that while many businesses may be focusing on profit, it is imperative to keep in mind the main components of the supply chain; capital-payables, receivables and inventory. Taking a more in depth approach to the three main aspects of managing material and cash flow will prepare you for any future delays.
With every crisis comes opportunity. Your less prepared competitors may suffer during the economic storm and fail to deliver for their customers. If you’ve determined the financial risks, and planned accordingly, you may actually realize the most gain. As the legendary coach John Wooden once said, “Things work out best for those who make the best out of how things work out.”
Ian Oxman, Co-owner Software for Hardware LLC based in Atlanta, GA. You can reach Ian at Ian@softwareforhardware.com