Water shortages in California, Avian Flu in the Midwest, frost in Florida, Longshoremen strikes on the West Cost, FDA Closures, or just a fire at key supplier plant can all place supply of critical ingredients at risk. While some impacts of sudden changes in costs can be absorbed, unexpected market volatility, price increases or material outages can severely impact revenue and profits. For larger companies that have contingency strategies already in place, alternative sources from global suppliers or material substitutions help manage, reduce, or eliminate the need for these materials in supply crisis. Others are using collaboration with suppliers to create new formulations for ingredient replacements. In a prior post of about rising egg prices, I reviewed a novel strategy between a manufacturer and key ingredient supplier who collaborated to develop a mixture of starches that were adopted as a substitute for liquid eggs.
While many companies may be aware of risks to supply, few are actively developing alternate supplier relationships and many more are actually driving for single material sources. The reality is that you are probably only going to seek out alternative items or suppliers at the last possible moment, and often because a crisis forces you to do so. When you need to start alternative sourcing of materials, a patch work of largely manual is minimally inefficient but often can be obstructive. With collaborative interactions from supplier evaluation to ECOs into production and eventual trigger to purchase materials; streamlined collaborative Supplier Business processes are more critical than ever. Using collaborative Supplier and Material digital processes, you can minimize the cycle times, eliminate unnecessary corrective iterations and ensure product compliance.
Tomorrow, I will discuss the potential threat and upside that Customer M&A provides.