Supply chain disruptions aren’t just annoying; they can significantly impact a business’ financial performance. And in some cases, they can even force powerful organizational change.
Take McDonald’s, for example. Following a port slowdown and a supplier closure that raised food safety concerns worldwide and created supply shortages that directly impacted sales, the fast food corporation was recently forced to appoint a new CEO.
If esourcing disruptions have such a huge effect on your bottom line, how do you limit this risk? While it’s impossible to eliminate the risk completely, there are many practices that eprocurement teams can use to bolster their sourcing strategies.
What could McDonalds have done differently to mitigate the closure of an integral meat supplier and avoid product shortages?
It all comes down to visibility and risk management. How well do you know the suppliers you are sourcing with?
While it’s hard to predict when a supplier may go out of business, or face a serious production problem—it’s not impossible if you have the right information.
In a case like McDonald’s, it’s essential to have various back-up supply sources. If a disruption occurs, you need credible suppliers ready to step in and increase production.
When a product is core to your menu, it’s also important to split up the supply volume between multiple suppliers—which lessens the burden on each source.
What are the top supply chain risks facing restaurants and food distributors today?
Natural disasters, adverse weather, rising food prices, food safety concerns, and cyber security issues are the top supply chain risks affecting the food industry today.
How should companies respond to supply disruptions? How should restaurants manage their supply chains to avoid menu disruptions?
Companies can avoid menu disruptions by ensuring they have additional sources of supply for key products.
The best way to prepare is by leveraging esourcing on a regular basis; by regularly taking key categories to bid through esourcing, eprocurement teams can establish a clear view of what other suppliers, products and prices are out there.
Investing in supplier relationships is also helpful, especially in the event of a crisis.
In general, discuss what companies should consider when evaluating a supplier. How can firms make sure their suppliers are complying with their standards? What can companies do to strengthen their sourcing strategies?
It depends on what the company is trying to accomplish—cost, quality, transportation, packaging, payment terms, reliability and value are all important.
One factor that’s often overlooked: the supplier’s financial health.
You also need to factor in the location of the supplier and how that impacts your broader supply chain. Before the contract is signed, it’s crucial to ask where the manufacturing plants are located. Understanding their plan of action in the event of a crisis will provide detailed insight into the risk you’re taking by doing business with them.
Conducting regular audits is a good way to make sure suppliers are complying with your standards. Regular site visits are essential.
Discuss the importance of having a diversified supply base. Why do so many companies struggle with this?
You don’t want to put all your eggs in one basket, which means you need to diversify your base of suppliers.
Some companies struggle with this because they don’t know enough qualified suppliers in their market. As mentioned earlier, esourcing plays a key role in this process.
It can be quite easy to hurt your company through incorrect esourcing techniques, so when you begin to grow, make sure that your eprocurement is set and ready to utilize. This is where the team at ProRFx can come in to help you with all of your esourcing needs.