5 Ways to Insulate Your Business From Supply Chain Challenges

March 16, 2022

The 2020s are the decade when “supply chain” became a household term. In Southern California, we have felt the pinch — from shipping headaches to backups at the Port of Los Angeles to related labor and transportation issues.

For companies of all sizes and shapes, supply chain challenges are real in a way we couldn’t have envisioned just a few years ago. In many industries, inventory levels are close to all-time lows, according to Federal Reserve Economic Data (FRED). However, with some forward planning, most companies can overcome supply chain management issues.

Here are five ways you can take action now:

1. Reassess inventory standards. Most likely, issues of inventory and availability will resolve as the supply chain corrects itself. In the meantime, we encourage companies to assess the products and materials they use. Might some alternatives do the same job? Putting in place a plan to diversify inputs can alleviate many issues. Companies may even find unexpected benefits, such as a more environmentally friendly solution that anticipates changes to local laws or offers a marketing advantage.

2. Diversify your supply options. The answer to many supply chain issues is having options. Materials costs, shipping fees and timelines, staffing and ports of arrival vary dramatically. Having a reliable contingency plan for what you use can keep a company’s supply chain moving. For example, consider avoiding possible business interruptions by having some manufacturing done locally and some done overseas, vs. one or the other.

3. Expand supplier relationships when possible. Your banker might be able to walk you through business interruption exercises to help you visualize potential future challenges and devise solutions. Experienced business bankers can discuss your inventory and funding needs and your options to increase flexibility. Perhaps you qualify for an increased advance rate or line of credit to facilitate purchasing larger quantities of materials at one time.

4.Speak to your banker about cash management and other payment strategies. Today, many companies keep a backstock of excess inventory to compensate for supply chain-related delays. Yet it’s important to weigh turnover and access to determine the right amount of inventory. With that in mind, it might be wise to take careful stock of your business needs, trends and sales projections in the face of potential supply chain problems. By also considering your credit limits and storage facilities, you can determine what preparation works for your company.

5. Update your credit availability. Making your money do more can put your business in a stronger position. Your banker can help review your electronic and foreign exchange payment strategies to ensure they are on target in the face of supply chain issues. Smooth electronic transactions, especially overseas, can help reduce delays in receiving critical inventory.

To learn more about how your banker can assist you in flexing with the supply chain’s ups and downs, contact your Torrey Pines Bank relationship manager or find out more about what our bank can offer businesses like yours.