We again plundered the Suitegum blog for some extremely useful insight into supply chain management which is especially important for smaller businesses when they rely on only one supplier of a key input. The following is taken from the Suitegum blog and you find more business insights on that blog here.
The risk of supply failure is playing out in the VW supply chain to Swiss car retailers, where the VW diesel test fraud has caused authorities to ban the sale of the vehicles in that country. That means that a bunch of car retailers will suddenly find themselves without one of their favourite sellers on their shelves, almost without notice.
The ramifications are huge for the entire supply chain, all the way down to the suppliers of platinum (South Africa) where that metal is used in the catalytic converters to make the emissions (supposedly) palatable.
The lesson to be learned for business owners is that of supply chain redundancy. If your supplier is suddenly unable to keep product on your shelves, where do you go?
Key in the business valuation process, is testing a business for this sort weakness.
- Are there alternative suppliers?
- Does the business have a relationship with alternative suppliers?
- Is the business somehow embargoed from buying from the alternative suppliers?
- Does the business regularly buy from a cross section of alternative suppliers?
- Is the business able to shop around for the best price, and actively keep suppliers on their toes, price wise?
- Is the business able to regulate its gross margins through negotiations with alternative suppliers?