Best Practices for Supply Chain Disruption

With all the media coverage, it should not come as a surprise that the U.S. economy is in for a wild roller coaster ride for the rest of 2020. When you factor economic uncertainty from the Covid-19 virus outbreak, unexpected supply chain delays from China, and the upcoming presidential election, it doesn’t take long to figure out that we all need to create well thought-out backup plans to adapt to these turbulent times.

Companies of all sizes will feel the pinch, but I suspect the greatest impact will be felt with small to mid-size businesses. Mainly, because they take on the most risk in order to compete with “big-box” corporations.

In my line of work, I supply product labels to manufacturers that require aggressive lead-times. I also help manufacturers improve their production line efficiencies by introducing them to unique label substrates and adhesives that can be applied to their products using either hand-applied labels or auto-applicator equipment. No matter the size of the company, I often see the same pain-points that relate directly to production time and material usage.

Most typically the issue is when a company uses JIT (Just-In-Time) inventory methods they can become too lean during supply chain disruption. Typically, when supply chain is running at 100%, this is an excellent way to handle inventory operations and production timing. But when delivery times can’t be accurately tracked and layers of additional delays begin to add up, on-time delivery metrics begin to break down.

Here are several “Best Practice” methods to keep in mind when you’re up against delays from your product label vendor(s).

Best Practice #1: Build-Up Inventory in Case Your Vendor Experiences Supply Chain Delays

This sounds like common sense, but you would be surprised to know how many businesses I see that try to hold out. Whether they can’t afford to buy more inventory at that time or just don’t have the experience, it’s a common mistake. So, if you need to order backup inventory how much should you order?

What’s interesting is that the “Goldilocks” balance of how much to order is changing to a less lean inventory average since the recent supply chain disruption began. Meaning, while every manufacturer watches customer demand and tries to determine forecasts and inventory flow, supply chain disruptions can cause manufacturers to decrease JIT orders and increase their overall inventory supply.

If you aren’t already allocating for additional warehouse space in temperature-controlled areas, your inventory costs can quickly sneak up on you. Keep in mind that your product label is usually the face of your brand at POS (Point of Sale), and depending on your specific industry, the label may need to follow strict regulatory compliant guidelines. So, properly storing your product labels to ensure readability is extremely important and is often overlooked.

Best Practice #2: Have a Backup Plan for Using an Alternative Label If Your Supplier Uses Material from China

If your company is already running extremely lean, it’s never easy to allocate additional time to work on side projects until they become top priority. But if your production times continue to suffer delays due to lack of supply from China, one idea might be to immediately start testing other types of label materials that are readily available in the U.S. This may take additional time to get approval for companies that have a strong marketing brand. But it’s better to work through that rather than being completely shut down because your label supplier(s) can’t get the right materials that your marketing and production teams originally approved.

If you’re a C-level executive and don’t have production experience, there’s an important factor to keep in mind. Always test new label materials, inks, and adhesives through your production lines and/or your label auto-applicators. Just making the decision to switch to a new label material without properly testing and not considering how it will affect production time can back-fire at the worst time. In addition, if you decide to switch to another material that is easier to obtain in the U.S., you should expect demand will rise from other manufacturers that may need that same material too…think about the potential ripple-affect.

Best Practice #3: Share Your Production Calendar with Your Label Supplier When Possible

With so much automation in our lives today, it’s still important to have solid business relations with your label provider. If you’re using a label company that only offers an automated online order process, you may have very limited resources available. But your more experienced “solution based” label converters will have a dedicated team that can help you avoid the headaches during supply chain disruption.

Understanding your customers’ typical seasonal demand each year and having a production schedule to share with your label account manager can help improve your long-term inventory operations. Keep in mind that label account managers usually know or have access to information about replacement materials that are best suited for your product’s surface and how the label is applied to your product (whether applied manually by hand or via auto-applicator).

What’s more, if your company is shifting to a completely different container or new lightweight packaging, the surface of the new packaging may require a different type of label adhesive in order to maintain its tact throughout your entire supply chain lifecycle. Realizing that you may not be able to share much detail due to “new product” confidentiality, any information you’re allowed to share with your label account manager will help them begin discussions with their suppliers to find the best alternative solutions.

Finally, sometimes businesses can experience unexpected inventory demand, especially when companies shift production to fewer plants or suddenly announce the acquisition of another company. And as most production managers know all too well, label shortages can greatly impact internal quality control and delay delivery times. Having a backup strategy in place to react to any supply chain disruption will help your label provider ship on-time so your production deadlines are met.

My goal for this article wasn’t to alarm you, but instead get you to think about how you can plan around future supply chain disruptions and avoid production delays without taking on excessive risk. Although labels may seem like the smallest part of your production worries, it is still a key component of the overall final product.