Whether relying on deliveries of supplies, spare parts, raw materials or delivering goods, into the supply chain, disruptions and skyrocketing costs are impacting every snow and ice management business. That’s right, regardless of where they lay in the supply-chain, disruptions are taking a heavy toll on businesses, many with fewer resources to absorb or push back on price increases and less leverage to pass those higher costs on to customers.
Consumer needs and spending patterns have changed, factory floor capacity remains diminished and supply chain problems persist. A whopping 44 percent of small businesses recently reported temporary shortages or other supply-chain problems according to a survey of approximately 800 companies by Vintage Worldwide Inc., a coaching and advisory organization for small businesses.
Every snow and ice management business can anticipate regulatory changes, new taxes and, of course, the continuing effects of COVID-19 to fuel supply chain risks and a higher cost of doing business. Whether fuel, raw materials, supplies or parts, how can any snow and ice management contractor hope to cope with, or even profit from, rising prices and supply chain problem?
Today’s shortages stem from factors beyond lean inventories. The spread of COVID-19 sidelined port workers and truck drivers, impeding the unloading and distribution of goods made in factories in Asia, materials and raw materials arriving by ship.
These disruptions have taken all shapes and sizes. Storms in the winter of 2020 shut down oil refineries in the Gulf of Mexico severely impacting not only the oil industry but chemical companies. And, who could forget the dramatic increases in demand that made pet food so scarce and caused Grape-Nuts cereal to all but disappear from store shelves for a time.
Commodities are not, however, the only factor driving prices higher. Logistics and labor costs have also increased and a shortage of workers in some industries is pressuring business to raise wages. For many snow and ice removal businesses, the main supply chain challenges can best be summed up as:
- Increased costs throughout the supply chain
- Supply chain complexity due to multiple channels to market
- Consumer demands drive need for improved speed, quality and service
- Risk in the supply chain creates pressure
- The impact of supply chain volatility, and
- Other demands on the supply chain.
MANAGEMENT: SUPPLY CHAIN VS. BUSINESS LOGISTICS
The terms supply chain management and business logistics management -– or simply logistics -– are often used interchangeably. Logistics, which is one link in the supply chain is, however, different.
Logistics refers specifically to the part of the supply chain that deals with the planning and control of the movement and storage of goods, materials and services from their points of origin to their final destination. Logistics management begins with the raw materials and end with the delivery of the final product.
Successful logistics management ensures that there is no delay in delivery at any point in the chain and that material, products and services are delivered in good condition. This, in turn, helps keep costs down.
Supply chain management, or SCM, is the umbrella term that covers product development, sourcing, production, procurement, logistics and more. Without SCM, a business runs the risk of reducing its customer base and losing a competitive edge.
SCM isn’t just about creating an efficient process, it’s also crucial to mitigate risk and ensure everything runs smoothly. After all, there are many elements that make up the supply chain, from mines and quarries, manufacturing sites and warehouses to transportation, inventory management and order fulfilment.
COPING WITH A VOLATILE SUPPLY CHAIN
Each step of this process carries countless risks along with many possibilities to derail an entire customer order. Minimizing delay, optimizing the time of day that goods are moved, the length of time that inventory is held for and the order dispatch process are all points that can have a huge impact on a snow removal and ice management operation. Without an optimized SCM process in place, the chain can fall apart from the very beginning.
It is an unfortunate fact that many snow and ice removal businesses with supply chains are far from where they should be when it comes to effectively dealing with large disruptions such as climate disasters, trade wars or another pandemic. Fortunately, no one has to reinvent the wheel in order to make a substantial upgrade.
A dynamic approach to the management of supply chains already exists and provides everything a snow removal business needs in order to integrate lessons learned and create a more robust supply chain, one that applies agile processes towards disruptions in real time, powerful analytics that address and resolve root causes and exception management practices that pave the way for long-term growth.
FLEXIBILITY VS. RESILLIENCE
When it comes to coping with disruptions and changes, flexibility and resilience are both critical traits for success with a volatile supply chain. A resilient supply chain can weather the storm if one of their suppliers has to shut down production. A flexible supply chain, on the other hand, can adapt to new market trends and conditions in the blink of an eye.
With the rate of change and disruption continuing and, in many cases, increasing, change management is required. It is important to focus specifically on dealing with disruption in addition to avoiding them (via flexibility). This hurdle involves establishing point people and protocols for particular sorts of events and changes -– with the help of digital technology.
Thanks to today’s technology, improved information and processes that lower supply chain costs are possible. By automating where it counts -– and keeping all necessary parts well managed -– the following can result:
- Economies of scale
- Smarter use of limited storage space
- Accelerated movement of supplies, and
- An improved ordering system
JUST IN TIME
While there is no one single best way to create a winning supply chain strategy, a popular option is so-called “just-in-time” management. Just-in-time management does cut costs for final producers and redistributes some of those costs to intermediate producers, who wind up either holding extra stock or finding other ways to cope with fluctuations.
Unfortunately, the major problem of relying too heavily on Just-in-Time is glaringly evident in the industry credited with inventing it. Automakers have been crippled by a shortage of computer chips –- vital car components produced mostly in Asia. Without enough chips on hand, automobile plants around the world have been forced to halt assembly lines.
Still, today’s shortages raise the question of whether snow removal operations have been too aggressively reaping savings by slashing inventory. Despite their role in the supply chain however, many key players say they don’t want to replace just-in-time entirely because the savings are too great.
A PROBLEM WITHOUT AN ANSWER
With price hikes already common, inflation expectations are rising posing potential problems for a snow removal and ice management business. If the operation’s customers think that higher prices are here to stay, they may change their behavior in ways that cause price pressures to persist.
Although there is no one single best way to create a winning supply chain strategy, many snow removal contractors attempt to cope by:
Cutting inventory costs. Whether inventoried supplies, spare parts or raw materials, savings may result
Use inventory management software. Fewer resources will be needed to serve customers or internal consumers, though they will provide more information throughout the process.
Integrate business processes with technology. Technology will help supply chains differentiate within a market that demands increasing speed, and
Manage inventory risk by remining flexible.
Pandemic buying and supply shortages exposed flaws in many supply chains that will continue to be exploited in the months ahead. Although many snow and ice management owners and managers learned how to cope with on-the-fly solutions (duct tape and chewing gum?), most postponed long-term investments while grappling with more immediate issues.
Today, all snow and ice management business owners and managers can utilize past lessons and move forward. For some, that will mean stockpiling more inventory and forging relationships with additional suppliers.
Unfortunately, for far-too-many snow removal business owners and managers, a lesson has not been learned and the pursuit of cost savings will once again trump other considerations.