Steps To Protect Your Business from Supply Chain Disruptions

The supply chain is the lifeblood of every manufacturer and whilst smaller businesses may be able to ‘wing it’ to a certain extent, as you grow you start to realise that you need to take a more structured approach.

In this post, we wanted to give manufacturers a few simple steps that they can take to ensure that their supply chain is secure and that they spot new emerging threats as they appear.

Invest in IT
Diversify suppliers
Use risk management techniques
Think security
Wargame it
Get the accounting right
Remove payment barriers

Invest in IT

How often has a break in your supply chain happened simply because someone forgot to order a critical supply?

Do you find that you spend time worrying whether goods are going to turn up on time and that they will be of the right quality?

In that case, it is time to invest in your IT infrastructure.

With the expansion of Software As A Service(SaaS) we are seeing so many more apps that integrate with accounting and production systems that are at an affordable price point.

A good SaaS ERP system can manage your supply chain much better than any human and the big benefit is that you can get information at the click of a button.

Integrations mean that suppliers can instantly inform you where your shipment is and when it will be arriving and you can see exactly what is on board.

Diversify suppliers

“Don’t put all your eggs in one basket” as Grandma used to say. Diversifying your purchasing does two things; it reduces the risk of disruption and it gives you options when something does go wrong.

Agreed, you will have to manage two suppliers with all of the admin and relationship building that is involved but by diversifying your risk you reduce the chance of a catastrophic supply chain failure.

You may also find that the suppliers ‘accidentally’ find out about each other and up their game as a result. Use risk management techniques Smaller companies tend not to use risk management. Partially this is for the good reason that resources are limited and they have to prioritise. Partially it is because they have an unfounded district of risk management ‘bureaucrats’.

But as you grow you’ll find that using simple risk management techniques such as having a standing risk register that is updated regularly and risk assessments on all of your critical suppliers can actually head off problems before they come to pass.

Think security

When we think about supply chain problems we often think of fairly benign problems like whether disruption or shortages but unfortunately in many cases, disruption can be caused by bad actors who have very much a malign intent.

It is really important that manufacturers think carefully about the security of their supply chain both in terms of physical security but also with regards to digital security.

Starting with the Cyber Essentials certification is a good beginning and you can move on to more in-depth certifications such as Cyber Essentials Plus and ISO27001.

The National Cyber Security Centre (NCSC) has a large number of resources, most of which are free of charge and they set out the four key areas that manufacturers need to think about;

1. Understand the risks

Make sure you understand what risks you are facing (through your risk register) and have a method of identifying heightened issues or new risks that have appeared.

2. Establish control

Risk-assess your supplies and make sure they too have an emphasis on security.

3. Check your arrangements

Building a ‘security first’ culture at your company and ensuring that everyone thinks about security

4. Continuous improvement

Don’t do it and leave it, work hard at making sure your supply chain security is as up-to-date as the threats it faces.

Wargame it

Wargaming business problems is a long-established way of teasing out things you haven’t thought about and identifying unintended consequences.

It has the added benefits of developing leadership skills and producing a much better senior management team that is adept at working as a group.

Wargaming is simply a process of asking “What if...”

What if one of our major suppliers goes out of business? What if one of our suppliers increases their prices? What if a major supplier loses a key person?

By asking these questions and working through your theoretical business response you will not only spot issues before they happen but also be better able to cope when they do.

Get the accounting right

There’s a reason why big companies use things like Purchase Orders (PO) and payment advice notes.

All of these accounting techniques have been developed over the years to ensure that the accounting for manufacturers is right and that decision-makers can rely upon the information they receive.

If you get your accounting right then you’ll feel more confident about what is happening at your business and about the choices you make as a leader.

Remove payment barriers

One of the most common reasons for breaks in a supply chain is that an order has been placed but for whatever reason payment hasn’t got through.

Sometimes this is because of an oversight and you just need to make a rapid payment to the supplier to get the wheels moving again.

Sometimes it is because you have problems making international transfers with the issues that can cause.

The important point here is that it is vital to have a modern, rapid and cost-effective way to pay your suppliers so that your goods aren’t held up.

The key here though is to use a platform that will integrate seamlessly with your accounting and EPR SaaS software.

Summary: - Manufacturing is about spinning plates

In truth, there are always risks facing manufacturers, especially when it comes to the supply chain.

Understanding the risks and running a risk register and finding ways to mitigate them is the first step. You can do this by wargaming your response.

Investing in new IT helps but do make sure you always have a mind on security, both physical and digital.

And of course, making sure you have your accounting in order and a modern, reliable way of making payments is key.

Was this article useful?

Check out our manufacturing industry payments hub or check out some of our other articles below.

Caxton provides manufacturers with a fully featured payment platform that is quick and easy to use. It’s perfect for manufacturers importing and exporting to receive and send international payments. You can make payments locally or internationally at the click of a button knowing that it is super-secure and highly cost effective. Its adaptive payroll payments make quick and easy changes for shift changes and new starts – make changes right up to pay day. Manufacturing finance and procurement personnel, who are exploring practical ways to increase control and efficiency of expense management can use this guide to navigate their way to an effective expense management solution

Caxton Payments

Caxton Payments is an alternative to traditional banks, established over 20 years, we help businesses make faster payments more reliably. We offer streamlined processes, automation through API and a collaborative solution to complex payment issues all from a single platform. Our payment capability extends from business expense management, to payroll payments, supplier payments, and currency risk management. We also offer personal prepaid travel cards and international money transfer.