By Ryan Upshaw | Senior National Account Sales Specialist | 15 years of downstream experience
When is the best time to explore changes to your supply chain? The answer is right now, even with all the economic uncertainty in the air. Strike that: especially with all the economic uncertainty in the air. As I’ll explain, when the world is shifting around us, the biggest risk is doing nothing at all.
If nothing else, the pandemic taught us the importance of being prepared for the next incoming disruption. It revealed how complex and fragile supply chains can be – the problems that can spring up with or without warning.
Nowadays, the risks are tariffs and potential trade wars. The deals and details are changing daily, but it’s safe to assume that, however it shakes out, the elevated tariffs won’t be wholly absorbed by upstream supply chain players. A product today will cost more than yesterday, and more tomorrow than today. So, essentially, the question goes from “when’s the best time to change?” to “what should I change now to offset rising costs?”
One way is by taking a hard look at your largest bucket of expense: labor. When it comes to managing, moving, and accessing products, you should have a labor model that’s as efficient as possible. If a touch or task doesn’t add value, can it be outsourced or eliminated?
Now think about MRO procurement, specifically the consumable side. Would you rather have that data in your ERP system? Or would you rather have a strategic supplier handle your PPE data and help with SKU rationalization and standardization? If the goal is to become more efficient and resilient in the supply base, I know which one I’d prefer.
Simply put, when the cost of goods is a giant question mark, look to control costs outside the cost of goods. The time to lock in those efficiencies and cost savings is now.
Make Price Pressures the Reason to Improve
It’s natural to focus on tariffs – it’s the story of the past several news cycles. A standard approach could be asking your supplier to bear the increased burden. However, if you focus too much on something you can’t control (and likely won’t produce the results you need), you risk missing out on improving the things you can control (and will actually move the needle).
For example, if you have a storeroom run by three or four people averaging 500 or 600 transactions a day, that’s a lot of labor you’re paying for and a lot of inventory you’re sitting on. This is the low-hanging opportunity to target: the resources being used to procure, handle, stock, and access materials, all on your own dime.
This is no small opportunity. When we analyze supply processes at customer facilities, we find an opportunity to reduce their total cost of ownership by more than 20% on average – simply by reducing supply-related burdens, steps, tasks, and touches. That’s a meaningful hedge against inflation. And the best part? It pays dividends year after year, whether prices are rising or stable.
Use price pressure as the reason to improve your current system. Without a compelling reason, people tend to resist change – they don’t have time, and they fear the risk. If they understand the urgent need (from a P&L perspective) to reduce the total cost of ownership in creative ways, they’re more likely to buy in and make it a priority.
In short, if you can’t control the rising price of a product, find a way to reduce the labor involved in handling that product. You’re making a change and saving money – just in a different way than you may have originally thought.
Be resilient. Be agile.
Resiliency means the supply chain can withstand long-term disruptions – it can take more than one punch. Ideally, you can also bob, weave, and counter to avoid some of the short-term jabs. That’s agility.
Remember when KFC ran out of chicken in the UK because they switched to a partner with only one logistics warehouse? They thought they would save on costs but ended up trapping themselves in a logistical bottleneck.
Their one-track approach sapped their agility; they had nowhere to pivot. In a positive light, agility can apply to improvements and opportunities – an ability to quickly ramp up and adapt solutions in response to fast-changing conditions.
With potential disruptions lurking across the supply chain, different methods can help build a resilient, agile supply chain. You can arrange safety stocks, assign alternative items, change the geographic concentration of your supply base, and introduce sourcing diversity.
One option to make these changes easier? Partner with a supplier who’s already doing all of this.
Make your move
Having worked on more customer RFPs than I can count, I’ve developed a particular perspective on how companies view change. When my team works on RFPs, we dig deep to provide information like:
• What locations are in scope.
• How automated supply chain solutions, including vending, can help.
• Why data management will improve.
• What the pay structure will look like.
They’re asking the right questions – they understand what’s important – but I’d estimate that 90% of the time customers just re-up with their current partner, whether that’s us or another incumbent supplier. Why?
My theory is that taking the plunge, any kind of plunge, is daunting. I get it. Being told the change will be handled well is one thing; actually SEEING the improved results is another. No matter how thorough the planning and project management are, it requires a leap of faith to get started and patience to wait for the outcome.
That said, some leaps are bigger than others. Look for a partner who can quickly come in, look at the entire process and understand it, then propose changes that can be delivered as promised, typically on a timeline of 90 to 120 days max. Ask them what structures they’re doing to build resiliency and agility into the supply chain, including how they can help you capture usage data to identify trends, red flags, and opportunities. These are the building blocks for a successful change in your supply chain.
Here’s another signpost to look for. Suppliers that truly drive change (especially in times of volatility) are the ones who stack resources, technology, and people right where they’re needed. After all, you can’t offload burdens and tasks if no one is there to carry the load. Look for innovators that have the infrastructure to support you and the technology offered.
Now is the time to make your move. Now is the time to begin changing for the better.
About Fastenal
Fastenal is all about helping businesses run smoother. From industrial supplies to custom inventory solutions, they’ve got the tools, tech, and people to keep things moving. Fastenal blends local service with global reach, making it easier for companies to get what they need, when they need it. It’s not just about products – it’s about partnership.
