Manufacturing contributes a considerable amount to the UK economy, creating almost £400 billion worth of sales in 20191, and employing 2.7 million people2.
It is a global industry and as many manufacturers will know, the supply chain can be lengthy. A longer supply chain can make things more complicated from a logistical point of view, and it brings other challenges too.
When dealing with multiple suppliers, you are naturally taking on more risk than if you were just dealing with one company. It’s not something that can be easily avoided, but you can protect yourself and your business, with the right approach.
Vet your suppliers thoroughly
You can never do too much due diligence! Ensure all new suppliers are thoroughly looked into. Research their reputation in the marketplace, ask for references and look into their other business partnerships. Companies House can also be helpful in highlighting any areas of financial instability of suppliers. Choose organisations with a strong, sustainable proposition that won’t cause potential brand conflicts with other clients. While it can be tempting to only look into new suppliers, it’s sensible to carry out regular audits on existing ones too so you can make changes if need be.
Plan for the worst
Crisis planning is a vital part of business management, and while most of us never face the worst-case scenario, it can be invaluable to plan ahead around wider events and their potential impact on your business. The COVID-19 pandemic showed us that we can’t always know what’s around the corner. Though some broader events such as government changes or bad harvests can be planned for. Brexit is also providing its own challenge for many manufacturers. Despite being in the pipeline for some time, some businesses are still being caught out when failing to adapt in a timely manner. But, if and when the worst does happen, despite all of your planning, there will be opportunities to learn for next time.
Use several suppliers
It can make for a more complex chain, but using various suppliers can be a much safer way to operate than using one or two large ones. That way, if one of them does run into difficulties, you are not left floundering. Always have a plan B and possibly a plan C too. Make sure you can quickly replace a supplier if need be. This applies to logistics, too. It’s sensible to have several routes and transport options if you run into a problem with your usual approach. Where possible keep a close eye on stock levels so that you are never left without. The aim is to be able to keep running smoothly, regardless of hiccups caused by problematic situations.
Invest in tech!
Artificial Intelligence impacts on everything, and that includes supply management systems. With so much technology at our fingertips, businesses of all sizes can look at and respond to everything in real-time through tracking and notification systems. Sophisticated data storage complements this ability and can often enable you to predict and respond to any issues before they arise. Therefore, investing in supply management systems is a must. Enterprise Resource Planning tools can include modules for e-commerce, manufacturing, purchasing, sales, inventory and accounting. There are also specific software options that track the factory floor and assembly line production.
All the planning in the world cannot fully prepare you for the unexpected, and this is where the right insurance can help. A number of covers are at your disposal depending on your risks, including;
- Contingent business interruption insurance - for physical damage caused by an incident at a supplier or customer premises.
- Trade credit - for the failure of service provision by a supplier, including supplier insolvency.
- Product recall - the dangers of an ill-managed product recall can be devastating to your reputation. At Marsh Commercial, we can provide solutions for you anywhere in the supply chain, for a vast range of products.
- Cyber liability insurance - which will help protect you should data be lost or stolen. As factories advance to industry, 4.0 having a cyber policy to protect connected devices against attacks and disruption is essential.
These are a few of the options open to manufacturers when considering your insurance needs. Speaking to a knowledgeable broker will allow you to discuss your requirements in greater depth.
Supply chain management is all about spinning many plates. The priority for you is to protect your business and its bottom line so that you remain resilient and agile for the years ahead.
If you’re concerned about your supply chain, why not check out our Top five supply chain risks for manufacturers article here.