Memo – Global Disruptions May Cause Business Supply Shortages | Become A Business “Prepper”

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It has been approximately 100 days since the Russian incursion into Ukraine. Combining this with some of the policies that the United States government has instituted during this presidential term, we are seeing inflation increasing and the worsening of the supply chain issues we had during the lockdowns.

I am monitoring the global oil and natural gas production. Since WWII, the flow of these resources globally has been smooth. All production and transportation rely on these basic energy resources, any kink in that smoothness will have an exponential impact on all processes up the chain.

I urge business owners to consider the near and far term potential negative consequences of this. The supply chain issues we experienced during the lockdowns may seem like vague inconveniences compared to what may be on the horizon.

I want to define the word “prepper”. Many preppers are portrayed by the media as people waiting for the end of the world in bunkers underground.

Basically, a prepper is someone who feels that basic services, such as utilities, water, food, and fuel, may be unavailable for an extended period, and so they prepare to be able to sustain themselves in case that happens

Business owners should also adopt a prepper mentality with all of the global uncertainty today.

We’ve already seen shortages of vital items such as baby formula. We’ve seen price increases at the gas pumps.

Many business owners take for granted that the vital supplies needed to run their businesses are just a click away at Amazon or a car ride away at Staples. Many of us assume that the specific supplies and components that we need will be available at the companies we have bought from for decades. On top of this we have become accustomed to next day delivery. 

I think that this mentality needs to change and we need to start planning and stockpiling things.

In the past 6 months I have dealt with many clients that have been scrambling to find things that are necessary to function. 

This could be anything from laser printers and toner and ink cartridges, to certain types of paper, component parts that are imported, lawn signs to advertise open houses for real estate, or hair products for hair salons. 

Even a professional office needs pencils and pens and staples and folders.

The more specialized or custom your business supplies or components are, the more planning is needed for them. Do you use a special paper or folders for letterhead, brochures, business cards or packaging of your products? Do your marketing systems rely on special supplies?

We have been very spoiled by just-in-time ordering of supplies we need for our businesses and getting them the next day.

I urge you to take some time and make a list of all of the vital supplies that you need for your business to function. This can go as small as erasers, whiteout, calendars, post-its, etc. and as detailed as a component part for products that you are manufacturing. In many cases losing just one component part can shut down an entire assembly line.

Once your list is complete, just imagine that there will be a 6 month to 1 year delay in you getting those supplies again.

And you must also consider the distance that those supplies will have to travel. The further they have to travel to you, the more attention and concern you need to pay those items and make sure that they are stockpiled to accommodate a long period of those not being available to you.

With oil and natural gas prices increasing substantially and global inflation, the further away that your supplies are from you, the more expensive they’re going to become. The increased cost of fuel and other related costs along that route will now be added to the price of your items.

So now more than ever, we should look at the proximity of your suppliers to your business location. The further they are away from you, the more risks you are taking and the less control you have over costs and access. 

Even though it is sometimes more expensive, I buy domestically from USA suppliers for these exact reasons. Having the piece of mind is definitely worth the slight increase in pricing. And now, with this inflation and increase in fuel prices, buying domestically may be much cheaper than going with a foreign supplier.

I would much rather have my main suppliers in Toledo, Ohio, than in Bangladesh for the foreseeable future. 

This advice is even more important for anyone who manufactures anything or is sending out physical items to clients or prospective customers.

What if you send marketing packages or ship goods in boxes or special envelopes? Just think of all the components that go into those. Yes many of us will have those made by a third party, but what if the third party suddenly has a supply chain problem?

Amazon may have something in stock today, and suddenly not have it in stock for a long time.

We have such instant access to the supplies we need for our business it is almost like Amazon is behind our supply cabinets in our office and are stocking them for us!

Stockpiling now will give us two great benefits. 

#1 We will have the supplies when we need them and 

#2 We will be buying them at lower prices now than they will be in just a few months from now.

If you rely on a third party manufacturer, this is a great time to discuss their supply chain strategy and issues. Remember, their supply chain issues are your supply chain issues. Are you using only one supplier for vital items and components for your business? This may be a mistake. You want to diversify and have at least two suppliers of vital component parts in case one of them can no longer provide you the goods on time.

I know, I know, this may reduce the discounts you receive from volume purchasing in some instances, but that slight cost increase may be well worth you not having any work stoppage, right?

One last note. If you transport your goods, make sure to discuss existing contracts with your customers and let them know that the original agreed to pricing may be amended upwards to accommodate your unforeseen increase in fuel costs to deliver their orders. And remember, your job costing or estimating models or spreadsheets need to be adjusted to reflect the increase in transportation costs due to fuel inflation before you send out another quote.