Yahoo News How to manage supply chains when scaling up
When it comes to managing supply chains for business growth, focus on sales forecasts, have a backup plan and invest in your suppliers, say these three entrepreneurs.
Suppliers can make or break a smaller business, especially when it’s scaling up. Securing sufficient product or service to support expansion is a minimum requirement for growth.
It’s also an area where business owners have a lack of control, being hampered by anything from bad weather decimating harvests to bureaucracy.
Here, three business owners share the lessons that they’ve learnt from managing their supply chain to support growth.
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Focus on sales forecasts
It’s important to focus on sales forecasts and plan two to three years ahead, explains Tim Westwell, co-founder and chief executive of organic tea producer, Pukka Herbs: “It's one of the things that we’ve tried to get right over time, so we can bulk-order herbs that are needed.”
The business launched 16 years ago and now produces 1.5 million teabags every day. It sources the 150-plus herbs that it uses from about 30 countries worldwide, including India, China, Europe and Latin America.
Working with natural produce – and adhering to organic and sustainable farming practices – means that suppliers can’t quickly supply more herbs at short notice if there’s a peak in demand. While the increasing interest in responsibly-sourced products is good for business, the world only has so many places you from which you can get these herbs, says Mr Westwell.
“For example, we use a lot of liquorice,” he explains. “Originally we were getting that from a place in Kazakhstan, but we’ve run out of that source, because we want to make sure there’s enough left behind. We’re now expanding so that we’re getting our liquorice from Georgia and Spain.”
The company focuses on having a good understanding of sales forecasts and a diverse supply chain, so that if something unexpected happens,
it can minimise the impact.
We look to multiple partners and solutions per country to make sure that if one thing falls over in our supply chain, we’ve got a plan B, C and D
Nat Davison, Frontierpay
“If the weather changes right at harvest time, it can really hit you,” says Mr Westwell. One year, a harvest of field mint, which Pukka uses for its Three Mint tea, failed in India.
“We used the reserves that we had in contingency and found a new area that we also had in contingency. Having back-up stock and an alternative supplier meant that there was a stall of a few weeks on that particular product, as opposed to a whole year,” he explains.
Have a backup plan
Frontierpay’s vision has always been to operate globally. “We've always wanted to deliver as many currencies as possible, because it enables clients to target new markets,” says Nat Davison, a partner at the fintech company that facilitates global payments.
However, the business’s biggest opportunity is also its biggest challenge: managing the complex, varied and often changing financial regulations of the 140 territories to which it makes payments. It minimises the risk by working with banks and other payment providers in 109 countries around the world.
“A lot of how we overcome regulatory issues is tied up in having multiple options in any given country,” Mr Davison says. “We always look to multiple partners and solutions per country to make sure that if one thing falls over in our supply chain, we’ve got a plan B, C and D.”
This paid dividends last year when one of Frontierpay’s partner banks in Nigeria temporarily lost its banking licence and could not make payments. “We actually had about five partners in Nigeria, so we then just had to look at what we could do with the other providers,”
he says.
Manage risks early on
Portview, which specialises in fitting out interiors in high-end retail spaces, has a complex supply chain. It works with suppliers across the world to source everything from luxury stone to high-tech fixtures and fittings.
The company works on a project-by-project basis with each one, requiring a slightly different supply of materials and products, often to a tight deadline, explains managing director, Simon Campbell. It means that Portview has to work with trusted suppliers. When clients say “jump”, he needs to know that his suppliers are alongside him asking: “how high?”
“We’ve been in a few situations where, for example, a client has recommended [a supplier], then they go bust or don’t deliver,” says Mr Campbell. Dealing with that challenge requires creativity, quickly coming up with alternatives to make sure that the client’s needs are met, even if it’s not quite to the original brief.
Portview now has systems in place to minimise the risk of being let down, especially when working with a new supplier. “You have to look at a particular process and say: ‘have we got any reason to think that might not happen?’
“If it’s an unknown [supplier], you have to make more enquiries, perhaps make visits. You have to be getting updates a week or two before delivery,” he adds.
Invest in suppliers
Maintaining Pukka Herbs’ organic certification means meeting various requirements along the supply chain, so the company spends time educating producers on how to grow organically.
“We work with farmers locally,” Mr Westwell says. “A couple of people in our team speak Hindi and we’ve written very simple books for farmers on how to plant, maintain and harvest, which has been really critical to the development of their systems and understanding of what conditions are needed for organic certification and growing the best quality herbs.”
Some suppliers have worked with the company since it started out, with one Indian producer growing alongside Pukka, supporting its supply chain operations as demand increased.
“He helped us develop systems, processes and logistics in India,” explains Mr Westwell. “[At the same time] the producer has improved his logistics, employed more people, got new warehouse spaces. Everyone has flourished and developed.”
