In November, the Federal Trade Commission (FTC) launched an inquiry into the continuing supply chain disruptions. Large wholesalers and suppliers, including Walmart, Amazon, and Kroger, were ordered to provide information to the FTC to help determine the causes of ‘empty shelves and sky-high prices’.
The inquiry highlights the severity of the supply chain issues that are plaguing entire industries, consumers, and the US economy more broadly. So, how can businesses keep customers and regulators happy? These 5 tips may help you:
Build more resilient and more compliant supply chains
Tip 1: Better Communication with Consumers Might Be Key to Resolving Supply Chain Issues.
In a world where ‘same day delivery’ is an option for consumers, businesses feel a lot of pressure to compete by offering very short delivery timeframes. Unfortunately, offering unrealistic delivery timeframes can attract the ire of both regulators and consumers. To avoid this, it may be beneficial to consider an approach that promotes transparent communications with consumers.
From a business perspective, transparent communication with consumers about your supply chain issues comes with a number of benefits. Firstly, it may reveal that your customers don’t need ‘instant’ access to your goods. Consumers are adjusting to the disruptions and expectations are shifting. For many businesses, simply communicating this with consumers may alleviate the pressures you’re feeling. Secondly, it better manages consumer expectations, which helps to maintain trust, protect your brand, and avoid or reduce complaints and/or negative reviews.
From a compliance perspective, you’re required to ship goods within any timeframe you promise. Additionally, you must provide the consumer with a new shipping date where a date is delayed and an opportunity to cancel the order (see the law). Transparency about supply chain disruptions, including the potential for long and/or indefinite delays, can help you to better meet your obligations.
Tip 2: Contract with Diverse Suppliers.
Supplier diversity has long been recognized by multinational corporations as offering significant value to businesses, and WeConnect’s Business Case for Global Supplier Diversity and Inclusion reports that diversity and inclusion efforts have been increasing. The potential benefits of supplier diversity include reduced supply chain risk, increased access to diverse and new markets, and improved brand reputation.
We previously wrote an article containing tips to increase supply chain diversity, so please feel free to review it for more details. But, in summary, the following steps can help your business move towards greater supplier diversity:
- Hire a diverse supplier manager or management team.
- Create and implement a framework for measuring key metrics and gathering data.
- Build a strong network of diverse suppliers.
Tip 3: Assess Your Pricing.
The supply chain disruptions have had extraordinary impacts on the costs of production, particularly when it comes to shipping. If you haven’t already, it might be beneficial to assess your pricing and determine whether you can offer to pay your suppliers more to obtain greater access to the products. In some cases, your suppliers may have agreed to pricing before the pandemic and they may be facing challenges meeting those pricing obligations, leading to further disruptions. Engaging in these discussions may help you to identify issues within your supply chain, and overcome them.
Again, being transparent with consumers about changes to your pricing can be beneficial for some businesses. The research here does seem to be mixed in terms of the benefits of pricing transparency, so you’ll need to determine what works for your business.
Tip 4: Consider Strategically Reshoring Certain Production.
Reshoring production involves bringing production which was previously off-shored back to your local area. For many businesses, bringing entire production lines back to your area isn’t realistic. However, it is likely that you could establish smaller supply chains locally for production areas that are key to your company’s viability. In practice, this involves an increase in modularity, which requires greater collaboration and communication, as well as increased flexibility in your supplier contracts.
While it is more work, this model does offer benefits beyond reduced supply chain disruption. It can also help to reduce the risk of forced labor in your supply chain. In turn, this can reduce the risk of your shipments being detained at the border (a trend we discussed in our earlier post on reducing the risk of forced labor in supply chains).
Tip 5: Contemplate Consumer Privacy Before Introducing Dropshipping or Direct-to-Consumer Delivery.
We’re seeing more businesses offer ‘direct-to-consumer’ delivery, where products are delivered directly to the consumer from the warehouse – bypassing the typical stop-off at the retailer in the middle of that process. This approach promotes efficiencies and can reduce the impact that product warehousing has on the environment, while also reducing costs associated with getting a product from a supplier to the purchaser. However, it’s important to bear in mind that privacy breaches that impact third-party vendors can impact your business.
This model relies on businesses providing the third-party supplier with consumer names and addresses. This is personal information that may be protected by privacy laws in the jurisdiction your consumer lives in. It’s critical that businesses adopting this model know and understand their obligations under privacy laws. Given these laws vary from state to state, and country to country, it’s best to get advice from your privacy counsel.
If you’d like to discuss your supply chain contracts with us, reach out. Our team would love to help you overcome any challenges you’re currently facing – whether that’s requiring greater flexibility, increasing protections, or embedding efficiencies.
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