Shortages of supply have multiple effects as they not only delay or prevent sales to customers but also increase prices. This last year has seen unprecedented rises in base oil prices, force majeure and allocation amongst retailers and suppliers of base oils and finished materials. How we manage these events will ultimately determine the long-term growth of our businesses.
Whilst not always possible, having a single supplier of any product or raw material. Leaves your business vulnerable to supply issues be they market led or not.
A minimum of three suppliers for any product, product line or service is advisable. These suppliers should have a track record and depending on the size of your business, should undergo vendor appraisals annually. Many large businesses subscribe to total fluid management programs, which have the advantage of removing the control of lubricants and lubricating oils from the general business; however, all contracts should contain the right of the business to seek alternatives should the incumbent fail or be unable to supply.
We are all used to the bi-annual visit of a representative to discuss either changes in prices or the joint visit with a manager or technical partner.
For critical components, raw materials or services regular meeting should occur to discuss changes and/or price structure. Each company should decide the criticality of each product; however if the product or service is supplied by a single organisation the level of interaction and communication should consist of a continuous assessment with the incumbent happy to undertake any work required to ensure not only continuity of supply but also the supply of statistical manufacturing data should the product be a component. Visiting your suppliers tells you a lot about their business. If you always meet in an office block or convention centre you are not at the heart of the business. For companies supplying raw materials and products make sure you visit production plants. Get to know those at the heart of your supply from drivers to production staff.
Any business should ensure supply of both raw materials and finished product be that a commodity or service. A risk plan can take several forms from disaster planning i.e., fire, flood or loss of critical components within a production line.
Any responsible supplier would also have their own contingency plan for which it would not be unreasonable to request should that product or service form a critical component of production.
Many management plans are put together for quality systems and insurance purposes but to make them viable should be reviewed annually. If you struggle to find yours or worst still must wipe the dust from the cover then the chances are the plan will not be fit for purpose.
No one believes the factory will burn down or rivers will rise to biblical levels but recent years have given everyone a salutary lesson. Oil and lubricants supply over the last six months has been dramatically affected by foreign travel. Whilst this may seem unrelated, the lack of domestic and international flights has reduced demand for fuels which in turn affects lubricant supply. Base oils are a byproduct of the fuels industry and their decline had a knock-on effect across the globe.
The annual review of risk and planning is best done without a crisis in place. Vendor appraisals, stock levels, contacts, contact numbers, alternatives listings, product name updates, process simulations all take time, but these are investments as the well-prepared companies of today will be reaping during these turbulent times.
Exol has already taken steps to protect its customers from a down-turn. See how you can benefit by reading our guide here.
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