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Editor’s note: The following column was submitted by Jim Abbey, a volunteer business mentor with SCORE’s Tip of the Mitt chapter. Abbey, a Charlevoix resident, worked in event management in the automotive industry prior to his retirement. He also has experience teaching business classes at the college level.
In June of 2018 I wrote an article about a business’s supply chain and how one must consider various disruptions in your supply chain (see article text below). Back then, I could not have predicted we would be in the current global pandemic that has impacted us all.
If you happen to be in an “essential business” and still operating, your challenges are great. Perhaps you are managing to stay open with takeout and delivery options for your customers, waiting to reopen.
Others may have had to expand their online offerings as the only alternative to in-store shopping. Many have had to stop operations for the time being. I hope all of you will survive the current circumstances and will be back.
You may have seen consumer product supply chain issues such as lack of toilet paper, disinfectants and, more recently, meat shortages. Businesses of all sizes are having to rethink operations as well as supply chain issues.
Hopefully our federal, state and local governments continue to support the medical supply chain that is most vital today.
When you have the time, please rethink your supply chains and how your business can handle disruptions.
Making preparations
The 2018 article reads as follows:
Supply Chain Management is a phrase we often hear in manufacturing discussions. However it is important in all business.
For example, let’s say you are running a hair salon business from your home in the basement.
You have customers coming to you because you use a special formula of hair products that are only made by one company. What happens to your business if that manufacturer goes out of business? Will you have enough inventory to continue your services until you find an alternative? Will your customers keep coming to you if you change products?
I call this process of thinking about scenarios that can affect your business the “what if” process.
In all businesses we need to prepare for minor and major events that can disrupt our business.
In many cases we buy various types of insurance to protect the business and employees from accidents, fire, etc. Whom you buy your supplies from and where should also be thought about.
Several years ago when Japan incurred an earthquake and tsunami, a particular paint plant was damaged and had to quit manufacturing black paint.
The problem that arose was almost all the major automobile manufacturers used this manufacturer for black paint, and no other supplier was readily available. For several months you could not order a brand new automobile that was black. Here was an example of a major global industry not thinking “What if?”
The events or scenarios that can affect our business fall into two categories: external and internal, or as I like to think about it, those that I can control, the internal, and the external events that I have no control over, yet which may cause great disruption or even closure, if not just costing money.
Natural disasters are the most obvious external ones including fire, storms, i.e., hurricanes, tornadoes, and floods.
Business owners need to consider the likely occurrence of these in the location that you are planning on locating your business. Some type of insurance to cover damage from these is the best planning. What if?
Less obvious external events that you may need to consider and plan for might include a work stoppage by the transportation employees that deliver your supplies or your products. Do you have an alternative shipping method for your supplies if needed, and for you products. If the truckers were to go on strike can you direct your supplier to ship via air, and what would the cost impact be. What if?
Another external event might be a natural disaster such as a drought in India where you purchase your cotton for T-shirts. Due to the reduced supply of your special grade of cotton your cost will go up. You have several choices, change the supplier, or, if possible, increase your price to the customer. Will that cause them to not purchase? Or you might look at buying larger inventory to get a better piece price, but that may cause you to have to rent storage space or build a larger warehouse. Many what-ifs to consider and work through the cash flow impacts.
Internal events are ones that you have more control over: hiring and firing employees, work hours, flex time for workers, injuries on the job. These can sometimes be covered with insurance as well, for example workman’s compensation insurance. However, the costs to your business may become great if on-the-job injuries occur often. Regulations such as OSHA standards may be required, some may be only minor, i.e., emergency exit signs in your offices, fire extinguishers checked annually. Liability for customers falling, etc. is also a concern and can be covered with insurance most of the time. What if?
As you can see there are an enormous amount of what-ifs to think about as you plan to start up a business, as well as periodically after you are running the business and making money.
Annually when you are updating your business plan is a great time to review the lists of what-ifs.
Both times, using simple cash flow spreadsheets is a good way to review the impact of your what-ifs.
I’ll end with the obvious caution, don’t become too paranoid and what-if yourself right out of starting the business.
Be sensible and use common sense. Your SCORE mentor may be of assistance with developing your what-if list and with cash flow impacts. And, your insurance agent is a valuable source of help deciding what and how much insurance to purchase.
Forward to 2020
SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. We have been doing this for more than 50 years. SCORE is associated with the Small Business Administration (SBA) and has 11,000 volunteers nationwide.SCORE.org has some wonderful resources available to everyone.
Tip of the Mitt SCORE is partnered with the Petoskey Regional Chamber of Commerce and mentors there on Tuesday and Thursday from 9 a.m. to noon.
We mentor in pairs and if the scheduled times don’t work for you, we will schedule a meeting outside of those hours at various locations such as the library in Petoskey, the library in Boyne City and various coffee shops.
To make an appointment with SCORE in Petoskey, just call (231) 347-4150. We have 20 mentors between Petoskey and our branch in Gaylord.
At the Gaylord branch we partner with the Otsego County Economic Alliance and meet with clients 5-7 p.m. on Tuesdays and 9 a.m.-noon on Thursdays. Call (989) 731-0287 to make an appointment in Gaylord.
We are currently mentoring via teleconference and emails. Please let us help you through these very challenging times.
