Manufacturers rely on a supply chain to provide the raw materials required for production. If a supplier doesn’t deliver materials as promised, then production could be delayed or halted. Manufacturers can guard against supply shortages by creating agreements in advance with backup suppliers.
Reinforcing the Chain with Backup Suppliers
By having a contract already negotiated and in place, a manufacturer can be certain of the backup supplier’s cost and capacity. To further round out potential risks, manufacturers should consider choosing backup suppliers from different regions so that local material shortages and disasters will be less likely to impact order fulfillment. Manufacturers should also consider asking primary suppliers to create a “mutual aid” agreement with partner companies to supplement shortages. Finally, explore the possibility of requiring suppliers to have business continuation insurance, equipment breakdown coverage, and other insurance to help reduce the likelihood of a halt in order fulfillment.
How Resilient is Your Supply Chain?
If you need to strengthen your supply chain, CRI’s manufacturing and distribution CPAs can help you implement strategies that will help ensure your business is up and running – even when your primary suppliers are not.