Supply chain management has been an ongoing challenge for small businesses since the onset of the pandemic and businesses engaged in exports and imports have been especially hit hard. On this week’s episode of The Playbook, host Mark Collier, business consultant for the UGA Small Business Development Center, sits down with Darrel Hulsey, Director of the UGA SBDC Office of International Trade. Darrel is going to share his insights on how businesses can best manage the supply chain challenges currently in play.
Transcription:
Mark Collier:
Welcome back into the Playbook, Darrel.
Darrel Hulsey:
Thank you, Mark. I appreciate your having me.
Mark Collier:
All right. Well businesses, they’re facing a myriad of challenges with the supply chain issues and I’m hopeful today that you can kind of shed some light on where we’re headed, man, and where we are and where we’re headed. So let’s start kind of with the basics. What’s the difference between supply chain management and logistics, because oftentimes those two terms are used synonymously?
Darrel Hulsey:
Right. In today’s world, they are interchangeable. However, there are some slight differences. The supply chain management is the entire process of getting a product from idea concept, to the business and then deliver it on to the customer, and really engaging the customer in the process. The logistics part of it is really related more to transportation, warehousing and logistics, as the name implies. So supply chains management is the overall process of getting products produced and delivered. Logistics really is just one part of that chain.
Mark Collier:
All right. So I know there’s probably separate issues with both types. So kind of share with me some of the issues you’ve seen with supply chain management and also with logistics.
Darrel Hulsey:
Sure. Well, there are separate issues, but it’s rather unique that there are some common issues related to both. And those issues primarily right now are cost, obviously costs are increasing. That is really common to any part of that change. Slowness. No longer can businesses rely upon getting products or components on a timely basis, so there’s been a slowdown in many parts of that chain. Unreliability. Suddenly you can’t get product or a product is going to be delayed quite a bit, so you can’t be as confident in the reliability of sources as you once were. And obviously there are challenge is trying to find good sources for products now. So, that’s a common problem. So all those together, it’s been a challenge either with logistics or with the supply chain management in general.
Mark Collier:
Well those challenges have kind of trickled down to the consumer. Goods are tough to find and when you do find them, their costs have significantly increased. So hopefully this entire process is going to play out. But I know you work in that space exclusively. I don’t particularly see things changing anytime soon, so we’ll see what happens. All right, so what would you suggest to exporters, especially small businesses and how to kind of formulate strategies to deal with these issues?
Darrel Hulsey:
I guess I should say first, there is no one solution that’s going to solve the entire problem. It’s a combination of factors that are contributing to this. But just a few ideas that I think a lot of my clients are finding that is useful to them. Number one, is diversifying their supplier base. And also not only diversifying, but trying to find suppliers that maybe are a little closer to home than before. So, that tends to alleviate some of the issues. I also find that working with good freight forwarders, logistic partners seems to be an incredibly important part of this process too. And simple things like maybe if you’re exporting, you should ask your clients about what alternative ports there may be for their product instead of if you’re shipping into a very busy port, maybe you want to find out if there’s another port that they have access to, that is less busy, so maybe that would help the situation.
Darrel Hulsey:
And another thing I think that’s very important too, is just basic forecasting. Do your homework. Know when you’re going to need product, how much you’re going to need of it and when you’re going to ship and when your customer expects you to have it. So basic forecasting seems to help those small exporters too. Another tip maybe, is to increase your inventory levels when you can. Obviously that’s some bit of a challenge at times, but trying to increase the inventory levels, having a little more product on hand, probably tends to give you a little more power in the bargaining position with your clients.
Mark Collier:
No, that makes perfect sense. And you raised two important issues about ports closer to home. I was in Savannah last week on some training and we heard a presentation from the port down there, Port Authority of Georgia. And they said they have been exploding in terms of growth because of those alternate ports that you just talked about. And I think another offshoot of that also is manufacturing here. You talk about diversifying your supplier base, that has helped manufacturers here, kind of capture some of that product delivery that businesses need.
Darrel Hulsey:
Exactly.
Mark Collier:
All right. So how does a small and medium size enterprise exporter kind of mitigate risks during this kind of tenuous environment?
Darrel Hulsey:
Sure. Well, I think the first step really is just identifying the risk. You can’t really deal with the risk unless you know what that risk is. So what I suggest is all the small businesses I work with identify all points in that supply chain, then assess those points individually to determine what risk are associated with each of those points. And then, you can start having a plan of action dealing with each of the points where you know there’s identified risk. I would also suggest some rather common things you can do, build extra time into your contracts with your customers. Maybe you can’t get it delivered in 30 days, maybe it’s going to be 60 or plus days, so be sure to build a little extra time in that process.
Darrel Hulsey:
A big component to me is insurance. Making sure your shipments are insured, not only logistically, such as marine insurance, but also if you’re selling on open account or you’re giving your customers terms, make sure you have that sale insured also. So you’re mitigating a lot of the, not only logistical risk, but some of the cash flow risk too, involved in the process. And again, I say, deal with experienced logistics partners. That’s probably one of the biggest things you can do, especially for an exporter, is to make sure you’re dealing with somebody that has ample experience in that particular product and industry. And finally, I would say again, back to just build a few more components in your inventory, just have a little bit of a fallback position in your inventory if possible.
Mark Collier:
Okay. Yeah. We call that in the project world, my previous life, float.
Darrel Hulsey:
Yes.
Mark Collier:
Want to build some float in there.
Darrel Hulsey:
That happens, yeah.
Mark Collier:
No, those are sound tips for businesses who are involved in importing and exporting. All of those roll up into the importance of strategic planning. Why clients come to you in the first place to really map out that path to kind of mitigate some of these effects that the supply chain crunch is delivering. All right, so what role can your logistics provider, you mentioned that, kind of play in helping ease this situation.
Darrel Hulsey:
Okay. That’s a great question. Again. I say that an experienced logistics partner is crucial in today’s world. But number one is, determine that they truly do have experience in your industry and in the products that you’re intending on shipping. That’s important because each product may have a little different entry requirements, a little different logistics requirements, so make sure you’re dealing with an experienced logistic partner that knows about your industry, knows about the products you’re shipping. That’s crucial, I think.
Darrel Hulsey:
That logistics partner can in turn, if they know the environment, they know what shipping lines are out there, what problems they’re facing, et cetera, they can better prepare you and give you a better sense of when your customer can expect to receive your goods. Practical things. They can help you with consolidated rates on shipping. They know what’s out there. They know what rates are available to you. They can put those together and you can come away with a little cheaper price tag and the shipping component of all this. And they overall, they just manage the process for you and they help navigate all the challenges that are in today’s world for you.
Mark Collier:
All right. So in short, what this supply chain crunch has kind of underscored is the importance of collaboration and partnerships and choosing the right partners, for your company.
Darrel Hulsey:
Right.
Mark Collier:
All right. So how does a kind of small to medium sized business enterprise deal with customer expectations during this time? Because I know me as a consumer, it’s frustrating when I go into retail outlets, I can’t find what I’m looking for. So how do your businesses kind of deal with that?
Darrel Hulsey:
And I think your experience is no different than that foreign customer waiting on goods from the US. My overall comment would be, just make sure there’s clear communication between you and your customer.
Mark Collier:
Got it. Over communicate.
Darrel Hulsey:
Over communicating by all means. Most customers all around the world know what’s happening in the supply chain, they know there are hiccups. But, the key is, just always being constant communication with them. Don’t over commit. If you were able to deliver in 30 days before, maybe it’s going to be 60 plus days now, make sure they’re well aware of that commitment time and that there will be a change. And I would say again, make sure you build any possible delays into your contracts with your customer. So beyond expectations, there are no other issues to be facing with that customer. Bottom line, just let them know what’s happening, be in clear communication with them.
Mark Collier:
Well, I’ll give you a real world example that we are in a process of purchasing a high end double oven for our home and from, I won’t mention the manufacturer, but it seems like every month we get an email from them saying, “Okay, now you projected delivery date is pushed out to two weeks.” Great communication, but those emails are starting to become a little bit frustrating.
Darrel Hulsey:
Yes it is. And the good thing with today’s world, if you’re dealing with some of the major logistics partners, you can track your shipments and then you can pass along the position of that shipment onto your customer.
Mark Collier:
Okay. That makes perfect sense. So how does the importer or exporter deal with cost fluctuations during this time? Because costs are always at the forefront of small businesses.
Darrel Hulsey:
Always at the forefront. And as we well know, cost is a factor in profitability. And that’s why businesses exist is to make a profit. So what I would say is just have a good way of tracking your cost. We all have some pricing models, hopefully, but now’s the time to refine those costing models. And those costs are going to change unfortunately on a very frequent basis in today’s world. So make sure you’re tracking those costs, make sure that you know what the profitable level is on your particular product that you’re shipping.
Mark Collier:
Makes perfect sense.
Darrel Hulsey:
And of course, reality says there’s a balance between profitability and marketability, so you can’t always increase those prices and expect to be marketable. So somewhere there’s a fine line there, but you have to keep up with what your level is on each product that you’re shipping.
Mark Collier:
Absolutely. Sound advice, Darrel. Sound advice. So lastly, what other advice might you offer businesses who are in the export business, that might help them?
Darrel Hulsey:
Well, I think overall, we all know it’s a tough time. It’s a challenging time for all businesses, whether they’re exporting or not exporting. But I would say number one, just always be aware of the changes that are going on. Keep informed as to the changes, especially in the supply chain management world. Those changes are happening almost instantaneously, so you’ve got to be aware of those changes. Keep in constant contact with all your partners in the supply chain, whether it be your suppliers, your customers, or your logistics partners, just always be in constant contact with them. Be in constant contact with your customers. And again, don’t let them learn surprises from somebody else. You be the one informing them of those changes. And keep them as your friend, they’re aware of what’s going on, but just be in constant contact with them. And I would say this, make sure that your internal staff knows what’s going on too.
Mark Collier:
Yes.
Darrel Hulsey:
Make sure your staff is well aware of the challenges and the changes that your business is facing, so they can better deal with it. And also they can better explain to the customers they may be in contact with also. Bottom line, plan for the unexpected. It may happen. Hopefully things will improve, but if not have a plan of action.
Mark Collier:
I love it. So back to the recurring theme, communicate, communicate, communicate.
Darrel Hulsey:
That’s it Mark.
Mark Collier:
Darrel Hulsey, Director at UGA SPDC Office of International Trade. Want to thank you for taking the time out of your busy schedule to come in, just impart some words of wisdom. You are a wealth of knowledge in terms of importing exporting. So I would encourage any business owners who are out there, who are in the import-export business, to reach out to you, Darrel won’t steer you wrong.
Darrel Hulsey:
Thank you so much, Mark. Appreciate your having me.
Mark Collier:
All right.
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