Industry-wide supply shortages are creating demand. What happens when there’s demand? Prices skyrocket. Cars, raw materials, weight equipment, etc. are all rocketing in price. Car manufacturers can’t get chips which is driving up the price of current inventory. In some areas, a new Escalade is running $20,000 above the sticker price. What’s even worse?
Everyone is buying computers, laptops, TVs, monitors, etc. Those electronics are getting the chips before the automotive industry. GM just shut down a major production facility because they can’t continue production without chips. Nick recently visited a machine tool builder and they can’t get the controls they need—so they can’t produce their product.
Tip #1: Find alternative vendors
A motor manufacturer that Nick works with is a Japanese company. He got in contact with the actual manufacturer in Japan to get some motors to finish their chip conveyors. There is demand to make products to be manufactured. People have normal vendors and suppliers to get parts. But the normal vendor base is at capacity. 4–6 week deliveries are being stretched to 10–14 week turnarounds. So what do people do? Look for a second supplier/OEM, like Carr Machine & Tool. But when we get busy, the process resets.
Jason’s business is more nimble than national competitors. Because of this, they secured a huge deal from a national tooling distributor who couldn’t help their customers get the tools they needed. If you talk to customer service at a large company they just tell you that they’re out and the conversation ends there. But when you’re a small company, you can be nimble with the supply chain to meet demand.
Don’t be afraid to move around the supply chain and use different sources when you need to. You can move from an A-player to another to help yourself in the supply chain.
Tip #2: Utilize automation when possible
On top of supply chain issues, it’s also becoming increasingly difficult to hire people. So manufacturers should look at automating some of the shop floor to help with those capacity issues. Software can automate some of the things that a person would traditionally do. Automation allows you to take on more business with the same amount of people.
Tip #3: Double-down on communication
Everyone is dealing with price increases. If an end-user is given a quote but we come in with higher pricing as a middle-man, that quote can’t be changed. You need to communicate with your distribution chain to avoid that problem. Give them a heads-upwhenever possible. People are more accepting of price increases and late delivery because every industry is impacted right now.
But they will be angry if they find out last-minute, well after you knew. No one wants to hear about a price increase or delayed delivery but they’d rather know sooner versus later. Allow them time to prepare with proactive communication (as far ahead as you possibly can). People understand what’s happening in the economy and will be more gracious if you communicate.
Jason just met with a new client who makes large equipment for the medical industry. She’s on the phone every day to connect with every player involved to resolve her issues in the moment. Many companies don’t have the staff to be proactive—so she became the person to resolve those issues.
How else are supply chain issues impacting the industry? Do we see change coming anytime soon? Listen to the whole episode to hear our take!
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