Product Flow–Potential Hazards That Can Cripple Your Company?

Cargo containers, imported goods, dock, shipping, import, export, tariffs, global economy

Importing components, finished goods, or packaging from other countries can cause a hiccup in your supply chain.

Right now Coronavirus aka COVID-19 is taking over the news. The virus and the debate on if it is “just like the flu” or if it is the next death scourge pandemic is causing panic, shelves to be stripped of water, cleaning agents, toilet paper and canned goods. Major events on our radar, like South By Southwest (SXSW) and the American Quarter Horse Association convention, are being canceled, causing economic repercussions in cities such as Austin and Las Vegas, costing individuals and companies hundreds of thousands of dollars in cancellation fees, which trickles down to airlines, hotels, restaurants, etc. all losing money and fewer dollars in workers pockets. BUT, it brings up another side point. China is still being hit pretty hard with the virus, causing workers to be quarantined, and becoming too sick to work. When you have a product or component or packaging that is made in China….it may LITERALLY be on the slow boat or not coming at all.

Many companies, even if products are assembled or made in the US, import components from China. Electronics, sensors, plastic, metal, heating units, footwear, most tech clothing, etc. are all MOSTLY manufactured in China. Apple has already warned investors it will not hit sales targets this quarter as factories and stores in China are closed. But besides the obvious cell phone, iPad and printer that are made in Asia, have you considered that the packaging, labels (many times required by US law on food and apparel), fasteners (buttons, velcro), and even packaging tape, printer ink, or shopping bags are made in China? Think through your ENTIRE product life cycle, including marketing materials and packaging, fixtures, labels, packing materials and anything you purchase from an outside vendor. Could factory and shipping delays from China potentially interfere with YOU getting your product out the door and money in your bank? If you can’t ship completed product on time, will you lose sales? For retail stores, where is your product coming from? If you can’t fill your fixtures, what will you replace it with? Something mundane like packaging may seem silly, but if you can’t ship your product correctly and it’s damaged, what will you find for an alternative? Do you have an alternative printer for your labels if they are required on your product?

According to Economist Sung Won Sohn of Loyola Marymount University, the virus outbreak, along with the Trade War, are causing some US Companies to rethink their reliance on Chinese suppliers (All Things Considered, 2/20/2020), and consider shifting the supply chain to other parts of the world, which may increase costs. I might argue that cutting costs in the short term by using overseas suppliers may not pan out so good in the long term when you’re crippled by a missing piece of the puzzle and can’t ship or sell.

Many of my clients are running into issues with components of their process, not necessarily the end product. Steel, velcro, neoprene, and plastic supplement buckets all come on the boat. So does bubble wrap, ziplock bags, and printer ink. Now may be the time to find alternative producers, less packaging, and not put all your suppliers in one boat. Because that boat may be a long time coming.