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Your supply chain is a key component of your business. Without an efficient supply chain, getting products to consumers on time can be difficult. Following the COVID-19 pandemic, a supply chain crisis emerged, leaving many businesses in peril. Learning from the past and preparing for the future is critical to the continued success of your franchise network. This article will explore key options to resolve supply chain delays that may affect your franchise.
Types of Supply Chain Disruptions
Evaluating the different types of disruptions is the first step to finding an appropriate solution. Once you know what type of disruption affects you most, you can take the right steps to resolve any current or potential delays. Disruptions can include:
- natural disasters – hurricanes, flooding, and storms have caused delays due to lost electricity, few workers, or damaged plants;
- transportation delays;
- price fluctuations – shipment delays as suppliers wait for prices to decrease;
- global pandemics; and
- cyber attacks – cyber attacks against your internal systems can bring operations to a halt.
Diversify Supplier Relations
Many manufacturers and retailers are diversifying their suppliers to protect themselves post-pandemic. Businesses with only one or two suppliers often face greater supply issues when their suppliers cannot deliver. As a result, reliance on one supplier can cause your business to lose money and damage its reputation if issues arise.
Importantly, your franchise should work to build relationships with several suppliers. This will help you fill orders without delays. It is best to research and search for suppliers well in advance to help you maintain profit margins rather than using a supplier in an emergency. Moreover, you should ensure your suppliers reside in different locations. As a result, if there are supply chain delays in China, you can still rely on your local suppliers for materials.
When using new suppliers, you may need to update your franchise agreement, disclosure document and operations manuals. These updates will ensure your franchisees are up-to-date and can best utilise their product sources.Continue reading this article below the form
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Communicate With Customers
Customers expect on-time delivery regardless of your supply chain challenges. Moreover, under the Consumer Guarantees Act, you must ensure deliveries arrive at an agreed time and in good condition. Once you realise there may be a shortage of products or inventory issues due to a supply chain disruption, you should communicate this to your customers. Aim to provide as much information as possible concerning how your business will resolve these issues. Clear communication will reduce the likelihood of a customer demanding a remedy for late deliveries, which is an issue you may have no control over.
Additionally, having a central system can help identify customers who are affected. It is also best practice to ensure your franchisees can use the system well and have a monitoring process for customers affected.
Promptly notifying customers can help reduce demands for refunds or unhappy customers. By explaining the situation fully, your customers are more likely to be understanding and patient as you try to overcome supply chain delays. However, leaving them in the dark and not providing updates can anger customers.
Manage Backup Inventory
Many franchises opt to have safety stock in case of a supply chain disruption. Backup inventory ensures you can still meet demand if your suppliers cannot provide materials or components. Doing so can avoid being out-of-stock and customers turning to other businesses that can fulfil their needs.
When managing safety stock, transparency is essential. Your franchisees must keep accurate stock amounts and inventory numbers to make good decisions during delays. Moreover, they should forecast trends to plan for future disruptions and demand levels.
Conduct a Supply Chain Audit
When anticipating supply chain issues, you can conduct an audit to identify the weak spots. Moreover, you can assess environmental, social, and political conditions affecting your suppliers. Your supplier may ask you to sign a non-disclosure agreement (NDA) before conducting your audit. An NDA will prevent you from sharing your supplier’s confidential information with others.
After identifying weaknesses in your supply chain, you can work to find alternative solutions. However, before implementing any significant changes, you must review your supply agreement and ensure you will not be breaching it. Moreover, your actions cannot be in breach of your franchise agreement.
For example, suppose your franchise states that your franchisee will get coffee beans from supplier X. In that case, you should update your franchise agreement and notify your franchisees before changing the supplier.
Commercial disputes are costly, stressful and can damage your business reputation. LegalVision’s free Guide to Resolving NZ Business Disputes can help.
Supply chain delays can happen for various reasons, from global pandemics to cyber attacks. However, you can resolve and mitigate these disruptions through many options. You can diversify your supply base, communicate delays to customers, have safety stock, or conduct supply chain audits to identify weak points. Your franchise agreement, franchise disclosure document and operations manual should reflect any changes in your supply chain.
If you need help managing your franchise network, our experienced franchise lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
You can resolve supply chain delays by diversifying your suppliers, having safety stock, and conducting supplier audits.
Disruptions can come from natural disasters, transportation delays, price fluctuations, pandemics, and cyber attacks.
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