Wow. What an experience these last few years have been (and continue to be) in the world of business. Since Covid-19 became part of our daily lives, supply chain disruptions have cropped up left, right, and center.

In fact, an EY survey of 200 senior supply chain executives found that 57% of businesses had severe disruptions while 72% reported a negative effect. In particular, semiconductor chip shortages are wreaking havoc as we speak.

A Goldman Sachs analysis expects this shortage to affect 169 industries, potentially causing a 1% decline in US GDP for 2021. After all, semiconductors are used in many different sectors, from soap making and consumer electronics to concrete manufacturing and more.

The question is, are you and your company prepared to navigate these significant supply chain disruptions?

This article will detail how I’m keeping our small electronics startup in stock and how you can too.

Let’s dive in.

1. Understand your supply chain issue

In particular, small businesses, startups, and bootstrapped companies need to be acutely aware of their supply chain.

Now that you’re aware of the potential issue, you should talk to as many people on the front line as you can. For me, that was contacting factories, chip manufacturers, and suppliers.

You want to get as close to the origin of the problem as possible so that your information is more accurate and timely.

2. Gauge the impacts for your company

Gauging the impact on your company is particularly important since this will tell you how you need to react to the issue. For example, I took the information I received from the front line and extrapolated it based on our semiconductor needs.

After this, I realized how much of an issue this would be for our company. We’re a small startup that’s in the process of developing a new product, and we rely solely on our current device sales to survive. Realizing that running out of stock—even for a day—could compromise our company’s health lit a fire under me to find a solution.

3. Start solving your immediate supply chain problems

Now that you know how these supply chain issues will affect your company, it’s time to start mitigating the danger. However, before you start solving problems, you need to have an overall goal in mind. Without this goal, it’ll be difficult to negotiate any tradeoffs that need to happen due to your solutions.

After gauging the potential company impacts, I knew I had to focus on one goal, not running out of stock until the shortage ends. While I did have a secondary goal of keeping our margins healthy, not running out of stock came first.

The plan

While the crisis isn’t completely averted, the immediate danger is over for now.

To avoid complete disaster:

• I contacted suppliers and chip manufacturers, asking for help to get our electronic components shipped on time. While the orders were late, I believe getting on the phone with them drove home the importance of our situation.
• I started communicating more closely with our contractor manufacturer (CM) as they are the ones that are in constant communication with the chip manufacturers and distributors. By strengthening communication with our CM, I believe they understood our urgency and made themselves available when I requested two extra production builds.
• I kept an eye on the state of our supply chain so that we were ready to pounce on any opportunity or avoid problems. In fact, through my observation, I noticed a unique component that was significantly delayed, and with the help of the hardware team, we were able to source an alternate part to mitigate future risks.
• I then had to negotiate a reasonable price for the alternate component with the manufacturer and hire a layout designer to redesign our boards (we didn’t have the bandwidth in our small team). Now, we’re working towards getting the new boards made and tested.

4. Create a revised supply chain plan to mitigate risks

While you may have avoided immediate danger with your initial plan, it’s essential to plan for the future. Supply chain issues can last for months (even years), so you should make a plan for at least the next 12 - 18 months.

After we weren’t on the cusp of being out of stock, I made a plan to increase our stock levels above and beyond what we would traditionally have. On top of this, we made a plan for maintaining (and improving) industry relationships and our communication with key stakeholders.

How we’re surviving our supply chain disruption

It’s been nine months since the initial impact of the semiconductor supply chain disruption, and things are looking healthy.

By following these four steps, we achieved our goal of building a surplus of devices and components. Plus, we are managing to re-design our alternate component for extra risk mitigation. As it stands, we are guaranteed to have enough inventory until March 2022, and we did it all without running out of stock or raising our prices.

If you’re in the midst of a supply chain crisis, don’t stress. Take a deep breath and build a better understanding of your supply chain issue, gauge its potential impact, and start formulating a solution one step at a time.

If my team and I can do it, so can you!