Supply chains all over the world have been disrupted, and it’s costing more to ship products, too. It’s hurt most businesses over the last year, and according to research group IHS Markit, it’s likely to continue this year.
But there are a lot of things you can do to help your business. So let’s look at ways around the supply chain issue.
• Nearshore or even source products domestically. China did very well because it turned out cheap products. Now, however, those products will now have to include the higher cost of shipping, and they are likely to turn up late. Look for relatively local suppliers and accept that your product prices may need to increase.
• You may need to find a new supplier if your former supplier has gone out of business or simply can’t be contacted. Look up the number two choice from your initial research before you start doing all the research over again – if they were only narrowly edged out by your first choice, it’s worth contacting them.
• Target your ad spend better. Start promoting heavily the products of which you have the most stock. If you have incoming supply, work out how long your inventory of that product will last at current sales rates – if there’s any danger of running out of inventory, stop advertising. This should help save you from stock-outs, and it will also make your advertising more cost-effective.
• Launch new products. This might not seem like the right time, but in fact, a lot of bigger businesses have been doing this. In some cases, they’re simply replacing components that were offshored; others are looking to launch while their competitors have been weakened. Diversifying your product base makes very good sense, too, if you suspect one or two of your products could be prone to supply chain trouble.
• Keep in touch with your suppliers regularly. Some people don’t speak to their suppliers between reorders – make sure you do. If trouble is headed your way, if their order book is too full for instance, you need to know about it – and you need to be one of their top-of-mind customers.
• Raise your product prices on products that are selling ‘too well’ and where you have supply uncertainty. You probably have a little room to move the price up without losing your rankings.
• Install a buffer for your most popular products by keeping some in storage yourself, rather than sending them directly to Amazon. That way, you don’t pay Amazon storage charges till you need to – but you ensure you have inventory when it’s needed.
Above all, you need to ensure that you’re continually tracking your inventory. A lot of FBA sellers are very good at finding new products and marketing them, but they are not so good at monitoring what’s in stock. You’ll need to track sales velocity and forecast how long your inventory will last at current sales levels – or at the current growth rate if demand is strong. Don’t forget sales spikes like Prime Day, either.
(If your hatred of having to monitor inventory is exactly the reason you decided to go for FBA rather than FBM, then hire someone to do the job for you.)
And remember that you’ll want to reorder sooner rather than later this year. Give yourself room for a two-month or even three-month delay and you’re probably going to be okay. (Make sure well before you place the order that you know the latest times to production from your supplier, and the current time to deliver on your usual route.)
It’s not going to be an easy year. But if you manage things right, it can still be a profitable one.