My Supply Chain Problems
I got a ring today from Haverty’s, the furniture store. Last winter — January 16, to be precise — my wife and I purchased a sofa there, with delivery promised for May. In March, I got a phone call: there were delays, and the sofa would arrive at the Haverty’s warehouse, in Atlanta, on July 13. That schedule has now been abandoned. Today’s news was that our sofa is expected in October. By then, Haverty’s will have had the use of our money for nine months and delivered us nothing in return.
The sofa, by the way, is to be made in Mississippi. The problem, it seems, is that the blue fabric that is to cover the frame and the cushions comes from China. It apparently hasn’t been delivered. The salesperson explained that the entire furniture industry is having supply-chain problems. My response to her was that I don’t accept this excuse. As far as I’m concerned, the problem lies not with China or with the ship lines that are to carry the fabric, but with Haverty’s. The company has badly mismanaged its supply-chain risk, and my wife and I, as its customers, are bearing the cost.
Let’s be clear: supply-chain interruptions aren’t always avoidable. Things happen. Earthquakes and fires disrupt factory production. Ships and trains run behind schedule. Deadlines are missed. No business operates a hundred percent according to plan.
But well managed businesses seek ways to control those risks. They purchase inputs from different places (no one told Haverty’s to order all its upholstery fabric from China). They ship those inputs via different routings (overdue ships may be bobbing in a long queue outside Long Beach harbor, but there aren’t long delays in Houston or Savannah). They use multiple plants to turn those inputs into finished goods. They build resiliency into their supply chains, which usually means building redundancy into their supply chains.
If Haverty’s had done that, it might have had some options to offer us when it first informed us in March that our sofa would not arrive on schedule. Perhaps we could have switched to a different upholstery fabric, not made in China, that would have been available sooner. Perhaps we could have changed our order and selected a different sofa, assembled in a different location, that wouldn’t have taken so many months to produce. Instead, its failure to manage supply-chain risk left us, its customers, exposed to its inability to make good on its promises.
Alas, our sofa is only a small part of a much larger story. Many, many retailers and manufacturers have misjudged the risks of long and complicated supply chains. In seeking to minimize costs, they have failed to incorporate the risk of business interruption into their cost calculations. The cost is very real: finding customers is a significant expense for most businesses, and driving them away by failing to live up to promises is money down the drain. Once potential business interruptions are accounted for, many of today’s supply chains may not make sense.Tags: risk, supply chains