Yoga Class Etiquette, Taylor Swift, and Supply Chain Management

The first 5 minutes of a yoga class are in silence. The goal is to focus on your breath, clear the mind, and prepare for a focused effort.

So, I was surprised when a student came in late. Their phone was loudly repeating “you have reach your destination”. The new student asked the instructor if he needed to turn off his phone.

Seemed to show a lack of awareness…

The coronavirus pandemic forced businesses to focus on topics that may not have been top of mind. For many business owners, that includes supply chain management strategies.

What is Supply Chain Management?

Simply put, the purpose of supply chain management is to get the items you need to create a product or deliver a service to customers. You need quality items that are delivered on time, so that you can fill orders.

There’s nothing more frustrating than to get an order from a client that you cannot fill. Not only do you lose the revenue from the order, you also run the risk that the customer will start doing business with a competitor. If you can’t deliver a product or service when the client shows up, you may lose all future business to the guy down the street.

Supply chain disruptions may lead to inventory shortages, higher product costs, and lower earnings.

We all dealt with supply chain problems during COVID. You may have seen a limited number of grocery items (remember the toilet paper shortage?), or waited months for an appliance to arrive.

A sound supply chain management strategy starts with reliable suppliers.

The importance of suppliers

Having reliable suppliers is critically important to a business. If you manage a retail clothing shop, for example, you need quality products that your clients want to buy. You need a supplier who can provide the right styles, sizes and colors.

The supplier needs to provide the quantity product you need- when you need it, and the price should be reasonable.

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If you manufacture a product, you may use suppliers to provide components for your product. A shoe manufacturer needs a leather supplier, for example. The same factors apply to a service business that relies on an IT firm to provide internet access and cloud storage.

When the product drives the business

In some cases, a few particular products drive sales for the rest of your business. We’ve all seen, for example, a display of shovels and rock salt at the grocery store before a snow storm. The grocery store hopes that you’ll come into the store because you really need a shovel. While you’re there, you’ll remember to buy bread and milk (we always need bread and milk in a snowstorm).

The shovels might even be priced as a loss leader. The store may sell the shovel at a loss, hoping that you’ll come into the store to buy other products- products that are sold at a higher profit margin. When you manage sales mix effectively, you can increase total sales and generate higher earnings.

Which brings us to Taylor Swift.

Taking a big bite of the Apple

In 2015, Time Magazine explained:

“Apple announced on June 8 that it would launch its own streaming music service…. But its launch would come with three free trial months of service—months during which it would not compensate labels for the music it streamed.”

Once Taylor Swift protested that she was not going to be paid royalties during the three- month trial period, Apple backed down and agreed to pay the fees. Taylor Swift is not only a big draw to users of the music service- she also has influence over other artists. The supplier (Taylor Swift) is driving the business (streaming music service).

How to Manage Suppliers

In the case of Taylor Swift, the customer demand for the product outweighed the price paid for the product (royalties). In other instances, you may determine that more than one supplier can provide the product to you.

A common mistake in business is to “chase” the supplier who offers a cheaper price. There are other considerations besides price:

• Quality: If the product has defects, it will slow a manufacturer’s production process. If you’re a retailer, you don’t want to sell a defective product that you stock as inventory.

• Timing: As mentioned above, a supplier must be able to ship you product when you need it. If not, you may lose business. Paying 10% less doesn’t do you any good if the product is shipped late.

• Variety of Product: A big issue for many businesses is using too many suppliers. One way to address this issue is to find suppliers that offer many of the products you need- one stop shopping for you. If your supplier can meet this requirement, you might be willing to pay more.

Consider all of these factors when looking for suppliers. Meeting the needs to your customers is about more than just price. By using these tips, you can meet your client’s needs as grow your business, and improve your supply chain management strategy.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website) https://www.accountingaccidentally.com/

Image: k4dordy, yoga