Having a family-owned construction business in times of
uncertainty, we spent many sleepless nights wondering how we were
going to make payroll. Where would our next job come from? Would it
be profitable, or would something terrible happen to cause us to go
bankrupt?
If your company relies on material suppliers in various
geographic locations, it's likely that at some point, your
construction business will face a supply chain disruption. Whether
that disturbance is caused by a virus, regulatory lockdown,
international tensions, changes in local laws, or a natural
disaster, there will probably be scenarios in which your suppliers
or transporters face obstacles that affect your
company.
Here are some steps you can take to respond to such situations
and even prepare ahead of time for them.
1. Know your supply chain
An essential first step to any preventive or reactive plan is
to know your supply chain. You and your team should know who and
where in the world your suppliers are, where their suppliers are
(if they have any), and any regional laws or international tensions
that could affect your supply chain.
Knowing how long transportation of goods takes can help you
anticipate when your suppliers' disruptions will affect you. For
example, if you receive goods from abroad and manufacturing plants
in that country have shut down, you might not be affected for a
month or two. This gives you some time to review the situation and
react based on your current inventory and your clients'
needs.
2. Reach out to your suppliers
Find out how the delays or issues affect your suppliers and
how they plan to address the case. If they don't already have a
plan in place—or if there isn't anything they can do about the
situation—you may need to take action on your own, such as finding
new suppliers, sourcing new products, or planning new transport
routes.
Reaching out to your suppliers can also help you more
effectively manage any customers or clients waiting for goods from
you. The more information you have, the better equipped you are to
make decisions about your current status and how your construction
business will operate through the disruption, or whether you need
to slow down or shut down.
3. Plan ahead
Have contingency plans in place and set parameters for when
the contingencies will be activated. If the disruption is likely to
slow down the delivery of goods but not stop it, place urgent
orders ahead of time—even a month or two in advance of when you
usually would.
If there is a chance your suppliers can't get you the items
you need, determine if another source can be found, albeit a
temporary one.
Even if you aren't currently affected by a supply chain
disruption, knowing the alternatives available to you, how quickly
they can respond, and their cost provides you with a level of
protection in the case of a risk to your supply chain.
Set guidelines for when you'll turn to your alternate
arrangements. If you wait too long, other companies could have
already reached out to your alternatives, leaving you with no
options.
Final Thoughts
If possible, diversify your parties. It may cost a bit more,
but you're less vulnerable to disruptions if your suppliers exist
in different areas. There are many issues out of your control that
can affect your supply chain. It's vital that you have a plan in
place so you can respond to such scenarios and keep your business
operational.
Over the years, I came to understand that the Universe has
everything under control, and in the end, everything works out for
the best. So if anything has not worked out for the best, it is not
the end.
Get in touch with us if you have a question about your
construction business. We are here to help you navigate the changes
during this challenging time.
About The Author:
Sharie DeHart, QPA is the
co-founder of Business Consulting And Accounting in
Lynnwood, Washington. She is the leading expert in managing
outsourced construction bookkeeping and accounting services
companies and cash management accounting for small construction
companies across the USA. She encourages Contractors and
Construction Company Owners to stay current on their tax
obligations and offers insights on how to manage the remaining cash
flow to operate and grow their construction company sales and
profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com