Although we talk about the value of the backup to the backup all the time in supply chain circles, when the rubber meets the road with the costs of the backup, it can be seen as excessive. Yet, sourcing and using backup sources of supply is critical. The point of a backup source of supply is to be there when you need them. Thus, there is no point in pursuing this strategy and to to pinch pennies so that you inadvertently create an unreliable backup source of supply. On the other hand, a successful strategy will likely result in market share gains when your competition cannot meet customers’ expectations.
For example, in my prior career as VP of Operations & Supply Chain, our private equity backers were not too thrilled with the cost of our backups. In our case, we had a main source of nonwoven material (which was core to our product) in Brazil. The cost and quality were attractive. Thus, when my Director of Procurement added a backup supplier in the U.S. to mitigate risks, everyone was conceptually happy. However, the cost was higher, and he committed to purchasing 20% of our nonwoven needs from them, which added to our product cost. They were less happy about that.
Of course, higher costs are frowned upon. It was quite similar to the pressure I received in reducing labor costs even though key talent could deliver a significant ROI with reduced waste and usage since material costs were the preponderance of cost. We prevailed as our CEO was focused on common sense decisions.
Fast-forward a few years, and there was a strike or some sort of an issue in receiving goods from Brazil. Even though we were the “little guy” as compared to our competition for nonwoven, our U.S. supplier jumped into action because we were a valued, ongoing customer. Cheers to Bill Weber for his brilliance! A backup in name only is not sufficient. Companies that have “real” backup sources of supply (of materials, I.T., transportation etc.) will thrive during these volatile and turbulent times.
How My Backup Excesses Finally Delivered an ROI
The California wind and wildfires proved the value of a backup to the backup. Unfortunately, where I live has 1990’s cell phone service which is quite ridiculous since I live on the outskirts of Los Angeles County. By no means is this rural! I need a Verizon booster to get decent service which is essential to a consulting business. Of course, the Verizon booster requires internet service which is also essential to a consulting business to be responsive to clients. I kept an old Verizon modem (purchased by Frontier) as backup to my Spectrum service for many years until it was so useless it didn’t even work as a backup. I called them to cancel, and I found out that it would cost more to cancel than to keep it because I also have an old-fashioned land line as an emergency backup as earthquakes occur in CA. Thus, I unhappily kept the useless internet service and unplugged it.
Of course, the internet requires power. In CA, there are many reasons the electricity goes out. Thus, when the house burned down many years ago (a saga for another day), I decided to splurge on a backup generator to power the house when the electricity goes down. After all, CA is known for electricity shortages even though they are regulating electric cars (EVs), electric blowers etc. It has come in handy multiple times for several hours at a time.
Last year, Spectrum started having a series of issues with outages. Of course, no phone and internet are completely unacceptable. Thus, I started looking into additional options for a backup internet service. I called several folks including my land line service (Frontier) with no luck. If I’m known for anything, it is being persistent, and so I didn’t give up. Instead, I called the chamber of commerce and got a referral to a company to help search for options. They did an assessment of more than a thousand potential options, and NONE were available at my house which is in a busy section of the city. Insanity! They suggested a high-speed point to point which is ten times the price. I wasn’t thrilled but agreed to a study. Miraculously, it turned out not to be an option. They provided two backup options which were not much better than what I already had yet would triple the price, and so I decided to put it on hold.
Since T-Mobile is known to be the only cell service that works better in the area, I asked my brother to add me to his plan, so I’d have a backup phone capable of being on a Teams call. A week after receiving the phone, the internet, and I seamlessly was on Teams calls with clients from my backup phone. Yeah! But it still wasn’t ideal.
My neighbor sent an email to our councilmember requesting help as she also is dependent on internet for work. Unbelievably, he happens to own the firm that did my internet search. Coincidently and unrelatedly, a week or so later, it turned out that Frontier installed fios which started one or two houses from me with plans to go in the other direction as well. My neighbor texted that someone stopped by, and they jumped on switching to Frontier. I was at a business meeting but excitedly asked her to get him to stop by my house too. She sent me his name, but I didn’t have time to track down the number immediately. Two days later, I received a call from Frontier saying they wanted to install fios for free and my service would replace my existing service (the unplugged useless service). Now I had a land line phone and better internet for less than what I was paying Spectrum. Of course, I jumped on the deal.
Fast-forward two weeks after the installation, and the power went out for 24 hours with the winds in Southern CA which is obviously a much-preferred situation than all the people devastated by the fires. My generator kicked in automatically, but both Frontier and Spectrum (which I kept for a few months while thinking about the situation) went down. T-Mobile seemed to be struggling as well. Although better service, it is not solid service. Perhaps it was due to the fire congestion because it typically works well. Spectrum texted that the internet was down. After logging into the Frontier app (which took forever since the power service internet was poor), I discovered that Frontier said the service was up. I followed the directions to reboot the router, but it still didn’t work. It suggested rebooting the ONT (optical network terminal). After Googling what that was, I realized that the backup generator was probably not set up to power the ONT. After getting an extension cord, the internet came back up – a backup to the backup to the backup.
A day later, the electricity came back on. The next morning after that, Spectrum texted that the internet was back up. The backup to the backup to the backup came to the rescue! I have a new idea of a better internet backup for the future, but I’m thrilled that my backups came in handy even though I wish they had remained backups for all the people devastated by the fires.
Are You Prepared?
As supply chain disruptions remain at the forefront, geopolitical risks run rampant, weather events (hurricanes, fires, etc.) are shutting down essential sources of supply, and events such as cyber-attacks and strikes have high-impact consequences, it is clear that the best companies will be proactive instead of reactive. If you’d like to take a simple supply chain assessment, check out our complimentary assessment tool. For a quick yet thorough assessment with prioritized recommendations, contact us. In the interim, review our special report, FutureScape: Crafting Tomorrow’s Supply Chain Today to learn about the most pressing risks, solutions, and strategies for success.
If you are interested in reading more on this topic:
Hurricanes, Common Sense Strategies & Predictive Planning Strategies