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As I walk into my sixth decade in the world of business, I can say I’ve seen a lot. Anyone can see that 2022 is turning into a challenging year (It already has been for many).
We’ve been living in a VUCA world (volatile, uncertain, complex and ambiguous) for decades — long before the pandemic seized the supply chain. Demand is up, prices are up, consumers are spending and Russia’s invasion of Ukraine will only exacerbate the situation.
At the same time, there are constraints and shortages throughout the supply chain, with the fewest available workers in decades who are demanding higher wages and more benefits.
While supply chain issues vary by industry, product and service category, and by the size, scale and scope of a business, there are some common approaches for managing the challenges: stockpile, do without or find a viable substitute.
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Right now, we are experiencing BOTH constrained supply and increased demand for many commodities. Some are simply unavailable for any amount of money for some amount of time.
At Procter & Gamble, occasionally but fortunately not very often, we had to temporarily suspend sale of a household or personal care product because a key ingredient was not available. Take psyllium, for example, the active ingredient in the popular Metamucil.
More often, we were able to adapt our formulas or provide product substitutes. For example, many of our cleaning products contain surfactants that can be derived from natural plants or oil based commodities.
Initially, our response to supply chain constraints was to switch back and forth between the commodity raw materials depending on availability.
As we became more capable and more experienced, we were able to shift in and out of formulas quickly across categories and countries, depending on commodity raw material sourcing locations, supply availability and prices.
Now, in many household cleaning products and several personal care categories, we offer product lines that are formulated from either “natural” or synthetic materials to meet the changing and different needs and wants of consumers in markets around the world.
As a lasting note, perhaps the most important input in any business during challenging economic times occasioned by high inflation and supply shortfalls is a company’s human resource.
At P&G, we believed our people made much of the difference. In fact, R.R. Dupree, the first non-family CEO, famously said you could take away all of the company’s brands and products, offices and manufacturing plants. You could take away everything except our people, and we would build it all back again in a decade.
For Sarasota businesses and nonprofits, 85% of which have 5 to 10 or fewer employees, and many of which operate in the service sector, taking care of the players on the team might be the most important supply chain decision any company can make right now.
Focus on the resources that matter most. To ensure an adequate supply, you need to adapt. Stay agile and flexible. Be prepared, be decisive, and move fast.
A.G. Lafley, the former CEO of Procter & Gamble, worked for decades in and with large public companies. Over the past 15 years, he has turned more of his attention and energy to small businesses and nonprofits. He currently serves on the boards of Omeza, Snapchat, Tulco, Hamilton College and the Sarasota Bay Park Conservancy. A Sarasota resident, Lafley is the co-author of two best-selling books, The Game Changer and Playing to Win. Read more at LeadingToWin.com.
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