Going from a larger organisation executive to a small business owner is challenging in so many ways, but especially because you can’t really delegate many things. You just have to figure things out as you go.
As an example, in business school, you learn a lot about supply chain challenges. One of the most critical components is timing – making sure you order everything just in time to ensure that you aren’t carrying too much inventory, but also enough so that you don’t hold up the manufacturing process. However, it’s a lot easier to do on paper than in reality.
Most of my career has been in service based businesses or organisations. I did own a physical products business about 5 years ago called The Great Australian Tea Company. I can’t say that I learned enough from that business though as we were only market testing 2 SKUs, and I outsourced the product making.
As I write this, I have plenty of inventory, but not necessarily the right things. And as I add more product SKUs, this seems to be a constant challenge too. I try not to order too much when I’m testing ideas, but sometimes I can’t get enough of what I need, when I need it especially for anything requiring to be imported during the Covid-19 crisis.
In the restaurant industry where I grew up, they tend to rely on just a couple of suppliers to provide most of their ingredients. And because most of it is perishable, they have to be an efficient supply chain. Furthermore, they can often substitute things like vegetables to make a certain dish.
I’m in the middle of creating my supply chain now, and it is NOT efficient yet. While my ingredients are perishable, generally I have at least a 12 month shelf-life or more. So, while I won’t often lose ingredients due to spoilage, it is still a waste of money if it’s just sitting around, and especially if I never use it. In addition, I can’t just change the ingredients without ordering new labels.
Challenge with Product Labels
Product labels in particular are proving to be a nightmare for my supply chain, but I can’t figure out a better, cost-effective solution at the moment. I’d love to get some recommendations for how to do this better.
It often takes more than a week to get them made even though I do the print-ready design work myself. If I don’t use all the stickers I ordered, like in the case where I change the ingredients in a product, the individual cost per label goes up significantly.
This has happened when I had to change the ingredients in my hand sanitiser products three times. Then the demand dried up as supply became more available. So, a label went from 30 cents each to over $1 each because I didn’t use them all.
I’ve found that paper labels with an inkjet printer won’t work because the ink becomes runny with water – obviously an issue for products used in the bathroom. There are more options with a typical laser jet (which I’ll need to buy – ugh!), but they don’t make blanks at the right sizes for some of my products like the 15ml round tins for lipgloss.
Also, I have found it difficult to line up the labels properly so that they print on the stickers correctly even when I use the Avery template.
I’ve already tried a Brother’s label maker which also costs about $1/label to use. However, I’m also limited in sizes and right now they are not printing with the right colour tone i.e. orange instead of yellow. The Brother’s support person was useless.
In the long-term I think I’ll either print directly on the aluminium packaging or buy a professional labelling machine. For now, I just need a more flexible, cost efficient yet good quality option. Any ideas to help me for now?
Speaking of lip gloss, I have a bottleneck with the tins right now. The tins are stuck with the carrier as it hasn’t moved since it was first picked up over a week ago in Melbourne. Normally, it only takes a day or two. I’ve been bugging the supplier to push the carrier as there’s no obvious reason why it hasn’t moved.
So, for the moment I’m reusing my current tins for trials and testing. It can be time consuming to clean them. My main reason for doing this is because I don’t want to recycle them when there still is good life for them. Still, I can’t reuse them for the purpose of selling which means I can’t launch the product as I had intended this week.
My lessons learned about supply chain challenges so far?
I’m still new to a products-based business, and the therefore I’m learning a lot as I build out the supply chain for these brands. Here are some of my lessons learned so far.
- When you’re experimenting, order as little of an ingredient as possible until you’re sure that you’ll use it in a product – even if the per unit cost is expensive this way.
- Don’t order ingredients unless you have a clear formula in mind where it could be used. I don’t have the budget for “nice to have” ingredients on the shelf right now.
- Proper storage is critical to extend shelf-life – i.e. avoid sun and oxygen.
- Shop around for prices. It might be easier to order from one supplier, but there can be significant differences in prices as you go up in bulk quantities.
- For me, the origin of the product is also important. If it doesn’t say Australian made, it’s probably imported.
- Beware of shipping costs which can significantly increase per unit costs especially in smaller orders.
- Larger quantities doesn’t always reduce unit cost that much. Do the math first to decide as it might make more sense to order smaller quantities to minimise inventory costs.
- Keep track of typical delivery times for each supplier. I know that I can get products within 24 hours from one company because they use Toll as a carrier and they always ship fast. Others are less consistent.
- Give yourself an extra week minimum for a product launch knowing that supplies will come in later than expected.
- A product in country is more valuable than a promise of a cheaper product coming from overseas.
- Prepare to buy extra products (especially for non-perishable items) during end of year sales as the prices can be significantly discounted.
- Don’t feel the need to remain loyal to one supplier if they are not meeting your needs – such as with delivery times in my case.
- Sitting inventory is like cash stuck in a safe that can’t be spent. Use it, sell it or find another purpose like promotions as soon as possible.
What other lessons learned from supply chain challenges lesson do you have to share for a new business? I know that I have a lot to learn.