Back to the on-screen lesson · Print

Plan a supply disruption

A contingency names one supply risk, counts the days of cover the business has, and prepares a back-up source, buffer, substitute or narrowed offer with a trigger — tested before it is needed.

Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.

1. What you will learn

You will name a specific supply risk, work out how many days the business can run on its stock, sort responses into back-up sources, buffers, substitutes and a narrowed offer, and write a plan with a trigger that someone else could act on.

2. What you already have

You can compare suppliers on their record. Even the best record has bad weeks, and most small businesses depend on one or two suppliers for something they cannot run without. This lesson plans for the week that supplier fails.

3. Words for this lesson

4. Name the risk, count the days, prepare the response

'Things might go wrong with suppliers' is not a risk anyone can plan for. 'Our one rice supplier's warehouse closes for a week' is. Start there, and count how long the business can carry on: Neighborhood Kitchen has 36 pounds of rice and uses 6 a day, so it has 6 days of cover. Those 6 days are the time the plan has to work in.

Then choose a response, or a mix:

• a back-up source, a second supplier with an account already open;
• a buffer, extra stock kept for this case, which buys days of cover at the cost of holding it (lesson 12);
• a substitute, such as another grain or a compatible part from another brand;
• narrowing the offer, such as a shorter menu or only the repairs whose parts are in stock, until supply returns.

Every plan gets a trigger, such as 'a delivery more than three days late', so nobody has to decide on the day whether this is the moment.

5. Ready before it is needed

A contingency only works if it is ready. The back-up supplier's account should already be open, and one order placed to check the goods are right. Maya fires one bag of the back-up clay before she ever needs it, because a clay that behaves differently in the kiln is no back-up at all. The plan should be written where others can find it, in words a new member of staff could act on: 'If a delivery is two days late, order from Pet Wholesale, account number on the office wall.'

6. The method, step by step, and how to check it

Name the risk. One supply, one way it fails: 'the only supplier of our stoneware clay stops delivering for two weeks'.

Count the days of cover. Stock on hand over daily use, at an ordinary point in the order cycle, not just after a delivery.

Compare with the back-up's lead time. If the back-up takes longer to deliver than the days of cover, the plan needs a buffer, a substitute or a narrower offer to bridge the gap.

Choose and size the responses. How much buffer, which substitute, which items come off the menu.

Write the trigger and action. A clear sign, a named action and the person who takes it.

Test it. Place one order with the back-up; try the substitute once.

Check the plan. Days of cover plus any buffer days must exceed the back-up's lead time, with a little margin. Every line of the plan must name something specific: a supplier, a quantity, a trigger. Read it as a new employee would, at six in the morning: can they act on it?

7. Why each step is allowed

Naming one risk is needed because a plan must say what to do, and what to do depends on what has failed. A clay shortage and a kiln breakdown need different responses.

Counting days of cover is allowed because, with no delivery, stock falls by the daily use each day, as in the reorder lesson. The days until it runs out are the stock divided by the daily use.

Comparing cover with the back-up's lead time is needed because the plan only works if the back-up arrives before the shelf is empty. If it cannot, the gap must be bridged another way, and the arithmetic says how big the gap is.

Setting the trigger in advance is allowed, and wise, because on the day, people wait and hope. A rule decided calmly removes the wait.

8. Choosing among the responses

Each response has a cost and a limit. A back-up source costs little to keep ready, but its goods may cost more and its lead time may be long. A buffer works at once but carries the holding cost of lesson 12 every day it sits there, and spoils for perishable items. A substitute may change the product the customer gets. A narrower offer loses some sales.

For most small businesses a mix works best: a back-up source for the main supply, a small buffer to cover the back-up's lead time, and a narrower offer as the last step. For fresh goods, buffers are rarely possible, so the back-up and the narrower offer carry the plan.

9. Disruptions beyond suppliers

The same method works for other things the business cannot run without: the delivery van, the one oven, the card reader, the person who knows how to fire the kiln. Name the risk, count how long the business can carry on, and prepare a response.

For equipment, the response might be a rental agreement or a neighbor business that will lend; for a card reader, a phone app as a back-up; for a key person, a second person trained on the essential steps, which the people unit of this course covers. Each plan stays bounded: one risk, one page.

10. Keeping plans current

A contingency plan ages. The back-up supplier closes its account after a year with no orders; daily use doubles after a new menu; the account number on the office wall is out of date. Review each plan when a supplier, daily use or price changes, and at least once a year.

Place a small order with each back-up supplier every few months, so the account stays open and the goods stay tested. It costs a little and turns a phone number into a working back-up. When a plan is used, note what worked and what did not, and change it before the next time.

11. Which supplies to plan for first

A small business cannot write a plan for every item, and does not need to. Start with a short list of supplies that pass two tests: the business cannot run, or cannot keep a promise, without them; and there is only one place they come from. For Neighborhood Kitchen that is rice, chicken and takeout boxes; for Northside Repairs, tubes, brake parts and chains; for Maya, clay and kiln elements.

Rank that list by how bad a week without each would be, and write the plans in that order. One good plan for the most important supply is worth more than five half-finished ones, and each plan written makes the next one quicker, because the method is the same.

12. What a plan costs to keep ready

Every contingency has a running cost, and pricing it turns the plan into a decision. A buffer of 60 extra cloths at 2 dollars each, held at 20 percent a year, costs about 24 dollars a year. Keeping a back-up account alive with a small order each quarter might cost a few dollars more than buying from the main supplier. Testing a substitute takes an hour.

Set those costs against what a week without the supply would cost: lost sales, broken promises, emergency purchases at retail prices. For the critical supplies, the plan almost always wins by a wide margin. For minor ones, it may not, and writing that down is a decision too.

13. Telling customers

When a disruption reaches customers, tell them early and plainly: 'Our rice supplier is closed this week, so the rice bowls are served with potatoes; prices are unchanged.' Customers accept a stated change far more readily than a dish that is simply missing or different without explanation.

Where a disruption affects promises already made, such as a café order of cups due next week, contact those customers first, with a new date or an alternative. The constraints lesson in the previous course made the same point: a limit stated clearly keeps trust, while a promise quietly broken loses it.

14. In the world: a Nashville bakery during a flour shortage

A wholesale bakery in Nashville bought all its bread flour from one mill. When a storm closed the mill's rail line for nine days, the bakery had a plan written the year before. It held about 6,000 pounds of flour and used about 1,000 a day: six days of cover.

The plan named a back-up, a distributor in Atlanta with an open account and a four-day lead time, tested with one pallet the previous spring. The trigger was the mill's notice of any delay over two days. On the second day the owner placed the back-up order, which arrived with two days of flour still in the bins. The plan also narrowed the offer: two specialty loaves that used a flour the back-up did not carry were paused, and the cafés that bought them were told on day one.

The back-up flour cost about 8 percent more, a cost the plan had accepted in advance. No café went without its daily bread, and two of them said the early notice was why they stayed with the bakery.

15. In the world: business continuity planning

The U.S. Small Business Administration and the Federal Emergency Management Agency both publish guidance on business continuity planning for small businesses. Their advice follows the shape of this lesson: identify the critical supplies and services, plan alternatives in advance, write the plan down and test it.

16. Where this goes wrong

It has never happened, so it won't. Every supplier has a bad week eventually.

We'll work it out on the day. On the day there is no time, and the back-up account is not open.

Plan for everything. A plan for everything is ready for nothing.

A back-up is a phone number. It is a supplier whose goods have been tested.

Any back-up will do. Its lead time must fit inside the days of cover.

17. Monica's fruit

1. Name the risk.

   $\text{the cooperative's Saturday delivery fails}$

   One supply, one failure.

2. Count the days of cover.

   $\text{less than one for fresh fruit}$

   Fruit cannot be stockpiled.

3. Choose the back-up.

   $\text{Market Traders, account open}$

   Tested with one order.

4. Set the trigger.

   $\text{delivery two hours late}$

   Decided in advance.

5. Add a narrower offer.

   $\text{a smaller range that Saturday}$

   No buffer for fresh fruit.

18. Northside Repairs' parts plan

1. Name the risk.

   $\text{main supplier out for a week}$

   One supply.

2. Count the days of cover for tubes.

   $38 \div 4 \approx 9$

   Days.

3. Note the back-up's lead time.

   $5 \text{ days}$

   CycleSupply, account open.

4. Check the cover is enough.

   $9 > 5$

   With margin.

5. Add a substitute.

   $\text{compatible parts from another brand}$

   For rarer parts.

6. Price the plan.

   $\text{5 percent dearer while it runs}$

   A decision, not an afterthought.

19. Neighborhood Kitchen's rice

1. Name the risk.

   $\text{the rice warehouse closes for a week}$

   One supply.

2. Count the days of cover.

   $36 \div 6 = 6$

   Days.

3. Note the back-up's lead time.

   $3 \text{ days}$

   City Wholesale.

4. Find the margin.

   $6 - 3 = 3$

   Days to spare if ordered at once.

5. Set the trigger.

   $\text{a delivery 2 days late}$

   Leaves 4 days of cover.

6. Add a narrower offer.

   $\text{two dishes switched to potatoes}$

   Rice use falls.

7. Write it where staff can see it.

   $\text{a page by the order sheet}$

   Anyone can act on it.

20. Your turn: Maya's clay

1. Count the days of cover: 85 pounds, 15 a day.

   $85 \div 15 \approx 5.7$

   Days.

2. Compare with the back-up's lead time of 4 days.

   $5.7 > 4$

   Enough, just.

3. Your turn: work this step out. Its working is at the end of the packet.

   Test the back-up before it is needed.

21. Guided practice

Northside Repairs is planning for its main parts supplier failing. Sort each idea by the kind of contingency it is.

22. Guided practice

Complete the worked solution: Maya has $24$ pounds of clay and uses $4$ pounds a day. Her main supplier has stopped delivering, and her back-up supplier takes $4$ days to deliver. Find her days of cover, the spare days she has if she orders from the back-up today, and the clay she will have left when it arrives.

1. Find the days of cover.

   $(\text{stock}) \div (\text{daily use}) =$ _c

   How long she can work with no delivery.

2. Find the spare days.

   $(\text{days of cover}) - (\text{back-up lead time}) =$ _x

   Margin if she orders today.

3. Find the clay left on arrival.

   $(\text{spare days}) \times (\text{daily use}) =$ _y

   What is still on the shelf.

4. Say what sets the plan off.

   $\text{a trigger written in advance}$

   So nobody waits to decide.

23. Guided practice

Maya is writing a contingency for her clay supplier failing. Put the steps in order.

Number the steps in order (write the number in the box):

• Name the risk: her one stoneware clay supplier stops delivering
• Work out how many days her clay stock lasts
• Set the trigger: a delivery more than three days late
• Write the action: order from the named back-up supplier
• Test it: fire one bag from the back-up before it is needed

24. Guided practice

Monica's fruit comes from one cooperative. Which is a contingency plan for it failing?

• Call Market Traders, where she already has an account, if the cooperative is 3 hours late
• Hope the cooperative never lets her down
• Work it out on the day if it happens
• Write a plan covering every possible problem at once

25. Practice

Neighborhood Kitchen has $24$ pounds of rice and uses $4$ pounds a day. Its supplier's warehouse has closed for repairs. Complete the sentence.

The kitchen can carry on for _k days without a delivery.

26. Practice

Bright Home Cleaning uses $13$ cloths a day and usually has $39$ in stock. Its back-up supplier takes $4$ days to deliver, and the owner wants enough cloths to last that long plus $2$ days of margin. How many extra cloths should it keep as a buffer? Fill in each figure on the sheet.

27. Practice

A florist in Phoenix has $112$ roses when her wholesaler closes for a week. She normally uses about $38$ roses a day. Her contingency plan narrows the offer: mixed bouquets use carnations in place of some roses, cutting rose use to $28$ a day. How many days will her roses last under the plan?

Answer:

28. Somewhere new

A pet shop's plan for its dog food supplier failing. Mark every line that is specific enough to act on.

This task has no paper form; do it on a device.

29. Lesson test

Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.

30. Test question

Bright Home Cleaning uses $19$ cloths a day and has $38$ in stock. It is thinking of keeping a buffer of $57$ more. Fill in the days of cover now, the extra days the buffer would add, and the days of cover with it.

31. What you can do now

You can plan for the week a key supplier fails, before it happens. Tell someone why a back-up supplier is not a back-up until one order has been tested. Next: the first work to hand to someone else.

Working for the steps left to you

20. Your turn: Maya's clay, step 3