Startups by definition are new, often fragile, organizations that are one or two major commercial mistakes away from going out of business. Thus, mitigating major commercial mistakes can dramatically increase a new venture’s chances for long term survival. Further avoiding commercial mistakes all together and instead turning commercial challenges into advantages can position a startup on a path for long term success. Our experience has uncovered a pattern that many early stage ventures often make. It includes these three common supply chain mistakes: 1) quoting only one as opposed to multiple suppliers; 2) focusing on tactical, not long term supplier relationships; and 3) entering into long term agreements too early. These mistakes can often be addressed with simple adjustments in supply chain strategy to lead to big reductions in supply chain business risk.
1. Quoting only one as opposed to multiple suppliers:
Early on, when startups are raising funds they see any interest from large suppliers and investors as attractive. Engaging multiple suppliers, just like engaging multiple investors, can dramatically de-risk operations, reduce time to market and reduce costs of the startup’s supply chain.
Recommendation: There are always cost and timing tradeoffs that need to be considered when working a product to market. However, startups should strive to engage multiple supply partners. This allows them to compare and contrast quality, timing, technology and cost options from each supplier. The additional research, effort, and time to attain and review multiple supplier proposals will often dramatically optimize the startup’s commercial outcome.
2. Focusing on tactical, not long term supplier relationships:
Startups are led by charismatic Founders and teams of passionate associates that have bought in to the company’s mission, 100%. However, we have found these same highly-motivated companies do not share this same passion for the future with their key supply partners.
Recommendation: Take the time to share your company’s long term strategic plans with your critical supply partners. Sharing the company’s vision and future product plans will allow your suppliers to share in the excitement with you. They will become true partners in your business.
3. Entering into long term agreements too early on:
Products are often rapidly developing at startups, making specific components and volumes difficult to pin down. The result is a constantly changing engineering environment. This is great for innovation, but creates a risky commercial environment for entering into long term supplier/contract manufacturing agreements.
Recommendation: Startups should focus on entering into more project-based engagements with supply partners. These short term prototype project engagements are great ways to build trust with supply partners by outlying, executing and paying for specific needs.
In conclusion, we hope the above helps your organization avoid these common supply chain startup mistakes. May your business implement successful strategy adjustments to build long term supply chain and business success.