For the newsletter and blogs, our topic for this month is “The Supply Chain Crisis.” Within the last few years, instability resulting from the pandemic and elsewhere has caused a severe upset in supply chains. This instability has resulted in various states of scarcity and excesses with different products in the supply chain, affecting markets the world over.
One of the phenomena of a supply chain crisis is that specific individuals will take advantage of scarcity by manipulating prices and forcing people to buy through fear of shortages. But when it comes to shortages, there is perception versus reality—that is, scarcities can be falsely reported with much of the public believing a scarcity exists.
The media, of course, is famous for this. News about particular shortages can spread like wildfire, and the public will swamp stores to purchase certain commodities, or companies will scramble to order certain materials. At the very beginning of the pandemic, it became widely reported that toilet paper was in short supply. Consumers panicked, and toilet paper flew off the shelves—even though it could be easily seen, prior to this panic, that there was plenty of toilet paper in stores, and that there was no such shortage. For a month or so, it became difficult to find toilet paper. Suddenly, though, the shelves were once again mysteriously filled up, and the panic was forgotten.
Unfortunately, far too much of what the media puts out is taken at face value and believed, resulting in such widespread fear and reaction. Remember, the media makes money through advertising, and advertising is purchased based on circulation or ratings. Circulation and ratings are, sadly, too often obtained through sensationalism or exaggeration.
While not necessarily media-created, probably the most famous example of created shortage is in the diamond market. Because diamonds are provided through a single monopoly, that company has periodically withheld and hidden diamond supplies throughout the years, driving up prices. Diamond wholesalers and suppliers, having nowhere else to go, have been forced to pay these inflated prices.
From a business standpoint, it is important that you not simply react to media-reported or otherwise-created scarcity. Do your homework. Discover for yourself what the situation actually is, and plan from there. Strategically you need to make the right moves, based on facts.
You might discover through your own research that there’s a real scarcity existing. For example, as we brought up in our last article, there might be material sitting in a port for an extended period of time waiting to be unloaded from ships. In such a case you know that scarcity is actually occurring and can plan your strategy accordingly.
On the other hand, you might discover upon investigation that someone is doing their best to create a panic to drive prices up. In such a case you can play it carefully, discover suppliers who are dealing honestly, utilize them, and probably find yourself well ahead of your competition.
It’s a great idea not to believe everything you read or hear in the media, especially when running a business. Do your own investigation, and consistently update your strategy as needed.
To learn more, sign up at SELLability.com
