How to Build a More Resilient Supply Chain

If the last two years taught businesses anything, it is to be prepared for big surprises. And big surprises we had: the COVID-19 pandemic, major weather events, skyrocketing consumer demand and worldwide transportation bottlenecks.

On their own, each of these could cause a supply chain challenge. Together, they created a level of disruption never experienced by most people working today. The result has been higher costs and longer lead times, affecting the largest pesticide makers to the smallest service providers.

“For years, we’ve seen these fractures in the supply chain, but we’ve been able to step over those. Now, with the ripple effects from COVID and from everything else, they’re no longer fractures; they’ve become large expanses and big voids,” said Shane Dooley, director of warehouse and operations at Forshaw, a distributor of pest management products headquartered in Charlotte, N.C.

To safeguard operations and ensure they have what they need to service accounts or to manufacture products and equipment, companies must build supply chain resilience.

“I think there will be a philosophical shift on what’s the best supply chain strategy,” said Steve Levy, president of Bell Laboratories, which manufactures rodent control products.

As such, various companies in the pest management industry told PCT they are making the following supply chain adjustments.

IMPROVE VISIBILITY. “Most companies do not have the level of supply chain visibility that’s necessary for resilience,” said Douglas Kent, a supply chain expert at the Association for Supply Chain Management (ASCM), which has 45,000 members in 100 countries.

A recent study by ASCM and The Economist Intelligence Unit found more than half of companies lacked end-to-end visibility into their own supply chain, leaving them vulnerable to dynamic or unexpected risks. They relied on internal data or on siloed or outdated data sets, which limited their ability to detect emerging threats and to calculate how disruption might unfold and impact the business.

“If I don’t have the visibility, I can’t take the mitigation action, and if I can’t take the mitigation action, I’m vulnerable to the impact that could have on me,” Kent explained.

To get greater line of sight, Arrow Exterminators in Atlanta got weekly updates from its distributor partners about product availability, and it also requested visibility into manufacturer supply chains for greater detail. This information helped Chief Development Officer Kevin Burns develop contingency plans.

Burns urged PMPs to “follow the supply chain all the way through.” Hearing that a product will be available next week isn’t good enough. You need to understand the specifics — is the delay due to a labor issue? a material or processing problem? a transportation challenge? — so you can plan accordingly, he said.

Effective, open communication among partners up and down the supply chain is critical to improving visibility. In early July, specialty products distributor Veseris alerted customers to price increases and delivery issues with specific manufacturers.

“Being an advocate for our customers, we’re going to continue to keep them informed. Also, we’ll continue to communicate information that we get from the supplier community,” said Karl Kisner, vice president of business and strategy development at Veseris.

Manufacturers, likewise, were upfront about challenges. “We’re in constant communication with our suppliers and customers, and whenever we have problems, we make them aware and we try to be as transparent as we can,” said Gabriel Phelippe, sourcing and planning director at Control Solutions, a specialty chemical manufacturer.

PLAN FURTHER AHEAD. The days of calling your distributor today to get product tomorrow may be over.

In a PMP Industry Insiders podcast that aired July 22, Dave Ravel, who leads sales for Syngenta’s professional pest management market, said, “We’ve been warning our distributors: Plan a little further ahead.”

To do this, distributors need better, more frequent forecasts from pest control companies. This helps all organizations along the supply chain, from PMPs to manufacturers, manage supply constraints and ensure finished products and raw materials are available when needed.

“We want to really do that demand planning with our customers so that we can stay ahead of their needs,” explained Dooley, Forshaw. Distributors and manufacturers have tools and programs to help PMPs better forecast their product and equipment needs.

Stephanie Jensen, director of professional and specialty solutions at BASF, said the company is planning for longer raw material lead times and encouraged PMPs to take a similar approach. “The sooner they can place orders, even if they don’t want delivery right away, that helps us because that’s a concrete thing we can plan around and adjust around,” she said.

King Jones, CEO of CT Pest Solutions in Naugatuck, Conn., generally buys well in advance because he likes to take advantage of manufacturer and distributor rebates and deals. “I don’t wait until the last minute and I usually have extra material around. I think that’s a big part to why I haven’t had so much disruption,” said Jones.

Clark’s Termite & Pest Control in Columbia, S.C., acted early to secure 2022 service vehicles, which are hard to find due to semiconductor chip shortages. “We’ve already preordered vehicles for next year, trying to get ahead and get in line for those orders,” said Alan Wilson, the company’s technical and training director, in July.

STOCK UP. More companies are shifting away from just-in-time to “just-in-case” inventory strategies, said Kent, ASCM.

It’s an about-face from turning inventory as fast as possible to improve efficiency; this strategy failed when the supply chain collapsed and long lead times became the new norm.

Burns Pest Elimination in Phoenix, Ariz., nearly doubled its inventory of products that were taking longer to get. “Our inventory is up substantially compared to where it used to be, but we need the product, so there’s nothing else to do,” said Austin Burns, the company’s operations manager.

Distributors, likewise, loaded up on inventory. Pre-pandemic, Veseris carried 30 to 45 days of inventory but pushed that out to 60 to 75 days to make sure it was available where needed. “We are beefing up our inventories of products that are readily available and looking to plan out even further so we can overcome those backorder situations,” said Mark Worthy, who leads planning and purchasing at the company.

Carrying a bigger inventory has fiscal implications. “Obviously, it’s affected our financial statements a little bit and there is a lot more money in inventory than in the past,” said Burns of Burns Elimination. As such, companies with large inventories may have lower profit margins or less money to invest elsewhere, such as in marketing.

Phelippe of Control Solutions, which makes specialty chemical products, said more manufacturers were “being cautious” and buying more inventory as a result. “They were used to buying product every week, and now with all these delays, they’re also scared they’re not going to have the product when they need it,” he said.

 

Arrow Exterminators embraced alternative control products when its preferred products became harder to acquire. “We have had to open up our approved products list to make similar products available that previously weren’t available,” said Kevin Burns. This move required operational changes and extra training for team members, but Arrow has the infrastructure — a large technical and training team and the online Arrow University platform — to get everyone up to speed quickly, he said.

PMPs who built service protocols around a specific product, device or piece of equipment had more challenges with supply disruptions than those who had backup plans. “I don’t rely on just one thing just for that reason,” said Bob Boyle, owner of C-Cat Termite & Pest in Burlington, Iowa.

Distributors and manufacturers qualified more suppliers for the same item, such as for gloves or plastic resin. “We had to go out and find alternative and resilient sources,” said Dooley, Forshaw. Sourcing redundancy is standard practice now, he said.

Bell Laboratories, which manufactures rodent bait stations and traps, had one qualified vendor for polypropylene before the pandemic. Now it has five. “For the foreseeable future, that’s how we’re going to approach it,” said Levy.

Qualifying multiple suppliers presents operational challenges for manufacturers but has become a requirement in today’s market. “The more critical the ingredient is, the more you can’t be without it and so the more you go through the process of making sure you have good sources of supply,” Levy explained.

At MGK, instead of just having one bottle, one cap and one label specification as it did in the past for its pesticide products, the company was qualifying alternative packaging. It also turned to air freight when ships, trains or trucks could not be secured. This was “super expensive, but we recognize our No. 1 objective is trying to serve the customer as best we can,” said MGK President Steve Gullickson.

TAKE PRODUCTION IN-HOUSE. Most pesticide manufacturers use third-party copackers to mix and package their products. But if they didn’t have all the materials or packaging needed when it was their turn on the production line, they got bumped from the schedule.

Companies that produced products in-house had more control over the manufacturing process when material supply was disrupted. “I’m grateful every day that we’ve had this obsession with doing everything we can ourselves because you do have so much more flexibility to be able to prioritize and shift and do what you need to do, and you’re not relying on someone else who has other customers,” said Cisse Spragins, CEO of Rockwell Labs, which produces a variety of products for the professional pest management industry.

Only one Rockwell product is produced by a third-party contractor, and Spragins actively was working to bring that back inside, she said.

Producing in-house gave Bell Laboratories an edge because it wasn’t relying on shipments of products made overseas that were stuck in ports. “That’s really allowed us to continue to have supply. We’re fortunate that we’re vertically integrated, and we can pretty much convert raw materials into our products,” said Levy.

RAISE PRICES. The higher costs of materials and shipping caused some manufacturers to raise prices. As such, PMPs may need to raise prices for their services.

“That is something we’ve earnestly been discussing,” said Courtney Carace, chief operating officer of Pest-End, in Plaistow, N.H.

Because the lead time to get fabricated sheet metal is eight weeks, she’s had to offer additional free service visits to rodent exclusion customers who are waiting for this service to be completed. “We’re trying to come up with creative solutions, and we’ve had really positive responses to what we’ve been doing, but that’s on our dime, not on theirs,” said Carace. She also had to create separate routes to inspect termite bait stations that overlapped existing general pest routes because she couldn’t equip all her technicians with locater devices due to a nationwide shortage.

“We don’t want to pass on significant costs to the customer, but we may need to do something to make up for what we’re losing,” Carace added.

Jones of CT Pest Solutions raised his prices but got little pushback from customers. “They understand if you don’t do a price increase then chances are that will jeopardize the longevity of the business and sacrifice the service that they continue to receive,” he said.