Stay on top of your supply chain: Lessons learned before COVID that helped two Utah companies stay on track

Nate Jones
CEO, Xlear Inc.

Xlear is a manufacturer and distributor of xylitol and nasal care products based in American Fork.

Two decades ago, when I started Xlear from an idea my dad had, the business was like a lot of startups — just me, a product and a lot of hard work.

We caught our lucky break when a physician heard my father speak about the product and included a story in a printed medical newsletter that went out to an audience of hundreds of thousands of people.

The problem was, we weren’t ready for that kind of exposure.

I was contacted ahead of publication and warned that with the high response rate of the newsletter, we could expect a huge influx of orders. With such a short lead time, I had to get creative to get the lifeblood cash flow, materials and final products we would need stocked. I made it happen, but it was nerve-wracking, to say the least, as we grew overnight from a one-man operation selling a few hundred dollars of product a month to orders north of 20,000 units resulting from the third-party medical endorsement. This transition made for some late nights.

We have come a long way since then, growing into a global company employing hundreds of people and contributing to the well-being of millions. Even in our success, I have never forgotten the lessons learned from those early days.

Because of this and other experiences, we’ve built our company on the concept of self-sufficiency, with a healthy dose of looking ahead to what is next.

Let me share the lessons we’ve learned as a company about building out a supply chain that helped us weather this last year. Although we had worries, just like every other company, being prepared meant that we never ran out of materials or had serious output problems despite the pandemic and global supply chain disruption.

Lesson No. 1: Just-in-time inventory as an outdated concept

Started in the 1970s, just-in-time inventory is a way to manage supplies so they aren’t taking up space on shelves or clogging up cash flow until they are actually needed. In theory, this way of managing materials is more efficient. This concept is pervasive in the auto industry.

In reality, while just-in-time inventory does allow for a nimbler production line, the risks don’t always outweigh the benefits.

Using this technique, any disruption to the supply chain can be catastrophic, as illustrated by a global pandemic. And as needed suppliers multiply and become more diverse geographically, the just-in-time inventory system gets riskier. It’s only “just in time,” for the last person in the chain. With dozens and dozens of suppliers you can see the problem caused by one tardy company that represents critical path delivery deadlines — the weakest link.

Instead, keep enough inventory on hand to give yourself some space to figure things out, not if, but when, disruptions occur.

Lesson No. 2: In-house production is key

As a company, we have over 80 SKUs, most of which are produced right in our manufacturing facility in Utah. This means that as long as we have enough raw material, we can produce whatever products we need, at whatever pace matches our demand and growth.

While a full production facility may not be within reach for every business, it is worth exploring and keeping in mind with future plans. The ability to control your own supply is freeing, and undoubtedly helps you stay strong through unexpected world events.

Lesson No. 3: Surround yourself with good people

This may not seem like it relates directly to supply chain issues, but this tried-and-true advice makes a serious impact on your business.

Saving a few dollars on labor is enticing in the short run, but building a strong, loyal workforce and positive company culture are vital in creating a resilient business. You need people who show up day in and day out, even when things are tough.

Lesson No. 4: Have backup plans

This sounds like a no-brainer, but even when we normally have excess capacity, it is a good thing to have a plan for when your production either goes down for some reason or for when the demand takes off. We partner with Dynamic Blending, a contract manufacturer, for such situation.

Gavin Collier
CEO, Dynamic Blending

Dynamic Blending is a Vineyard-based contract manufacturer of cosmetics, personal care products, dietary supplements and nutraceuticals.

Working in the contract manufacturing industry, my business partner and I saw a lot of brands make costly mistakes. Both of us came to the conclusion — separately — that we wanted to build something different, something better.

We have built our brand by providing turnkey services to companies both large and small. A service offering so broad carries with it a certain unique skill set to be able to produce a wide variety of formulas, even in smaller quantities. We must pivot often, which makes our services extremely attractive to our customers.

As we have watched businesses large and small manage supply chains, while managing our own, we have been fortunate because of our experience to do it right the first time. I’ll share just a couple of ideas and words of advice.

Lesson No. 5: Scale smart

Scaling is difficult under the best of times, but in the early days of a startup it can be particularly stressful. The pressure to find funding and increase cash flow and output is intense. Some say cash is king. We tend to agree.

The reality is, scaling faster than you are ready for is detrimental to your business. If you are not careful, you’ll wind up over- promising and under-delivering. That will leave you with nothing but a long string of disappointed investors, employees and customers. Or worse, you will overextend your operation, and risk putting yourself out of business.

Keep in mind that every time you take on a loan or an investor, you are giving up a piece of control over your business. One of the best ways to scale is to keep the long-term vision of your business in mind with every decision you make. And most important, keep control. Look for other funding options before giving away equity.

Lesson No. 6: Buy local

We source as many materials as possible right here in the U.S. and we have redundancies in supply chain where needed. There are always elusive ingredients only grown in certain parts of the world, but keeping your supply chain close offers a serious safety net.

Local supplies mean fewer disruptions due to weather, political issues and even quarantines. It’s also better for the environment and adds to the economy of our own community instead of sending dollars elsewhere. Having backup suppliers further ensures smooth sailing.

The delays and disruptions in materials due to COVID-19 haven’t yet come to an end and there’s always another problem lurking around the corner. There is no perfect formula to weather a massive supply chain disruption, but there are definitely things you can do to prepare so that small hiccups in the routine of your business don’t cause a total collapse.