2023 is already shaping up to be the year of layoffs in a multitude of industries, especially the tech industry. In tech, we’ve seen mass layoffs from Amazon, Coinbase, Google, IBM, Microsoft, PayPal, Salesforce, Spotify, and Wayfair to name a few.
Meanwhile, Okta, FedEx, 3M and countless others in every industry are planning or have already done the same. Anywhere from 7–10% of these companies’ teams were cut due to disruptions in the economy, inflation, and changes in focus from brands trying to restore their image and sentiment in 2023.
But, the question on everyone’s minds right now — especially business leaders — is how these layoffs will affect the supply chain, profits, and the employees that are still with the company. For that, let’s break down what is likely to result from these layoffs as well as ways that business leaders can overcome these obstacles and remain profitable throughout the year.
The Impact This Mass Exodus has on Business and Supply Chains
Think of these layoffs as a butterfly effect — only the butterfly is really just a lethargic grungy little chihuahua nipping at your ankles and getting in the way every time you try to take a step forward. While it may seem comical, the truth is that these layoffs are bound to slow down progress for business leaders both in the supply chain management realm as well as within their very own teams.
Google’s recent layoffs alone affected 18,000 staff — and that’s not accounting for any of the exterior companies being affected by these layoffs and dealing with slower delivery times, less communication channels, and weaker supplier relationships as a result of all of this.
Meanwhile, to make matters even worse, some companies such as McCormick are actually cutting their supply chain staff just to increase their profits but do they realize the devastating effects this may have on the supply chain, suppliers, and their staff that are now expected to overwork without burning out all for the same wages.
So, what can we expect from these major changes that are disrupting the very nature of businesses and their supply chain systems? Well, if ‘The Great Resignation’ is any indication, it is likely that there will be yet another employee-led exodus, a demand for higher wages, slower production and delivery times, an even sharper turn towards local businesses (even if they are more expensive), and a desperate need for better local and diverse suppliers to create relationships with.
To overcome these likely inevitable results, business owners need to know definitively that they can rely on their teams and supply chain relationships even when they are short-staffed or struggling with a lack of supplier procurement options.
Can you Rely on Your Suppliers and Short-staffed Teams?
If you plan to be one of the companies making layoffs this year — or, you work with one of these companies within your supply chain or day-to-day operations — it’s crucial that you first take the time to analyze your supplier and team relationships to ensure they are strong and resilient.
Cutting 7–10% of your team members means that you will be operating at a 7–10% deficit unless your team and suppliers are up to the challenge. This kind of deficit could reduce profits even when done in a ditch effort to increase them like McCormick and others.
You will want to make sure that the employees you consider laying off are either redundant or can easily have their workloads split up and added to other employees’ daily tasks so their disappearance doesn’t disrupt your infrastructure and streamlining. You will also want to make sure that your team is praised and even given raises when necessary for taking on the extra work. While it may seem counterproductive to increase wages while cutting down staff, the truth is that a few extra dollars per hour is a drop in the bucket when compared to a whole other person being on the bankroll.
As Insperity HR explains, your best strategy for laying off employees smoothly all comes down to:
- Establishing your game plan
- Handling layoff conversations with care
- Identifying employees needed for a transitional period
- Establishing incentives for transitional staff
- Giving flexibility to transitional staff
- Providing outplacement assistance and support
This method of laying off employees whilst still having a well-oiled business structure helps to soften any blows that come your way. However, in this same regard, you must also be able to build resilient supply chain structures as well since laying off supply chain employees can lead to a series of neverending bottlenecks in the blink of an eye.
Building More Resilient Supply Chains With Data
Layoffs can have a profound impact on a bad supply chain, exacerbating existing problems and creating new ones. For example, if a key supplier or member of the supply chain team is laid off, it can lead to production bottlenecks and a reduction in the overall quality of the products being produced.
In addition, a reduction in personnel can lead to a decrease in communication and coordination within the supply chain, leading to misaligned expectations and disruptions in the flow of goods and services. Ultimately, this can result in profit losses and a decrease in customer satisfaction.
Therefore, it’s crucial for companies to have a resilient supply chain in place to help mitigate the impact of layoffs and other disruptions. Just as a strong internal team is valuable, your external relationships and the ways that they operate can either make or break you when layoffs are necessary. However, building a resilient supply chain that can withstand layoffs within a company requires careful planning and a proactive approach. Some strategies to consider include:
- Diversifying suppliers: Having a single supplier for a critical component or raw material can be a major risk. Consider sourcing from multiple suppliers to reduce the impact of a single supplier going out of business or facing financial difficulties.
- Building inventory buffers: Keeping a sufficient amount of inventory on hand can help absorb disruptions in the supply chain. However, too much inventory can tie up capital and lead to obsolescence, so finding the right balance is key.
- Implementing contingency plans: Having a well-thought-out contingency plan in place can help mitigate the impact of unexpected events, such as layoffs. This can include identifying alternative suppliers or rearranging production processes to accommodate for a loss of personnel.
Fortunately, using data analytics for all of these strategies can help to make your supply chain management process even easier and more streamlined. This is where working with a data-driven supply chain management software platform can help. Using data insights, relationship-building tools, and a proprietary score, software like the Stimulus Relationship Intelligence Platform can help companies to strengthen their supplier network, procure new and diverse suppliers, and find the best ways to keep their supply chains resilient even when layoffs are inevitable.
All in all, with more and more companies laying off employees, it may only be a matter of time before your company is forced to do the same. However, to make a true profit and not lose any of your steam, you must focus on strengthening and fortifying your internal and external operations and relationships first and foremost. With this strategy, you can ensure your current team is valued and your customers remain happy without having to forfeit your profitability in 2023.
