Expanding globally can boost profits, yet it also presents logistical challenges. Founders need to manage everything from identifying reliable partners to dealing with international finances.
Rapid growth is ideal, but a fragile supply chain is a big risk. Imagine launching in a new market only to have your products held up in customs or your suppliers suddenly raising prices. These kinds of problems can derail your growth before it even takes off.
Everlane, for example, faced serious supply chain disruptions that led to big production delays and frustrated customers with months-long backorders. This shows why a strong supply chain is so important. Without one, these problems can quickly become overwhelming. The good news is that smart planning can lessen these risks considerably. Making wise choices now can prevent expensive disruptions later.
Below is a look at practical methods to develop a robust international supply chain. Diversifying suppliers, managing costs, and using the right technology can help you stay competitive even when the market changes.
Picking Partners You Can Count On
When you’re a startup, any delay or lapse in quality can be detrimental. That’s why reliable suppliers can make or break your business. Identifying inefficiencies, such as unnecessary transportation or poor scheduling, can help reduce costs and establish a reputation for efficient operations. Whether that involves checking references, production capacity, or financial stability, conducting thorough research is essential.
Misunderstandings can incur costs. Whether you are facing language barriers or differing business cultures, establishing clear expectations from the beginning helps prevent expensive misunderstandings.
A notable example of this is Airbnb’s expansion into China. Initially, they encountered challenges because business negotiations predominantly occurred over WeChat rather than email, which deviated from their usual communication methods.
The preferred communication style of local partners can greatly influence the success or failure of an international deal. By clearly articulating your product requirements, timelines, and expectations for payment, you reduce the likelihood of costly errors.
A critical piece is to recognize and remove waste from your supply chain. Cost can be inflated by inefficiencies, which can damage the environment as well. This means doing everything from cutting down on excess inventory to optimizing transportation and logistics to the workplace itself.
You don’t want to gamble by relying on one supplier, either. If they run into a natural disaster or financial trouble, so do you. History has proven this risk time and time again.
Toyota, for instance, previously relied on a single supplier for key components. When the 2011 tsunami struck Japan, production delays rippled across their entire operation worldwide. This case highlights why diversifying suppliers is a necessity for resilience.
Keeping Costs Down Without Cutting Corners
Chasing the lowest price can backfire on you. Cheap suppliers might cut corners, miss deadlines, or surprise you with hidden fees, costing you way more in the long run. A great example of this in action is the clothing company Outdoor Voices. Early on, they worked with a low-cost overseas manufacturer to save money.
However, this decision led to serious quality control issues, resulting in a wave of product recalls and frustrated customers. A slightly pricier but more reliable supplier would have saved them from this costly mistake.
Weigh the trade-offs between price, quality, and reliability so you don’t burn through capital fixing mistakes or smoothing over unhappy customers later.
Long-term supplier contracts can save money if negotiated carefully. Volume discounts and locked-in pricing protect you from sudden spikes caused by raw material scarcity or other market shifts.
Another cost-saving strategy is local sourcing, which shortens shipping distances and helps you dodge steep tariffs. Some brands have already leveraged this approach to great effect.
When the U.S. imposed tariffs on Chinese imports, footwear brand Allbirds made a strategic move, shifting their wool sourcing to New Zealand. This not only reduced shipping distances and avoided tariff costs but also reinforced their commitment to sustainability. Exploring local solutions for international expansion might reduce transit times and lead to better relationships with in-country vendors.
Cost control isn’t a ‘set it and forget it’ deal. Staying on top of supplier quotes, exchange rates, and performance reviews helps you spot issues before they drain your budget. An open dialogue with suppliers ensures you can renegotiate terms if business conditions change.
Optimizing Logistics for Efficiency
A robust international supply chain depends on smart decisions about shipping methods and transit times. Air freight is fast but expensive, while sea freight is cheaper with longer delivery times.
Many startups find that a combination works best: using air freight for time-sensitive orders and sea freight for routine restocks. This was especially evident during the 2020 shipping crisis when companies had to make quick decisions to maintain supply.
For instance, when demand for Peloton’s bikes surged, global supply chain disruptions threatened to delay shipments. To keep up, they turned to air freight, an expensive but necessary move to meet customer expectations in the short term.
Real-time tracking systems go a long way toward keeping everyone in the loop. Automated alerts help you identify delays, reroute shipments if needed, and communicate updated timelines to customers or stakeholders.
Third-party logistics providers (3PLs) can also handle these tasks. Outsourcing logistics can be a cost-effective way to scale without heavy investments in warehouse space or freight management teams.
Mitigating Risks and Ensuring Compliance
Global supply chains come with a lot of moving parts—trade rules, currency swings, and even unexpected political shake-ups. Many UK-based e-commerce brands underestimated the impact of changing tariffs and customs rules amidst Brexit, leading to unexpected import duties and weeks-long shipping delays. Staying ahead of regulatory changes is key to avoiding similar pitfalls.
Without a dedicated legal team, staying ahead of risks is even more critical. Identifying potential bottlenecks, such as abrupt changes in customs regulations, reduces surprises. Some businesses adopt agile frameworks to tackle these risks, making it easier to adapt when issues arise.
Adopting principles from the Scaled Agile Framework can help unify different parts of the operation. Small, cross-functional teams might handle compliance checks, while leadership focuses on strategic decisions.
While red tape is inevitable, it doesn’t have to slow you down. Amazon handles this challenge by using AI-driven compliance software that tracks global regulations in real time. For startups, the right automation tools can streamline compliance tracking without requiring a massive legal team.
Conclusion
To succeed globally, startups must treat their supply chain as a strategic asset, not just a back-end function.
At its core, supply chain resilience is about positioning your startup for long-term success. Embracing technology and a proactive mindset fortifies your business against the inevitable bumps in the road. Plan smart and stay agile, and you’ll not only keep your promises but also keep customers happy and growth on track.
