A chokepoint was originally a military term referring to a place where the terrain was tight, forcing large armies to trickle through a few people at a time. Chokepoints are excellent positions for an ambush or for a smaller force to confront a larger one, as proved at the Battle of Thermopylae, which was made famous in the movie “300.”
In business and supply chain management, the term chokepoint refers to any point in a process where a single point of failure can jeopardize the entire supply chain and business. For example, one local meat vendor is not a chokepoint for a restaurant because other vendors exist and are eager to earn the restaurant’s business. If that restaurant were a franchise with a contractual obligation to buy meat only from a specific vendor, that vendor would be a chokepoint because no other options exist.
Chokepoints are vulnerabilities in modern business and should be eliminated whenever possible. However, the complexity of today’s supply chains means that sometimes chokepoints are unavoidable. When that happens, you need to
- be aware of where your chokepoints exist
- know the ways your chokepoints can fail
- establish a fix for each chokepoint.
To help you accomplish this, here are five of the most common supply chain chokepoints businesses have and some suggestions for how to fix them.
Chokepoint 1: International production
Buying your components from a high school buddy who owns a shop two towns over is just as much of a chokepoint as buying them from a manufacturer across the ocean. However, having even just one international supplier could cause hiccups.
Longer production chains, even if they remain domestic, have more links, which can slow down product flow and create problems. When you add international aspects like shipping, regional stability, changing tariffs and taxes, your risk exposure can be serious.
For example, during the recent trade war with China, small businesses suffered losses on reliably profitable items because tariffs from both China and the United States skyrocketed the costs of the merchandise and parts manufactured in China.
Unfortunately, the best plan here — dealing with domestic or local suppliers whenever possible — isn’t practical for most businesses. The next best option is to source vital materials from two different international vendors in two different countries. This won’t cut out all of your risks, but it does mean you can shift the order load if one region becomes problematic.
Chokepoint 2: Shipping components
Getting the components you need to make your products is vital. You need to get them from the manufacturer to either your customers or your own plant. If something goes wrong, it often means your products won’t get made and sold.
This is especially true of long supply chains in which a single shipment might pass through the custody of a dozen or more responsible people and organizations between the loading dock and your receiving department. For example, the global retooling and widespread absenteeism that came with the COVID-19 pandemic has slowed a large percentage of the non-essential shipping worldwide. As a result, many small and medium-sized businesses haven’t had stock to sell, even if they stayed open to sell it.
Hedging your bets against this problem takes two steps. Step one is to stay informed of situations that might impact the region, routes and companies involved in moving your supplies. Get early warnings whenever possible so you can make new arrangements in time to avoid a problem.
Step two is to always have a light relationship with a competitor to your usual shipper. Let them know you’re available to be poached if the opportunity arises. When a problem pops up, they’ll be ready to save the day for you to win your business moving forward.
Chokepoint 3: Timing chokepoints
A timing chokepoint happens when event A needs to happen before event B can happen and event A gets delayed. This ultimately delays the timing of the supply chain, causing further delays and missed opportunities.
Sometimes the delay to event A happens because of a chokepoint earlier in the supply chain. Other times, there’s something happening with how event A gets accomplished that causes the slowdown. Either way, that single point of failure cascades downstream.
The easiest solution to this chokepoint is to widen your timeframe so there’s no risk of choking. Sometimes, this means simply reworking your schedule. Other times, it means establishing a stockpile of components and supplies so a late event isn’t a problem.
Many small and medium-sized businesses can’t do this because they’re waiting on payment for one contract before they can begin work on the next. A small-business line of credit or small-business loan can be a powerful solution here, allowing your timeline to extend beyond the restraints of your cash flow.
Chokepoint 4: Shipping product
This chokepoint is the opposite side of the supply shipping problem. If you ship what you sell, any interruption between your shipping department and the customer creates a poor client experience and reduces your chances for the next sale. Whether the problem is the way you get units to your shipping subcontractor, an issue with delivery or theft in high-crime areas, you’ll still be the one the client blames when things go wrong.
For example, one of my clients shipped a set of branded planners to leads in the United States and Canada, but because Canada had a nationwide mail service strike starting the day after he shipped the items, the Canadian leads didn’t get their planners until after the first of the year.
Your best defense here is to have a close, customer-oriented relationship with whomever delivers your goods to your customers. If possible, make sure you have an arrangement that helps you know about problems before the client does so you can contact the client with your plan for making things right.
Chokepoint 5: Your staff and system
Your staff forms a chokepoint any time just one person knows how to do something or has the qualifications or permission to make something happen. Whenever that person is ill, on vacation or busy with other duties, your supply chain blocks up. If that person leaves the organization, everything grinds to a halt.
Your systems can create chokepoints when they produce a single point of failure through the timing of a task, the physical layout of a workstation or any number of other factors that go into your business doing what it does. For example, a secure shipping system that requires a manager sign-off before the product leaves the warehouse works great when the manager is available. But if the manager is in a meeting, out for the day or otherwise unreachable, then that product ships out late.
The solution to this chokepoint is to look at your systems and staffing to identify single points of failure. For each, either adjust your operations or invest in training staff so there always is a second option whenever something goes wrong.