You know what usually happens when stock starts to back up when orders drop off.

Product starts dropping into black holes. Damage mysteriously occurs. Inventory comes and goes without proper paperwork hitting the books. It gets tougher to count units accurately.

Bottom line: The tighter your inventory space gets, the more inefficient your productivity will be. One chilling stat: If your already full inventory is increased by 7%, you can expect to see productivity dive by up to 27%.

Ouch!

Once stuff starts piling up in the aisles (often the first spot for homeless inventory), your workload can easily triple.

Instead of picking up one pallet or unit, workers must pick up one, move it, pick up the one they’re looking for, then put back the pallet or unit they moved in the first place.

That’s a mouthful and a headache.

There’s no easy solution.

You can:

• try to reconfigure your existing floor plan to accommodate overstock
• talk to sales or production about ways to expedite sale or use of more stock
• see if vendors are interested in buying it back, and
• try to document the costs and the outweigh the expense, consider making an argument for acquiring outside storage.

Just ask any of the companies that have relied on China for supplies, parts and products.

Tens of thousands of manufacturers have gone belly up in China — often overnight — leaving many of your peers scrambling for a back-up plan.

If your business handles mainly middle of the road product, available from more than one source, you’re certainly better positioned.

But that doesn’t mean you don’t have to prepare yourself for any problems that might pop up.

What if another customer fails to pay your supplier, and it means your supplier can’t fill your order? What if something as simple as a shortage of shipping materials hangs up your next delivery?

No matter how secure you might feel today, you still don’t want to come up short if the unexpected occurs.

There are three ways you could offer to help:

• If your supplier is unable to obtain necessary product, offer to go one step further and deal directly with your supplier’s supplier. You might even be able to generate a volume discount.
• Depending on your relationship with the supplier, you could offer expert advice from your own staff on navigating process changes that could improve operations for the supplier.
• If it’s a matter of money — your supplier is locked into a contract with you, but the supplier’s costs have unexpectedly increased, you always could offer to negotiate a way to mitigate that cost difference.

In fact, most suppliers will tell you the hits are more like body blows than toe-tapping tunes.

Chances are, you’ve already formulated back-up plans for key suppliers, by scoping out and maybe even contacting alternate sources.

But the suppliers you rely upon for more specialized goods or products aren’t so easily replaced.

In some cases, it’s in your best interest to lend a helping hand, to keep your own lifeline open.

There are five strategies you could consider, and determine what might work best for you:

• Offer a troubled supplier a bridge loan, which must be secured by a tangible asset like real estate or equipment. If this is the path you choose, tread carefully — you don’t want to obligate your company to end up with a supplier’s white elephant.
• Become a supplier for your supplier. See if you can purchase the raw goods or materials your supplier relies upon, and feed them to the supplier. In return, you get credit or discounts on your own transactions with the supplier.
• Speed up your payments to a supplier. Instead of taking the full net 30, mail the payment sooner, so the supplier can pay its own bills more quickly.
• Offer your company’s expertise, to help advise the supplier in ways to improve business practices. Your people might be able to quickly spy weak spots the supplier might have historically overlooked.
• If nothing else seems  to be working, it’s likely the supplier will consider a price increase. Spend time weighing this against the cost of finding a new, specialty supplier. Many companies opt to pay the new price and stick with a reliable business partner.

In this case, it’s the possibility that your suppliers could suddenly go belly up.

One worst-case scenario (and it has happened): The supplier who provides nuts-and-bolts goods, like packing materials, leaves you in a lurch. Result? Some companies have been unable to ship product.

Of course, you want to make contingency plans for where you could turn if one of the suppliers fails.

You might be able to detect which suppliers are feeling the squeeze the most. Some have fallen behind in paying their own suppliers, which has slowed the flow of materials they need.

Before you pull the trigger and switch suppliers, consider taking a supportive stance. After all, you probably have a long track record with these guys, and it’s tough to break in a new supplier. Add that to the fact that a new supplier is more likely to make mistakes, and it’s worth your time to take a second look.

One strategy: Your company can offer to buy the materials the supplier needs, and then receive a discount on the finished product.

If your buying power is strong enough, you might even be able to earn a bulk discount and lower your own costs further.

So before you get the phone call — or worse yet, the bean counters show up one morning — it pays to get your ducks in a row. That way, you’re more likely to remain in the driver’s seat and be the moving force behind any changes (rather than getting swept up by them).

Many companies are engaging in a practice known as “spend analysis.” It is just what it sounds like: A way to determine what’s being spent, with whom, and for what. 

According to Spend Analysis: Optimizing Your Sourcing Process, a research report from Bristlecone, this is most often a two-step process: Three “big picture” action steps, and seven targeted action steps.

The “big picture” steps:

• Prioritize your sourcing needs, in order of importance and cost
• Examine the number of suppliers you’re currently using and seek out opportunities to increase spending with a smaller number of suppliers, in exchange for volume discounts, and
• Turn attention inward and redouble efforts to plug any financial leaks in the purchasing process.

Next, experts suggest you identify areas for improvement — and what the anticipated payoff is for those improvements. That also will help your company prioritize what aspects of the purchasing operation should be targeted first.

By focusing on:

• materials/services costs, companies can cut costs 2% to 12% by making sounder sourcing decisions
• supplier management, companies can reduce or eliminate “double” suppliers
• contract compliance, companies can improve compliance by more than 50% and save up to 7% by stronger management of contract pricing
• regulatory compliance, companies won’t have to be concerned about overlooking regs
• inventory management, companies have cut stock by up to 50%; inventory costs have been reduced 5% to 50%, and expediting costs have been trimmed as well
• product management, companies can increase part re-use and reduce unnecessary parts by 20%; integrate suppliers and design strategies, and
• process cycles, companies can make changes through spend analysis that often run between 30% and 50%.