Navigating (and Reimagining) the Great Supply Chain Disruption

By SBE Council at 3 November, 2021, 8:21 am

UPDATED

By Karen Kerrigan –

As pointed out by SBE Council chief economist Ray Keating in a recent analysis of the global supply chain crisis and its impact on small businesses, 45.7% of respondents polled in the Census Bureau’s Small Business Pulse Survey (October 4-10) reported delays or difficulties with domestic suppliers. Three months ago, that stood at 38.2%.

In addition, 19.6% cited delays/difficulties with foreign suppliers in the same survey compared to 15.6% three months earlier.

The chase for goods and services along with supply chain bottle necks are driving prices higher for small businesses, adding to other operational woes. The latest Small Business Pulse Survey finds that 71.1% of small businesses are paying more for goods and services for their businesses – 30% say those price increases are “large,” while 41.1% categorize the increases as “moderate.”

Certainly, these disruptions are taking their toll on all-sized businesses, but the effect for small businesses can be more acute given limited resources and economies of scale to absorb price increases. While hesitant to do so, many have had no choice but to pass on these higher costs to their customers, which can put them at a competitive disadvantage to larger firms.

Successful small businesses work hard to compete on service, create innovative goods and services, and deliver unique customer experiences. Oftentimes, however, price wins out. That’s the reality of the marketplace, especially in uncertain economic times. Still, millions of small business owners and their employees are finding ways to stay relevant and needed. Their resiliency is a testament to the can-do entrepreneurial spirit.

How can small businesses more effectively navigate the supply chain mess?

At this point in time, I am finding that most small business owners and managers have a good handle on existing inventory and supplies and expected demand through the end of the year and through the first quarter of 2022. Many business owners are working to figure out or game play where there may be possible gaps in future supply, and identifying alternative suppliers, which many have already done. But as we’ve seen in the data and surveys, this is more easily said than done. Many small business owners are still scrambling to identify alternative suppliers, which is more acute in certain industries such as manufacturing, construction and food services. In the most recent Small Business Pulse survey, 23.1% of small business owners reported difficulty in locating alternative domestic suppliers, and 9.3% said the same about alternative foreign suppliers.

As I read through a variety of “how to” content pieces and articles on the issue (I’ve included links to several pieces below), some general themes and strategies stand out.

For example, boosting inventory within reason, sourcing “local,” and always being prepared to tweak processes or ingredients when needed, are some of the basic actions many small business owners have taken to date. Most importantly, they are communicating with customers and clients early and often, which is critical during this period of time.

Thankfully, there is widespread public knowledge regarding the supply chain crunch and most customers seem reasonable and understanding about delays or backlogs – as long as business owners and their front-line team communicate clearly and transparently on these matters. Steady engagement and communication may also provide opportunities for entrepreneurs to identify new trends or ideas for offering new products and services.

Conversely, if  your business is not being impacted by the supply crunch – for example, through a customary practice of local sourcing and manufacturing – that may work to your marketing and competitive advantage.  Get the word out, as consumers and customers may assume delays and disruptions when that may not be the case.

Business owners are also teaming with other businesses, even competitors, joining forces in efforts to identify new suppliers. Along these same lines, local business leaders are helping other local businesses by looking for opportunities to support local suppliers, or start new businesses that provide solutions in response to supply disruptions. Last, but not least, as many small business owners learned during the pandemic, technology is an important tool that is helping them better track inventory, production, and to plan for the future.

Take time to plan and be proactive

The broken global supply chain will work itself out (hopefully) over time – but it will take some time. This is not something small business owners can control. Business owners and their teams need to focus on what they can control. Resilient small business owners view current circumstances as an opportunity, as many did during the early days of the pandemic, by responding to changing consumer preferences and demands and new opportunities in the marketplace, and collaborating with other businesses to move quickly and scale faster to take advantage of these promising opportunities. These are some of the positive things to focus on.

Small businesses need to double down on what they’ve been doing even before the pandemic to stay competitive and relevant – differentiating their value proposition, focusing on ‘hyperlocal’ demand trends, building a niche community or unique experiences with customers through their business, strengthening communication channels and their social media presence, and by competing on service and quality.

Successful entrepreneurs embrace change, and while all of us would like things to return to “normal,” disruptive events such as the pandemic and the supply chain crunch offer opportunities for growth and new businesses. Thankfully, this optimistic take on a challenging period for small businesses is one that successful entrepreneurs also share.

Helpful articles: 

How Small Businesses Can Benefit from Supply Chain Delays Happening Right Now, Business Insider

5 Ways Small Businesses Can Navigate Supply Chain Instability, Sales Force

Supply Chain Disruptions Affecting Small Businesses Due to the Covid-19 Pandemic (What caused the shutdown of global supply chains? How is the disruption impacting businesses and what can they do now? Where do we see businesses and supply chain resilience in the next few years?), Biz2Credit

Supply Chain Disruption: How Small Businesses Can Smooth Their Supply Lines, Biz2Credit

Experts Explain What Small Businesses Can do to Address Supply Chain Challenges, Zebra

7 Tips for Small Business Supply Chain Management During a Rapid Growth Phase, (Several of these lessons apply to the pandemic) Cover Wallet

I was recently interviewed by ABC News about how small businesses are faring under supply chain constraints. I noted: “Small businesses may have less sophisticated purchasing operations, but they do have more flexibility due to their size.” I noted the importance of communication during the supply chain crisis. Read the piece here, which also provides additional tips.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.