Mitigating Supply Chain Disruption for SMBs

supply chain illustration

The hardships for small businesses and retailers in the U.S. only seem to be increasing since the onset of the pandemic. As customers questioned empty store shelves, delivery delays and shrinking purchasing limits, SMBs were hit hard. The large, ongoing supply chain concern for SMBs is to become more prepared for the impact or even avert the risk.

For SMBs, the supply chain impact trickled down from the abrupt shutdown of manufacturing, causing mass unemployment, product shortages and operational losses. And shifting consumer consumption patterns triggered a series of supply-demand turbulence. While consumer activities halted initially, a surge in demand emerged for specific items, further straining global retail supply chains and leading to shortages.

Alongside massive business losses for SMBs, mergers, business acquisitions, sales and leadership transitions followed. Many companies sought capital investments to meet the rising demand and cost hikes to keep production alive.

As geopolitical risks continue to threaten global supply chains, the Russia-Ukraine conflict is expected to affect nearly 86% of them, according to an April survey from Software Advice. U.S. sanctions on Russian imports have severely disrupted of supplies of raw materials, energy and numerous commodities.

The resurfacing of the Omicron variant in China, along with the emergence of newer strains, has only added to the destabilization of labor markets and production. The shortage of skilled labor followed by the “Great Resignation” has increased the pressure on business owners.

Soaring instances of factory fires across the U.S., up by almost 129% in 2021, have only worsened the supply chain crisis, affecting industries from food processing and automotive to life sciences and home furnishings.

U.S. SMBs Dealing with Quite a Blow

A lot has changed since the onset of the pandemic but supply chain disruptions continue to evolve. Over 61% of SMBs reported an impact on their business from the pandemic-fueled supply chain crisis, according to the U.S. Chamber of Commerce. While the degree and nature of disruptions differed for every company, almost all discovered many hidden supply chain imbalances.

Many were forced to limit or shut down operations due to critical supply delays and shortages. The percentage of SMBs who experienced foreign supplier delays was 19.2% in 2022, up from 12.2% in 2021, according to the U.S. Census Bureau. Inventory procurement, therefore, became much more difficult for many SMBs. In 2021, nearly all SMBs (91%) said the situation was further exacerbated by vendors prioritizing larger companies over them, according to an Oracle survey.

The combination of rapidly shrinking supply chains, geopolitical risks and rising consumer demand set the stage for rising costs. Over 22% of SMBs cited inflation as a major cause of worry. Simultaneously, the Software Advice survey showed a 14% hike in the number of SMBs increasing prices to balance out supply chain costs. Simply put, the buck stops with customers.

Finally, the loss of customer base is a new concern for SMBs struggling to keep supplies on the shelves while maintaining costs. Lengthy delays and cancelled orders are also taking a toll on customers, pushing them to rethink brand loyalty.

Guiding SMBs Through Supply Chain Issues

With very little respite for U.S. SMBs in the near future, it seems like the outlook is worsening. However, here are a few ways SMBs can make the best of these turbulent times.

Collaborate Closely with Suppliers

Nearly 46% of SMBs have expressed the challenges of disruption in their supplies because of their suppliers prioritizing larger businesses, Software Advice found. That means it is vital for SMBs to build and nurture close relationships with their existing key suppliers. Good communication means receiving live and regular production updates and earning the trust and priority status of the suppliers.

SMBs must also discuss their challenges and goals with suppliers as it helps open new avenues of collaboration and better risk mitigation strategies. Communication ensures better utilization of resources towards the collective pursuit of a common goal.

Diversify Supply Chains

It’s getting riskier to rely on a single supplier from a single market, so you need to diversify. Focus on onboarding more suppliers as a backup while strengthening relationships with existing ones. Monitor the supply chain of competitors and identifying potential suppliers. Looking out for other potential markets for sourcing can also help you fight supply shortages and rising costs.

Data from TelUs found significantly higher cumulative growth in U.S. imports from Vietnam and India over the past three years. While U.S. imports from Vietnam grew by 119% from 2018 to 2021, those from India grew by 53%.

End-to-End Supply Chain Visibility

This is the ultimate step toward framing actionable strategies that result in operational efficiency, customer satisfaction, revenue optimization and cost control all at once.

Thoroughly visible supply chains can provide you with harmonized data for all stakeholders. Insights from this data can be used to achieve higher supply chain resilience with timely identification of gaps and forecasts for proactive decisions. End-to-end visibility into inventory, carrier selection, shipment tracking, the last mile and customer inquiries allows you to take better control over every step of the order flow. Software can you create a robust multi-party ecosystem and surface hidden opportunities.

Invest in Technology and Data

While the traditional methods of data intelligence may become overwhelming and yield insignificant results, consider investing in technology to gather and leverage the data available for enhanced real-time supply chain risk management. It can take help from supply chain intelligence platforms that tap big data and machine learning to offer actionable insights.

Additionally, CRM and ERP systems can help to streamline your supply chain workflows. These systems can help you manage a range of business relationships including suppliers, vendors, employees and customers. Businesses can manage contacts, automate workflows, manage projects and monitor pipelines.

The chaos is likely to only change form for U.S. SMBs in the coming years. However, small businesses have also shown surprising resilience and adaptability. A great strategy includes decision-makers supporting a relationship-driven, technology-based approach to navigate through the narrow lanes.

Shalabh Singhal is the Founder and CEO of Trademo