The supply chain shortage is wreaking havoc on many small businesses. In a recent Small Business Pulse Survey from the U.S. Census, 45% of small businesses note they have been affected by supply chain shortage and delay issues.
Whether they’re unable to import products or are waiting on components for manufacturing and services, these challenges — especially when combined with a U.S. labor shortage — have created operating challenges for many companies.
Here’s a closer look at how businesses have been affected and what strategies they can use to overcome these obstacles.
How the Supply Chain Got Here
Global shipping infrastructure has been impacted by a perfect storm. Slowdowns in production in the Asia-Pacific Region and shipping delays intensified by a U.S. labor shortage in key areas — such as offloading cargo in ports — have affected many industries.
Suzanne Clark, President and CEO of the U.S. Chamber of Commerce, recently issued a statement noting: “This supply chain crisis is hurting businesses and consumers alike, leading to inflation and shortages of key supplies. Coupled with massive labor shortages, this is a major threat to our fragile economic recovery and long-term competitiveness.”
Broadly speaking, the supply chain has impacted everything from key ingredients to finished products. While discussions have recently centered on the holidays, issues include routine products from clothing to household cleaners and biomedical products. Other factors compound the situation. Fewer shipping containers mean less cargo space to ship items from Asia. Truck driver shortages mean longer delays in moving freight once it’s unloaded. And labor shortages touch every link in the supply chain.
The federal government recently announced a 24/7 initiative for key West Coast ports to help get goods into America faster. Yet many small businesses fear that the benefits are more easily reaped by larger companies with more buying power or will take significant time to make a noticeable difference. In the short term, companies may face scenarios in which they can’t deliver what their customers need or must pay a premium and raise their rates to keep offerings profitable.
How Companies Can Weather the Storm
While supply chain shortages may have been caused by a perfect storm set in motion during COVID-19, small business owners are adapting how they operate. There are proactive steps you can take to find alternatives today and build more resilient supply chains moving forward.
Identify Your Risks
Whether you’ve been experiencing these delays for a long period of time or are just seeing the effects of a supply chain shortage now, take stock of the areas affecting your business. A competitive analysis can help you identify your risks.
For example, many foodservice businesses have plenty of access to food but are experiencing container and cup shortages. Stores may be able to sell new products but are wrestling with a shortfall of components needed for servicing older models. Understanding where shortages are occurring and how they impact your customers is the basis of developing a strong strategic plan.
If you’ve always relied on one supplier, it may be time to diversify your options. For example, if you’re working with a supplier that sources products from Asia-Pacific, you might be able to find a distributor that works with suppliers from a different region.
Diversifying your supplier base can help you create more options for sourcing products or find adaptive solutions when things are in short supply across the globe.
Add Flexibility Where Possible
Another strategy small business owners can apply is finding places to be flexible. For example, perhaps your coffee shop has historically offered small, medium and large cups in specific ounce formulations that are hard to track down. Being open to different sizes of cups can help keep you operating, even if it requires adapting to new processes. Explore how flexibility can make it easier for you to keep moving forward.
Order in Advance
While many small businesses have historically used just-in-time ordering to manage costs and keep inventory under control, now may be the time to implement ordering in advance. For example, many florists order the vases they need just a few weeks ahead of a major holiday. Yet when floral supply companies run short, this leaves florists unable to fulfill orders.
Many floral shops might consider ordering Valentine’s Day supplies now — or perhaps a few months ago. Ultimately, this approach requires access to both capital and storage, but it can help keep you operating and competitive when other companies can’t deliver.
Simplify Your Offerings
Supply chain shortages can be dramatically compounded when you’re out of several products at the same time. Consider streamlining your offerings to items, sizes and solutions you can keep in stock.
With this approach, you can focus your supply chain management efforts and dollars on high-impact areas while you deliver a more consistent and stable experience for customers.
Many of your customers are already familiar on some level with the general supply chain issues the world is facing, but not all buyers will know specifically how these issues impact your business. If delays are affecting your business, let people know ahead of time. If you’re implementing new options, let customers know what’s happening, why and what they can expect from you.
Again, florists might consider sending out a message stating that their holiday flower arrangements are without vases due to the shortage, but that they are offering innovative wrapping designs as an alternative as well as lower prices.
Find Ways to Address the Labor Shortage
Forbes reports that 60% of businesses are being impacted by a labor shortage. Innovative businesses are using a variety of strategies to operate efficiently with fewer people.
- Offer flexible schedules and competitive wages. This will help attract willing workers, even if that means shorter shifts or fewer days per week.
- Embrace technology. Customers can complete orders from a gift shop online instead of shopping in person, and restaurants can install self-pay kiosks at booths — reducing the need for in-person staff.
- Find ways to implement automation. A clothing website, for example, might create a chatbot function on their website to answer basic customer questions in an effort to reduce the volume of requests their customer service representatives have to field.
- Evaluate what work is essential. Your team may be spending time on tasks that are not value-adds, which can be eliminated, reduced or put on hold until the labor shortage abates.
- Invest in training. Effective training can help people do their jobs as efficiently as possible, make the most of their time and get more done per shift.
The past two years have been challenging, and labor and supply chain shortages promise a demanding landscape ahead. By looking at the supply chain from a strategic point of view and taking actionable steps — such as diversifying suppliers and finding ways to be more efficient with fewer employees — you can find innovative ways to operate effectively in a variety of environments.
Learn more about how small businesses are facing the challenges of the pandemic on the National Funding blog.