Even the tiniest hiccups in the global supply chain make it difficult to source inventory and materials for businesses of all sizes and industries.
Unfortunately, there are many links in this snarled chain that have disrupted Americans’ ability to secure the items they need. Here’s what you need to know about the impact of the global supply chain on local businesses.
Why is the global supply chain impacting small businesses to such a degree?
Short answer? We don’t make much here anymore. Long answer? It’s complicated. We’ll break it down to the best of our ability.
Essentially, a significant percentage of American businesses rely on products created overseas. As a result, a complex, diverse, and extensive supply chain is much more susceptible to disruptions than a shorter, more localized chain. Unfortunately, this means that local US businesses are subject to manufacturing bottlenecks in other countries.
For example, a Chinese port shuts down because of the pandemic, it impacts domestic supply chains. When Russian fertilizer is banned, US farmers are in trouble. And when chip-testing factories in Taiwan halt operations due to Covid-19, Americans can’t get new cars — ad nauseam.
To make matters worse, the global supply chain isn’t a simple light switch you can flick off and on, and voila! Everything’s back to normal. It takes a lot of time to fill a backlog of demand.
How did we get here?
A big part of it is the pursuit of cheap at all costs. Hollowing out domestic manufacturing capabilities has led to a host of issues brewing beneath the surface — long before the supply chain disruptions brought the average person's attention to it:
- Lost jobs
- Environmental impacts
- Hollowed-out communities
- Human and animal rights violations
This has also led to a drop in product quality and misforcasting due to long lead times. In addition, excess items often end up in landfills or discount bins. Consequently, a lack of products leads to price inflation and negatively impacts brand perception and future business sales.
Additionally, sending manufacturing overseas has led to significant knowledge loss around design and production. Design and manufacturing is a substantial part of the country’s long-term resistance to foreign policy issues, armed conflicts, natural disasters, etc.
So cheap isn’t really cheap.
What can small businesses do now?
You know the best time to plant a tree? Yesterday. But the next best time is now. The inherent problems with relying on a global supply chain won’t be fixed overnight and won’t be easy fixes either. What local small businesses need to do to weather the storm is brainstorm creative solutions to stay in business and meet customer demand.
1. Alternative suppliers
Research alternative suppliers, especially local suppliers, so you don’t have to rely on overseas manufacturers.
Shortening your personal business supply chain can buttress your brand against hiccups. This can also be a great long-term solution for your company.
Although local suppliers will probably be more expensive than your previous contact, you’ll likely come out ahead in the long run since you’ll be eliminating a host of logistical problems that are inherent to shipping products across the globe.
Since your upfront costs will probably increase with this method, you’ll want to consider increasing your prices so you can retain your profit margin. Without charging more, your bottom line will suffer.
I love paying more for the same product!
Said no one. Ever. So yes, your customers probably won’t like paying more for the same items. But truth be told, we’re seeing increased prices across the board.
The good news? Sales don’t appear to be slowing. If you go this route, double down on customer service. Be sure to explain any inventory delays and offer updates.
2. Offer alternative items
If you can’t get your usual inventory, can’t get a different supplier, and don’t want to raise prices, consider offering an alternative product that you can price the same as your usual inventory.
Either way, diversifying your supply chain with local sources is a sound long-term business strategy.
3. Explore financing options
Since these problems with the global supply chain won’t go away anytime soon, you might want to explore taking out a small business loan. A loan with favorable terms can help you obtain the capital you need to weather the supply chain crisis.
Some of the most favorable business financing options are:
- Bank loans
- SBA loans
- Business lines of credit
- Merchant cash advances
- Equipment financing
- Business credit cards
Financing your business operations to fill in gaps in cash flow or cover upfront costs doesn't make much sense. Plus, most small businesses can’t do it anyway. So, use other people’s money to make your money.
4. Eliminate intermediaries
Why use a middleman if you don’t have to? This may take a bit of time and sleuthing on your part, but eliminating intermediaries can significantly strengthen your business supply chain long-term.
For example, consider eliminating stateside vendor warehouses to get your items shipped directly to you from the manufacturing facility.
5. Prioritize forecasting
Business owners need to know their supply chains like the back of their hands. So, keep close tabs on your inventory.
Closely track prices, shipping times, and any economic issues that may affect your business. The sooner you can predict hiccups in your inventory, the faster and more efficiently you can head the problem off at the pass and recover.
Regardless, you do not want to wait until someone stops shipping an essential item. Invest in a point-of-sale system or inventory management app with robust inventory management capabilities.
Protecting your small business from global supply chain problems is not easy
Stressed out small business owner, you’re far from alone navigating these supply chain woes. Unfortunately, it’s not a werewolf, and there’s no silver bullet solution to the problems.
But there is a silver lining.
Main Street mom and pop shops will need to get creative with sourcing their products as locally as possible. Customers who care about supporting local businesses will make an effort to shop locally if your brand offers top-notch customer service and transparent communication.
Keep these supply chain tips in mind to strengthen your business and come out the other side stronger for it.