Under normal circumstances, a functioning supply chain enables your business to get products from point A to point B. However, in the words of the White House, “The COVID-19 pandemic and resulting economic dislocation revealed long-standing vulnerabilities in our country’s supply chains.”
Unfortunately, a long-time prioritization of low costs and efficiency over sustainability, resilience, and security has come with some big costs for American business owners and consumers. Empty shelves, delayed delivery times, and inflated costs have all become commonplace across many industries. But what can you do about it as a small business owner?
Here’s a closer look at supply chain disruptions, what we’re facing this year, and what you can do to protect the growth and success of your small business.
What is a Supply Chain Disruption?
A supply chain disruption is a sudden crisis or change, on a local or global level, which negatively impacts the network of people, activities, and organizations that deliver a product from a supplier to a final customer. As a result, a process that seemed like a well-oiled machine can break down causing interruptions for a business and its customers.
Supply Chain Disruptions in 2021
Once the coronavirus pandemic hit in March of 2020, many businesses around the world halted or slowed operations due to the shelter-in-place protocols and shifts in demand. As a result, the production of a variety of items stopped or slowed down. Now, as the U.S. economy has been rebounding, thanks largely to massive fiscal stimulus packages, we are experiencing a supply chain that can’t keep up.
Restarting the economic machine after a pause has proved to be difficult. In addition to producers being closed or running in a limited capacity due to the labor shortages, shipping rates increased and have now more than doubled since the pandemic started. Further, a shortage of shipping containers developed, international ports faced congestion which then expanded to inland rail terminals and railroads, and the trucking and chassis shortage worsened. To add insult to injury, several extreme weather events and human-caused events (like factory fires) also caused supply chain issues and delays.
Here are a few stats that give a snapshot of the severity of disruptions this year:
- Global supply chain disruptionsdue to shortages were up 638% in the first half of 2021.
- 75%of business owners reported that supply chain disruptions had negative or strongly negative impacts on their businesses.
- 70+ container ships were recently backed up off two CA ports, unable to unload goods because of a worker shortage.
- 90%of the chamber of commerce leaders from various cities across the U.S. say labor shortages are limiting economic growth in local areas.
- The semiconductor chip shortageis estimated to cost the global automotive industry $110 billion in revenue in 2021.
Long-time concerns about limited domestic suppliers, competitor country suppliers, and a global supply chain vulnerable to disruption have all proved themselves to be valid. Key products such as semiconductor chips, essential medicines, food, and lumber have all experienced strains, along with a variety of other items.
The White House acknowledged that secure and resilient supply chains are essential for our economic security, national security, and technological leadership, and has created a task force to help increase supply chain resilience. A key part of its plan is to rebuild a manufacturing base within the U.S. that consists of small- and medium-sized businesses. Further, for outsourced goods from global markets, the plan is to diversify our international suppliers to reduce geographic concentration risk.
In the meantime, what can you do as a small business owner to prevent supply chain disruptions?
How Small Businesses Can Prevent Supply Chain Disruptions
As a small business owner facing the threat of a disrupted supply chain, you’re likely worried about how to keep your company running and meeting your customer demand. It only takes so many delays before customers will look elsewhere for another solution. So, what should you do? Approximately 87% of supply chain professionals are planning to invest in resilience within the next two years, according to a recent Gartner survey. Here are a variety of ways you can respond to build a more resilient supply chain.
1. Improve Supply Chain Visibility
One of the ways you can secure your supply chain management is to increase your chain’s visibility from end to end. That means tracking your products in real time every step of the way from raw materials and final products to serialized assets moving through the value chain. With comprehensive insights, you can keep close tabs on each link in your chain and spot potential problems ahead of time.
However, for many businesses, supply chain visibility is easier said than done. Some of the common challenges that limit visibility include a lack of reliable data, a lack of tools and technology that forecast demand, siloed information across different stages of the supply chain (often in legacy systems), and a lack of synergy between automated systems and manual operations. In short, the links of the chain are often fragmented, rather than managed as a whole, which leads to blind spots.
The good news is, various technologies like artificial intelligence, the Internet of Things, and robotics are enhancing supply chain visibility and enabling businesses to:
- Extract vendor data out of ERPs and legacy systems to create a single source of truth for companies — eliminating manual processes and connecting individual solutions.
- Track products while they are in transit.
- Observe moisture and temperature conditions throughout shipment.
- Keep up to date on environmental statuses.
- Observe traffic patterns while products are in transport.
- Gain earlier notice into when it’s time to switch suppliers (such as when a vendor is seriously affected by port congestion issues).
- Gain visibility into supplier costs (and all of the associated costs).
An increase in knowledge about the details of every step of your supply chain empowers better risk management. You can pivot quickly when necessary to lower costs, prevent errors, and keep your supply flowing.
2. Identify Alternative Suppliers
It’s also a good idea to plan for your supply chain to fail. Look over each part of it and ask yourself what you would do if it failed. Then, find suitable alternate suppliers, shipping couriers, etc., and build relationships with them so they can step up if needed.
In doing so, you’ll prevent the need to scramble to find a replacement if one of your links fails. Instead, you can simply replace your chain link with a new one already lined up.
It can also be a good idea to diversify your suppliers on a regular basis. This will build stronger relationships with those suppliers and can help to reduce your risk level. It’s best if your various suppliers are in different geographic locations.
3. Stock Emergency Back-Up Inventory
It’s also a good idea to keep an inventory of essential supplies stocked up in case your supply networks fail. This way you have a buffer in case of an emergency like another economic shutdown or one of the many natural disasters that could occur. What you stock will depend on your business. It should include whatever you need to maintain your business through a temporary supply shortage from raw materials to final products.
4. Implement Demand Planning
Next, many organizations, markedly healthcare, high tech, and pharmaceutical companies, report that national interests are playing a larger role in their future supply decisions. For example, imminent needs like personal protective equipment and vaccines, as well as ongoing issues like Brexit and the U.S.-China trade war are all impacting demand.
Machine learning through software solutions can help you to use the data available to predict consumer demand and improve forecast accuracy. As a result, you can maintain lean inventory in your value chain.
5. Optimize Warehouse Management
If you’re managing a warehouse, you can put processes in place to optimize labor, space, and inventory. As a result, you can improve your pick-and-pack, inventory receipt, and put away operations. You can also automate physical operations with robotics and wearables to further increase efficiency.
6. Partner with a Logistics Pro
Partnering with a fulfillment and supply chain expert like Amazon can help to ensure that the ball doesn’t drop when disrupting events occur. They can help you identify problems early, locate alternative couriers, navigate fees, and work through disruptions. Often, providers have user-friendly dashboards that enable users to view delivery times, costs at checkout, and more. Having a company watching your back can help you stay focused on your core business growth while ensuring you can fulfill your orders.
7. Consider Onshore Manufacturing
Sourcing products from other countries adds more variables which can lead to more risks. Being so, many supply chain professionals are planning to bring their manufacturing back to the U.S. However, they are hoping to keep the process economically viable through the use of advanced robotics and other automation technologies.
8. Implement Risk Evaluation Tools
Lastly, it can also be helpful to use software that helps you to predict supply chain risks using system data and external data sources (like those monitoring economic indicators, capacity disruptions, and weather). Plus, by implementing a decision support platform, you can mitigate overall risk in your supply chain with speed and at scale.
Protect Your Small Business’ Supply Chain?
By taking steps to create a resilient and agile supply chain, you’ll be better prepared for anything that may come your way from a trade war to a pandemic. When one link in the chain breaks, you can quickly connect another one, making it easier to overcome supply chain challenges and maintain your business’s well-being.
Looking for a loan option to help you improve your supply chain management? Learn more about the business financing options available from Biz2Credit.