Even on a good day, managing a supply chain is difficult for many small businesses. Regrettably, this makes them especially vulnerable to global supply chain issues such as the COVID-19 pandemic.
It seems that only retail giants, large companies, and international conglomerates can be affected, but these supply chain disruptions are disproportionately affecting SMEs. Faced with raw material and product shortages, international manufacturing and shipping delays, and rising costs (especially for freight containers), most SMEs have the infrastructure and resources available to large competitors. It lacks, and as a result, competition is difficult.
However, are small businesses doomed? Certainly not. As pandemic waves rage on, small businesses are devising strategies to build more resilient supply chains.
In this blog, you’ll learn about the various stages of the supply chain, the impact of disruption at these stages on SMEs, and practical tips and improvements that can be implemented to protect SMEs from supply chain problems.
Supply Chain Components for Small Businesses
Every supply chain is unique, but most of the time there are some things in common. Small business supply chains normally include the following parts:
- Product Acquisition
Most supply chains begin with sourcing (also known as procurement), which entails identifying and evaluating suppliers who will provide your company with the goods and supplies it requires to function.
These products can be anything from the raw materials used in manufacturing (or production of the inventory) to finished products that are ready to be sold to end-users.
- Logistics of Transportation
The next key element of the supply chain is the logistics of physically moving goods from a supplier to a store, warehouse, or fulfillment center. Transportation logistics help ensure that products arrive in the right place at the right time. This prepares the product for delivery to the customer when the order is placed.
Small businesses can use a variety of methods to transport their products. Depending on the source of the material or product, it is advisable to consider sea or air freight and move the product from the supplier to the warehouse. Both ground and express air transportation are common options when delivering orders to customers (although transportation costs and speed are important factors).
- Inventory Management and Warehousing
Manufacturers typically ship materials or goods to a company’s warehouse, where they are received and stored on a racking system.
Inventory in an efficient warehouse is both organized (each unique SKU has its own location) and strategically designed to use space as efficiently as possible. Once inventory has been stored, small business owners must monitor of inventory levels as individual items are selected for orders.
With the right system and technology in place, inventory management can help you maintain right inventory levels at all times, making sure that your supply chain runs smoothly and with few interruptions.
Delivery and Fulfillment
When an order is placed, it must be fulfilled and delivered to the customer. This includes processing orders, selecting SKUs requested from warehouse shelves, packing in crates, and shipping the crates to customers using the Last Mile Carrier. By optimizing this process, orders are picked, packed, and delivered in a timely and accurate manner.
The Impact of Supply Chain Disruptions on Small Businesses
Disruptions in any of these supply chain components can have serious consequences for small businesses. Here are some of the most common issues that arise as a result of supply chain disruptions, as well as how they affect small businesses.
- Inadequate Product Availability
During difficult times, supply chain disruptions can lead to delivery delays and product shortages across the industry, but SMEs tend to have fewer relationships with suppliers when it comes to inventory procurement. , A disadvantage compared to large competitors.
Small business cash flow is confused when there are few or no products to sell. This means that SMEs are having a hard time keeping their business going. In some cases, you may even lose valuable customers due to out-of-stock due to shortages or dissatisfaction with backorders.
- Rising Product Prices
Whether due to limited product availability or transportation challenges, disruptions frequently cause the cost of procuring, producing, and transporting goods to skyrocket in the short term and, in some cases, remain higher in the long term.
Unlike large companies with capital, SMEs often have to operate with less capital and limited cash flow, so they cannot afford these increased costs. As a result, small business owners and entrepreneurs are struggling to restock and continue their supply chain.
- Inadequate Supply Chain Management Expertise
Small businesses rarely have experienced supply chain professionals on their team to help protect them against disruptions like the COVID-19 pandemic, owing to their smaller budgets and limited resources.
First-time entrepreneurs are especially unprepared to face the challenges posed by these disruptions, as they lack the knowledge and experience required to effectively navigate disasters.
Even as supply chain issues settle, it is much more difficult for these small businesses to stay afloat unless they have access to a vetted industry partner or 3PL.
How SMEs Protect Themselves From Supply Chain Issues
Because small businesses are more vulnerable to severe consequences as a result of supply chain disruptions, they must take strategic precautions to protect themselves against these issues.
Here are some practical strategies for navigating difficult times for startups, small businesses, and small retailers.
- Make informed purchasing decisions by using inventory and demand forecasting.
Being proactive rather than reactive helps to mitigate any supply chain issues. Forecasting demand and inventory, in particular, is an excellent way to protect your company from product shortages.
By estimating future consumer demand for a variety of products and ordering inventory accordingly, small business owners can prepare for changing trends, especially during the holiday season, and strategically adapt to the current situation. It can be adapted more easily.
Using historical data on purchasing rates, inventory turnover, and seasonal trends, you can use advanced analytics tools to anticipate demand and forecast inventory requirements. This allows you to make more informed purchasing decisions, avoid wasting money on inventory that will not sell, and maintain optimal inventory levels in your stores and warehouses.
- Look for alternative suppliers.
When suppliers are unable to meet your procurement demands due to product shortages or trade blockages, relying too heavily on the same suppliers can become problematic. It is critical to find alternative suppliers to tide your business over to quickly get inventory back on shelves.
This has become much easier for small businesses, as there are numerous online resources available to help them find new suppliers. Sites like Alibaba, GlobalSources, and DHGate, for example, provide access to a massive database of reliable suppliers from all over the world. These websites will help you find the best suppliers based on the product category and other search criteria.
Alternatively, you can procure inventory through a local company or supplier. This is a great way to better manage your supply chain and help keep your supply chain costs down while reducing your environmental impact.
- You should outsource your logistics.
Many small businesses find it difficult to manage logistics efficiently due to a lack of resources and talent. Unfortunately, this makes them more vulnerable to supply chain challenges because they lack the expertise and tools needed to respond effectively.
Outsourcing your logistics operations can help you solve many of these challenges by letting professionals handle complex tasks. In addition to fulfillment and delivery, many logistics processes can be outsourced, such as customs clearance, import/export documents, shipping integration, and product packaging.
Warehouse and inventory management processes are also frequently outsourced to third-party logistics companies. Many 3PLs even provide advanced technology for shipment tracking and customer demand forecasting, both of which are critical in streamlining your supply chain.