Can Small Businesses Adapt Their Supply Chain With Current Challenges?

2021 brought rising shipping and oil costs and major supply issues, largely driven by shipping disruption, container shortages, COVID staffing challenges and Brexit red tape.

2022 has brought even more challenges, the devastating war in Ukraine has exacerbated global retail issues as 86% of SMB supply chains have already been or expect to be impacted by the conflict abroad.

The resurgence of Omicron in China kick-starting Covid restrictions is also predicted to have a major impact on the supply chain well into the summer.

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So the ongoing and ever-changing supply-chain issues are a constant theme for retailers – small businesses are feeling the brunt. Insights from Software Advice’s new Small and Midsize Business Retail Supply Chain Survey show “nine out of ten small and midsize business (SMB) retailers feel that larger companies have an advantage over them in their ability to procure inventory”.

According to survey findings, the current supply chain crisis has impacted small and midsize retail businesses (SMBs) at a disproportionately higher rate than larger enterprises.

Big retail hold the advantage

“91% of SMBs say larger companies have an advantage over them in procuring inventory”. Why? Although no one is immune to the ongoing disruptions, larger companies tend to place larger orders and essentially are less risky for suppliers than small businesses.

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The survey found that “42% of respondents say their inability to meet minimum order sizes set by vendors is a key challenge. Whilst 41% say they’re unable to pay premium prices, which can sometimes help a company earn prioritized status and reduce the likelihood of cancelled orders”.

Talk openly

Discuss any challenges with your current suppliers and work together on how to address them. Work with other nearby small businesses if they use the same supplier or get the same products. The supply chain is effectively a network, so reach out in as many different ways as possible to find creative solutions.

SMBs are being dropped by vendors – diversify

The survey shows that “46% of retail SMBs have had at least one vendor drop them for reasons specifically related to being a small business. Another 23% are expecting to be dropped in the near future”.

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If you don’t have a strong relationship with your suppliers, you risk being deprioritized and some suppliers may even drop you as a customer altogether. Having vendor diversity, or at least having backup vendors, helps mitigate supply chain disruptions.

Higher costs hitting consumers

50% of SMBs have increased their retail prices to offset the increased supply chain costs. Of them, 35% plan to increase retail prices again if costs continue to increase.

There’s high pressure for the retail sector to absorb rising costs and small companies have to work even harder to keep up because they are not only affected by supply chain disruptions but higher prices squeeze them out of competing with larger companies.

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Be clear

Tell customers prices are increasing and avoid other terminology when communicating this – authenticity matters. Customers are still buying and spending but confidence is low so communicating value to customers is crucial – do this often and consistently.

There is no one size fits all answer but there are actions small businesses can take and strategies they can adopt to mitigate this ever-changing and challenging industry.