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Labor shortages, shipping backlogs and slowed production — caused in large part by the ongoing coronavirus pandemic — have left business owners scrambling to source everything from couches and car seats to rubber and lumber.
While current supply chain woes are unprecedented, they aren’t a complete anomaly. Supply chain disruptions are simply a fact of doing business, and companies that can innovate and adapt will be the ones left standing.
The following short- and long-term strategies can help small-business owners withstand current conditions and shore up supply chains against future turmoil.
1. Short-term: Double down on customer service
Keep your customers in the loop and set realistic, rather than optimistic, expectations for delays.
If you anticipate an item could take five months to arrive, for example, provide that time frame upfront. Promising delivery in 30 days, only to repeatedly push it back, will leave a bad taste.
“The worst a business can do is to let customers guess or plan for product deliveries which won’t happen,” Simona Stan, professor of marketing at the University of Montana College of Business, said via email. “When in doubt, it's better to underpromise.”
Businesses also can find big and small ways to stand out from competitors, which are likely experiencing the same supply problems. Something as simple as stock notifications can give your business an edge, getting your product in front of customers as soon as it's available.
Educating customers on alternative products and workarounds can also build loyalty as you wait for merchandise to arrive, Stan said.
“When necessary, help customers find product, even if it’s from your competitors,” she said. “You may lose immediate business but [you’ll] gain goodwill, good reviews … and hopefully a more committed long-term customer.”
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2. Long-term: Make forecasting a priority
Business owners need to know their supply chains inside and out.
Keep close tabs on key products and diligently track prices, shipping times and other economic factors to identify abnormalities early — then act, says W.C. Benton, professor of operations and supply chain management at The Ohio State University’s Fisher College of Business.
“The earlier you can predict the shocks, the faster you can react and recover,” Benton says. “But you can’t wait until someone is not delivering. You need to be proactive.”
3. Short-term: Revamp your products, displays
“Empty space and empty shelves send the wrong signal,” Stan said. Get creative to fill in the gaps.
Brick-and-mortar retail stores can reconfigure product displays to showcase available items. Online retailers can highlight in-stock merchandise that ships quickly. And restaurants can reimagine menu items to play up easier-to-source proteins and produce.
“You have little to lose, so this is a great time for innovation,” Stan said.
4. Long-term: Diversify your supply chain
“Only resilient supply chains can survive,” Benton says.
To fortify yours, work with two or three suppliers and evaluate them regularly.
“Don’t just rest on one,” he says. “Figure out which ones add value to your business.”
Examine your product offerings and supply chains to identify any weak points, too. Then take steps to mitigate those risks.
If your products are manufactured exclusively overseas, can you add an option closer to home? If you depend on a single component, can you identify a backup?
Take total costs, including time and freight, into account when weighing options, as transportation costs from overseas markets like Southeast Asia are on the rise, advised Douglas Kent, executive vice president of strategy and alliances at the Association for Supply Chain Management.
“Businesses that rely entirely on goods manufactured in this region should explore diversifying their manufacturing base to avoid spending extra money on transportation,” Kent said via email.
Trouble finding suppliers? Team up with your competitors.
“Finding new suppliers can be difficult, especially for small businesses with limited resources,” Kent said. “Talk to your competitors and consider forming a partnership to help find the best supplier in new markets.”
5. Short-term: Eliminate the intermediary
Pish Posh Baby, which sells strollers, car seats and other baby gear, went straight to the source when supply chain issues led to monthslong delays. The New Jersey-based boutique started importing containers directly from manufacturing facilities overseas, bypassing stateside vendor warehouses.
“It took a lot of research, time and diligence on the part of some of our employees to ensure that the products got here as soon as possible,” Charlie Birnbaum, Pish Posh Baby’s chief operating officer, said via email. While this move didn’t erase the delay, it did shorten it. “We got them in a lot faster than we would have had we waited for the company to ship out the products to us.”