Supply Chains and Small Business Risks
Many small business CEOs are struggling with the “supply chain” issue. They want to know what they can do to survive in this crazy business environment. I will share some understanding about this from one of our SCORE content partners, Drake Forester who writes extensively about small business issues and specializes in translating complex legalese into language everyone can understand. His writing has been featured on Fox Small Business, AllBusiness.com, Score.org and many other websites and blogs. One of his works regarding this topic is included in SCORE’s resource library and I will share that as I try to add some clarity to the issue.
Unfortunately, it’s clear that the supply chain disruption plaguing the American economy is not a short-term crisis. While you can’t fix the broken supply chain, you’ll need to steer your business through the crisis and be able to explain delays to your customers when necessary. To do so, it’s important to understand what’s behind the supply chain disruptions.
What is the Supply Chain?
The supply chain is the journey products take from where they’re mined, grown, or otherwise made all the way to their eventual destinations in the hands of consumers.
Supply chains are made up of so-called “nodes” and “links.” Nodes are stops a material or product makes along the way, like at a factory, port, warehouse, or retail store. A link, on the other hand, is the time a material or product spends in transit between nodes—usually on a cargo ship, train, freight aircraft, or semi-truck.
A whole industry exists around managing supply chains and securing an efficient route for products along various links and nodes. It’s a complex system, but you don’t need to get into the weeds. Here are the big-picture issues troubling the supply chain.
Two Factors Influencing Supply Chain Disruptions.
Coronavirus lockdowns spurred major changes in consumer behavior. Money normally spent on experiences was redirected at products. Workers needed home office equipment. At the same time, factories overseas were hit hard by outbreaks and couldn’t keep up with the demand.
So the pandemic started it. But as outbreaks recede in parts of the world, lingering effects continue to ripple down the supply chain. Here’s where we are today.
1. America’s ports are jammed.
According to the Organisation for Economic Co-operation and Development, around 90% of traded goods travel by sea. Right now, unprecedented “traffic jams” are clogging up America’s ports.
According to NPR, 52 cargo ships were waiting off the coast of Los Angeles one day in late October. Off the Port of Savannah, The New York Times reported that cargo ships were anchored up to 17 miles off the coast, waiting at times more than 9 days for their turn to dock and unload their shipping containers.
Additionally, The New York Times noted that nearly 80,000 unloaded shipping containers (50% more than usual) have been left at the port for up to a month, waiting for a ride. You might have heard by now about the country’s shortage of truck drivers. These containers are the lego-like, rectangular prisms you see stacked up at sea, hurtling by on the interstate behind a semi-truck, or clanking by at a railroad intersection. They can hold almost anything and can be stacked and transferred between vehicles seamlessly.
The problem? Shipping containers are not where they need to be. Some parts of the world have so many empty shipping containers that they’ve run out of places to put them. In Southern California, residents have reported seeing empty shipping containers parked on residential streets. In China, on the other hand, shipping containers are hard to find, causing more delays. Each container stranded on a cargo ship or in a port is a container that can’t be unloaded and then reloaded again.
2. Labor shortages are contributing to the bottlenecks.
According to the U.S. Department of Labor, 4.3 million Americans quit their jobs in August 2021. If you’re a small business owner, you’ve likely felt the strain yourself—workers are not easy to come by or retain.
People speak of the supply chain as though it’s made up entirely of ports, shipping containers, and warehouses, but it runs on the power of workers. Dockworkers, truck drivers, warehouses workers, pilots, and others essential to the supply chain are stuck at home caring for children or quarantining after exposure to Covid-19. Even more, are leaving positions.
Impacts of the Supply Chain Disruptions on Small Businesses.
In a recent survey conducted by the U.S. Census Bureau, 38% of small businesses reported domestic supplier delays in the most recent phase of the study.
Publicly traded retail giants like Home Depot, Target, and Walmart are using their tremendous spending power to charter their own ships and transport products around bottlenecks in time for the holiday season. Most small businesses—already strained by the effects of lock downs and the labor shortage—will need to wait in line.
There’s no silver bullet solution for supply chain woes. The only thing that will help is time. While small businesses wait for the supply chain to unsnarl and catch up, the name of the game will be survival. This will be especially true during the holiday season, when big box stores are likely to have much more inventory than small businesses.
This means that Main Street will need to get creative, sourcing products and goods locally as often as possible and finding ways to repurpose existing inventory. Customers who care about shopping locally will make every effort to support mom and pop, but it will be vital for small business owners to communicate clearly with their customer base, explaining delays and offering frequent updates.