10 Steps to Deal with Supply Chain Issues as a Small Business

How your retail operation can make it through today’s crisis and beyond

It’s been decades since businesses have had to deal with supply chain issues. Computers, software, advanced production techniques, and dependable shipping have made the supply of products relatively stable for a long time.

The coronavirus pandemic over the last year plus changed all that. Even the best computer, tracking, shipping, and production systems couldn’t overcome the fact that people weren’t able to work in production facilities for the last year or two, causing manufacturer shutdowns. Add to this the items that were in wholesalers’ inventories couldn’t get delivered by truckers who were in lockdown.

The pandemic seems to be waning, but sourcing issues have continued, and in many cases, worsened. Churn in the workforce, a lack of raw materials, difficulties filling open positions, and a shortage of truckers have prevented manufacturers from working at maximum levels and the products sitting at ports and in warehouses from getting delivered.

This has resulted in an unprecedented shortage of goods and a global supply chain crisis. And like many issues, it has impacted smaller businesses more than larger ones because they have fewer resources available to help them find new suppliers or delivery systems to help meet customer demand.

Small business owners shouldn’t give up. There are ways they can maintain reasonable inventory so they can serve their customers well.

Here are ten things small businesses can do to keep popular items stocked, maintain customer goodwill, and navigate through the current supply chain crisis.

Take stock of current inventory and supplies.
Watch your stock.
Increase your inventory whenever possible.
Be proactive to reduce supply chain risk.
Use the same tools big businesses do.
Make honesty your policy with customers.
Stay informed.
Find sensitive ways to pass on costs to customers.
Make supply chain issues a top business priority.
Develop a long-term plan for your business.

1. Take stock of current inventory and supplies

Start by figuring out what you already have on hand. Ask yourself:

What can you do with what you have in stock to maximize sales?
What do you need to get through the next four to six months, including holiday season or seasonal demand surges?
Where do you have immediate stock and supply gaps?

Many small business owners are too busy to spend many hours on inventory management, but at a time like this, when supply issues are becoming critical, it’s important to block time to figure out your current inventory situation.

2. Watch your stock

Even during the best of times, it’s important for businesses to carefully track inventory levels. When supply chains are unstable, it’s essential to know what you have in stock and what needs replenishing in real time. You never want to be caught off guard, running out of items only to discover that it’s impossible to restock them with the lead time you have. When this happens, it can turn into a customer service nightmare. Consumers who can’t purchase an item from you will turn to a competitor that has it available and it’s unlikely that they’ll come back to do business with you when you have the items they want in stock.

The remedy: If you don’t have a modern, computerized, real time inventory forecasting system, it’s time to install one and start using it. It’s a small investment that will pay off in a big way to the bottom line of your business. Make it a point to check inventory at least once a day and more if you own a business that has high product turnover or sales spikes. Proactively and consistently tracking your inventory will go a long way toward being able to keep your customers happy, even during challenging times like today.

3. Increase your inventory whenever possible

During normal times, it’s usually a bad idea to have too much inventory. It can cause cash flow issues because it forces small businesses to invest money in products that are sitting on the shelf and not being purchased by customers, added labor costs, and rent for warehouse space.

Right now, it probably makes sense for many businesses to increase inventory beyond normal levels. Here are some tips on how to do it in sensible ways:

When a popular product — or one that is particularly profitable for your business — becomes available, buy as much of it as you can afford.
Get creative. Look for discounted items to stock up on that you may be able to sell to customers in addition to, or in place of, what they typically purchase from you.
Get a business loan or line of credit. If you don’t have enough cash on hand to increase inventory or purchase alternate products, consider getting financing. Run the numbers before borrowing to purchase inventory. Make sure you can add interest and other loan-related expenses to the price of your products. During these inflationary times, you may be able to make the math work out.

Having extra products on the shelf is usually a nightmare for small businesses. These days, it might help you sleep better at night.

Check it out: Take a moment to read some Biz2Credit client stories about inventory loans.

4. Be proactive to reduce supply chain risk

The worst time to deal with an inventory issue is when you are experiencing one. It will likely force you to respond in a panic, which will likely lead to bad decisions, like spending too much on replacement products or accessing ones that are poor substitutes.

Instead, proactively plan for potential supply chain crises. Think about the worst things that could happen and prepare for them. Research alternative distributors and how you can expand your supply network, ideally in different parts of the United States and the world. (One lesson we learned during the pandemic is that it’s possible for product production to continue in certain parts of the globe while others are being impacted by a crisis.) If you do this, you’ll be more likely to be able to maintain your stock even if a certain supplier is unable to meet your needs.

Get creative about offering alternative options to your customers. For example, if you have a restaurant or food-related business, research alternative ingredients and dishes that you can position as “better” alternatives to your customers. This will make them think that your business is offering them a premium product instead of leaving them feeling that they’re dealing with a hardship.

5. Use the same tools big businesses do

Taking advantage of the latest inventory automation tools — the same ones used by larger companies — will help you stay on top of your inventory and supply chain and allow you to plan efficiently and effectively. Currently, supply chain management (SCM) software is mostly used by larger companies. It was developed to help them deal with multiple departments, locations, product lines, and suppliers in different places. Small businesses can also benefit from SCM, especially during challenging times like these. This software, which leverages cutting-edge artificial intelligence (AI), will help you track inventory, manage shipping, stay updated on which items are moving off the shelves the fastest and the most efficient and cost-effective ways to get new inventory. Many of the SCM solutions for big businesses can be costly, but there are less expensive, not to mention no less effective, options available that are designed for smaller operations.

6. Make honesty your policy with customers

Supply chain challenges have been in the news a lot lately. This has left more people than usual feeling okay about late deliveries or out-of-stock items. Still, many consumers are unhappy when they encounter these situations. The best way to handle them is by being honest and transparent.

Always take time to explain the current situation your business is dealing with and the steps you’re taking to remedy it. If possible, present information about what’s going on prior to customers asking questions. Provide it on your website, on social media, and through email. Make consumers feel that you’re all in this crisis together. It will make them feel that you’re partners and friends and not adversaries. It will go a long way toward building customer relationships instead of allowing them to break up.

7. Stay informed

Supply chain disruptions can occur at any time. However, in many cases, they’re completely predictable.

Supply chains can be impacted by politics, economic factors, weather conditions, and more. The current issues have resulted from the pandemic, the inability to fill manufacturing jobs, and a shortage of long haulers and delivery drivers.

It’s critical that you stay current with supply and demand and other trends in your industry along with news affecting your products. If you can anticipate a shortage, you can take the right steps to deal with it, such as stocking up on products before there’s a problem or finding alternative ones.

You may not always be able to predict every future supply disruption or the timing of the resolution of this one, but you can prevent issues by staying up to date on news that could impact your operation.

8. Find sensitive ways to pass on costs to customers

When small business owners actually find goods to sell, they often come at highly inflated prices these days. The cost of almost everything — from tapioca to toiletries — has increased.

Avoid giving customers sticker shock. They’ll associate extreme price increases with your business and will likely hold them against you. It could have a negative impact on your brand and the reputation of your company.

Find sensitive ways to handle and communicate about cost increases.

Take a small cut on your profits.
Offer free or reduced-cost shipping.
Pair up items with increased prices with lower-cost ones into packages that provide extra value.
Give away older inventory items as free gifts with purchase.

Most important of all: Be honest and transparent about price increases. Customers will be more likely to accept them if they understand why they’re happening and don’t come away feeling like you’re using this inflationary period as an opportunity to price-gouge them.

9. Make supply chain issues a top business priority

Businesses haven’t paid much attention to their supply chains for decades. There was plenty of product and delivery capacity available to satisfy customers. If anything, they had to occasionally deal with suppliers that closed or eliminated a critical product. Even when that happened, it was relatively easy to quickly find alternative suppliers or goods.

The future of supply chains and product procurement is uncertain. Many issues, such as climate change, political instability around the globe, economic issues, the continuing pandemic, and future health crises could cause short-term or longer-term disruptions. However, positive things should lead to supply chain resilience, including blockchain management of supply chains, improved supply chain processes, better software solutions, new forms of distribution and delivery, and geographic diversification of production may help smooth things out.

As a small business owner, you owe it to the future success of your operation to do everything possible to prepare for all that could happen.

Get a handle on your current inventory situation.
Be proactive.
Monitor your inventory data.
Seek out alternative suppliers and products.
Stock up on inventory when you can.
Keep your customers informed.
Apply for a small business loan or line of credit so you have money available to stock up on additional inventory, rent extra space to store it, pay for shipping and help get you through other supply chain-related emergencies.

Like most things in business and life, being proactive is better than being reactive. Taking steps now to address current and future supply chain issues will keep you in the driver’s seat and prevent you from getting taken for a ride.

10. Develop a long-term plan for your business

Developing or updating your business plan is critical during times like these. It helps you figure out where your business is now, where you see it in the future and how you’ll get to that future vision. Your business plan roadmap will help keep you on track even during the most challenging periods, like the one we’re living through now.