Sri Rama Yashaswi Peesapati is the senior product manager at SAP Ariba. All opinions are the author’s own.
In today’s global economy, supply chain disruptions can be daunting to any business. During the COVID-19 pandemic, we saw large retail companies struggling to keep their shelves stocked due to heavy demand and panic-buying. We also saw automobile manufacturers unable to keep up with manufacturing timelines due to a semiconductor shortage.
However, these disruptions do not only impact large companies — small businesses are affected even more because they lack the resources and flexibility to face supply chain challenges. Transportation delays, raw material shortages and any other adverse situations in the supply chain would have a serious impact on their customer base, and ultimately, business continuity.
In turn, small businesses should take proactive measures alongside robust risk management strategies to strengthen their supply chain resilience.
Supply chain challenges for small businesses
Let’s try to understand the challenges small businesses face in effectively managing their supply chains.
- Single sourcing/supplier reliability: Small businesses heavily rely on either a single supplier or only a few suppliers, which increases the risk for disruptions due to natural disasters, geopolitical events or financial instabilities.
- Inventory management issues: Effective inventory management is not an easy task for small businesses. They lack the technology and expertise that large players have, which allows bigger companies to predict demand and understand customer preferences.
- Transportation delays: Small businesses may lack the visibility into the logistics of their raw materials and finished goods. This can pose a challenge in meeting manufacturing and delivery timelines, ultimately leading to customer dissatisfaction and revenue loss.
Strategies for building supply chain resilience
Here are a few strategies that small businesses can employ to mitigate supply chain risks:
- Diversify the supplier base: Small businesses should reduce the use of single sourcing, sole sourcing or having a limited supplier base. By diversifying their supplier selection base both locally and internationally, this will ensure business continuity when they face supply chain disruptions.
- Strengthen supplier relationships: Small businesses should focus on building better relations with their suppliers so that they can partner to avoid any potential disruptions.
- Strengthen relationships with other small businesses: Small businesses can collaborate to identify alternative suppliers and transportation partners to effectively manage their supply chains.
- Leverage inventory management technology: Inventory management technology solutions and demand forecasting tools will reduce the risk of stockouts and wasted resources.
- Deploy logistics technology: Collaborating with logistics partners that provide better tracking information and provide analysis and trends of possible issues in transportation can help small businesses map contingency plans.
Effective risk management strategies
Small businesses often lack the resources and technology to effectively identify, monitor and mitigate supply chain risks.
Conducting a thorough risk assessment to identify potential supply chain vulnerabilities is an important first step when drafting contingency plans. Investing in technology solutions will also benefit small businesses by monitoring suppliers and identifying any potential disruptions early on.
However, by adopting efficient strategies such as supplier diversification and technology adoption, small businesses can work towards building stronger and more resilient supply chains.
Small businesses play a significant role in our economy. So, when small businesses successfully navigate supply chain challenges efficiently, it is mutually beneficial for society. Finally, it could be great if technology companies and business consulting companies could offer pro bono or subsidized support for small businesses.
