Supply chain shortages have always posed a danger to businesses of all sizes. Yet small businesses, in particular, can struggle to avoid supply chain disruptions and adapt when they occur.
The global pandemic has only amplified the usual supply chain risks that companies face. According to the Institute for Supply Management, in May 2020, the vast majority of companies (97%) were either already dealing with pandemic-related supply chain disruptions or were anticipating them.
As an owner or manager of a small business, supply chain disruption of any kind can represent a serious threat to your profitability. Yet there are actions you can take to protect your business, even during unpredictable times like the present.
Supply Chain Disruption Defined
A supply chain disruption occurs when outside forces prevent a business from producing, distributing, or selling its products. Small-scale disruptions in your company’s supply can slow the flow of goods into the hands of consumers. Large-schedule disruptions, meanwhile, might stop the flow altogether.
Below are several examples of outside forces that could affect your company’s supply chain:
- The COVID-19 Pandemic
- Natural Disasters
- Mechanical Failures
- Fuel Shortages
- Regulatory Changes
- Supplier Closures
The impact of supply chain disruption
Whatever the source of a supply chain disruption, it can create instability in your business. Some of the side effects your business might face from supply chain interruptions include:
- Lower Revenue
- Increased Expenses
- Stress and Frustration Among Your Team
- Production Delays
- Customer Service Issues
- Damage to Brand Reputation
In extreme cases, which are all-too-common, a breakdown in your distribution network could even cause your entire operation to grind to a halt and your business to fail.
Jimtown Store, a general store in California’s Wine Country, is a prime example of the danger supply chain disruption poses to small businesses. The historic small business first opened in 1893. Carrie Brown purchased the business over three decades ago, turned it into a local gourmet hotspot, and even branched out to create a fresh condiment line of gourmet spreads and jams.
But on December 30, 2019, the Jimtown Store shut its doors for the final time. Supply chain challenges, among other factors, made it increasingly difficult (and expensive) for the local general store and deli to remain profitable. The Jimtown fresh condiment line also stopped production when a manufacturing partner went out of business, and Brown could not find a suitable replacement.
5 tips to avoid and survive supply chain disruption
The checklist below offers five strategies you can use to both prevent supply chain disruption and adapt if it happens to your business.
1. Verify suppliers.
The suppliers you contract with play an important role in the long-term success or failure of a business. So, you must ensure that the vendors you choose are legitimate and dependable. You can reduce your risk in this area by having an effective supplier verification system in place.
2. Monitor suppliers.
Finding reliable suppliers is a good first step in protecting your small business. But you need to keep an eye on the suppliers you contact with as well if you want to minimize the risk of supply chain disruptions (and the headaches that come along with them). Monitoring your suppliers, including the business credit scores of those you contract with, can help you detect potential problems early if and when they occur.
3. Establish strong supplier relationships.
Even the most reliable suppliers may let you down from time to time. Like your own company, suppliers can also face obstacles that are outside their control—from raw material shortages to shipping delays and more. When you establish strong supplier relationships, however, supply chain breakdowns can be easier to navigate and resolve in a timely manner.
4. Build a stockpile.
Despite your best efforts, supply chain delays and disruptions aren’t always avoidable. Having a stash of essential materials or even final products you can access can help you when issues arise. Of course, a stockpile won’t last your company forever. But it can provide you with some immediate relief while you troubleshoot with your suppliers or search for replacements to fill the gaps in your supply chain.
5. Create a backup plan.
Even if your business is running like a well-oiled machine, it’s important to find backup suppliers you can turn to if needed. Having alternative vendor connections in place before you need them can help you pivot quickly if part of your existing supply chain slows or collapses.
The best way for small business owners to avoid or survive supply chain disruptions is to have the right tools at their disposal. A successful company needs the ability to find the right suppliers quickly (primary and backup), verify them, and monitor those relationships on an ongoing basis.
Yet the reality is that most small business owners and managers lack the resources that larger corporations have in place to manage supplier relationships. At least, they have until now. Markaaz aims to level the playing field for these companies by making the supplier verification process faster, more reliable, and more affordable.
Through the Markaaz platform, small business owners have unprecedented access to a global network of suppliers. At present, you can access more than 119 pre-verified business listings through the platform—and we project that number to surpass 300 million by later this year.
The platform, powered by Equifax, enables small businesses to make informed decisions like never before. Activated businesses on Markaaz undergo Know Your Customer (KYC), Know Your Business (KYB), and several other verifications. So, you can be confident that the suppliers you find are verified to the highest standards.
When a business uses Markaaz, it could potentially reduce the time it takes to verify a new supplier by as much as 92%. Furthermore, the platform may help companies reduce costs by as much as 50% by consolidating the number of software solutions they need to manage supply chains (and more).
In the United States alone, there are 30 million small businesses. That number represents 97% of U.S. businesses—18% of which are minority-owned and 20% of which are owned by women.
Our team at Markaaz recognizes the importance that these businesses represent—both to the 35 million people they employ and to the global economy at large. That is why we passionately feel about helping small businesses access the solutions they need to thrive.
Fabi Hubschmid, Chief Operating Officer and Co-Founder, Markaaz
About the author: Fabi Hubschmid is Chief Operating Officer and Co-Founder of Markaaz, the world’s first global platform to verify and connect every small business on the planet and the network of partners that support them. Hubschmid is an entrepreneur with global experience in the platform, construction, and smart cities industry with a track record of leading global and complex transformations across private and public sectors. Before co-founding Markaaz, Hubschmid was Strategic Development Officer for AXA Global Enterprise & Partnerships, Founder & CEO of the Enix Advisory, Tutor for the ‘Beyond Smart City’ course of the Massachusetts Institute of Technology (MIT), and a member of PwC’s Global Smart Cities Team. Under the leadership of Hubschmid, the Markaaz team is developing the next generation of tools and resources for small businesses. Hubschmid is focused on creating a positive and sustainable impact for small business owners. Hubschmid is a member of the WEF Global Innovator and Global Shapers and the Young Entrepreneur Council (YEC).