Will 2023 Be Better for Supply Chain Woes?

Supply chain disruptions continue to affect small to medium-sized businesses (SMBs) throughout the U.S. Back in 2021, many local SMBs thought the worst of the pandemic-related supply issues were behind them. Unfortunately, they persisted throughout 2022, with customer back-orders becoming the norm.

Degrees of Suffering

Do SMBs have greater supply chain woes than larger companies? Data from an SMB Retail Supply Chain survey conducted in March 2022 indicated that the answer is yes, and these difficulties are expected to last through 2023.

While larger businesses are certainly not immune to these issues, because they can route materials more quickly in more ways and are also first in line with suppliers because of the sheer scale of their purchases, they have a major advantage in procuring inventory.

Nearly 60% of SMB owners surveyed say it’s taking “somewhat longer” to “much longer” to procure inventory than in 2021. More than one-third of SMB retailers are paying 20% more for shipping than 12 months ago, and 50% have increased their retail prices to offset the increased supply chain costs.

Cause and Effect

Destabilizing trends such as inflation, B2B (business-to-business) shipping moving to D2C (direct-to-customer), and increasingly tense global trade, are contributing to the current supply chain crisis.

Focusing too much on being efficient, or what’s known as the just-in-time model, has highlighted how prone supply chains are to disruption. Companies are contending with this increased need for sustainability alongside an explosion of e-commerce.

Additionally, the demand for physical goods is surging and manufacturers are often understaffed. In short, the supply chain cannot keep up.

SMB Solutions

Many small to medium-sized business owners are coping with the disruptions by looking carefully at their own sales and operating processes and using technology to create rolling forecasts regarding what needs to be sourced and when.

One of the first steps toward recovery is supply-chain transparency, which companies can achieve by mapping their networks fully from tier-one suppliers on down, so they understand the exact composition of their chain. Having multiple suppliers can also help reduce costs associated with production delays and improve the operations of the chain as a whole.

There are resources for SMBs to address supply chain challenges as the business community focuses more on this issue, and as always, working with experienced lending partners can help your business be prepared as issues and solutions arise.

Glenn Margraff Executive Vice President Wintrust Commercial Banking at Town Bank, N.A. www.townbank.us