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To prepare for an unpredictable future, small businesses may want to strengthen their supply chains to preemptively avoid further disruption.

How Small Businesses Can Strengthen Their Supply Chain

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Small Business Saturday will be especially impactful this year. The annual day of shopping local on November 27 comes after an unpredictable year for small businesses facing supply chain disruptions.

The coronavirus pandemic defined 2020 and brought the importance of the supply chain to light. Until recently, supply chains were largely a quiet business function, operating without much attention, but the frequent shortages and delays of 2020 meant that businesses needed to reassess their current supply chains to ensure they support business growth and reduce financial risk. To prepare for an unpredictable future, small businesses are looking to strengthen their supply chains to preemptively avoid further disruption.

State of the Supply Chain

The supply chain can represent about 80% of a company’s cost. Supply chain management affects cash flow, growth, and shareholder value. During the pandemic, nearly 80% of businesses experienced a disruption in their supply chain. These disruptions were initially the result of global lockdowns halting the flow of goods, however, the economy continues to face labor market disruptions, production bottlenecks, and shipping and transportation barriers, which have created shortages that have hurt both consumers and small businesses.

According to a U.S. Census Small Business Pulse Survey conducted between Oct. 11 and Oct. 17, 45% of businesses said they are having domestic supplier delays. The number is up from 26.7% during the first week of 2021. Products and supplies are more difficult for small businesses to acquire since they can’t order in bulk or in advance like larger businesses. The Biden administration even expanded the work hours at Los Angeles and Long Beach ports to operate 24/7 to resolve the supply chain bottlenecks ahead of the holiday season.

Following the COVID-19 pandemic, it may be advantageous for businesses to re-evaluate their supply chains through end-to-end optimization, involving all aspects of the business at all points of the supplier ecosystem.

How to Strengthen Your Supply Chain

One of the most important things to manage your supply chain risk is to stay abreast of developments in your industry. Below are some best practices small businesses can integrate into their business plans to mitigate risk:

  • Choose suppliers carefully, and conduct regular audits and inspections to ensure that their commitment to business interruption prevention matches yours:
    • Check the Moody’s or S&P rating of potential suppliers.
    • Verify suppliers’ insurance coverage. Remember, a certificate of insurance is evidence of insurance only when the certificate is written, and not at any time after that moment.
  • Clearly define contract scopes and draft contracts carefully with the assistance of specialized legal counsel. Consider indemnification, hold harmless, and defense agreements.
  • Work with your insurance provider to understand the extent of your exposure and create a business interruption worksheet to quantify as accurately as possible the effect these exposures could have on revenue and profit.
  • Re-evaluate the worksheet on a regular basis to account for changes in the market or your business model. Focus not only on the inherent risk of a broken link in the supply chain, but the interdependencies between links throughout the chain:
    • When there is a global event, examine your supply chain to see if any part of it might be affected.
    • Be aware of developing risks, e.g., cyber warfare, climate change, nanotechnology, and synthetic biology.
  • After identifying risks, put a plan into place. While it is easy to prioritize speed over follow-through, identifying risks is of little use if steps are not taken to mitigate these risks. Plans might include these components or others:
    • Business continuation plan
    • Geographical diversification of servers
    • Plan to relocate business to an alternate location
    • Sourcing of goods from alternate suppliers
Small Business Saturday

Small Business Saturday on November 27 will take on new importance this year. According to the American Express Shop Small Impact survey, 56% of small businesses surveyed said Small Business Saturday is more critical than ever this year for their business. 78% of small businesses say holiday sales will directly impact their ability to remain open in 2022. Consumers shopping small this holiday season have the potential to contribute an estimated $695 billion to the U.S. small business economy. Small businesses are fundamental to the culture and economy of our communities. When you spend money at a local business, more of that money stays in your community rather than leaving the local economy when you shop at non-local businesses.

This Small Business Saturday, invest in your community by shopping local and shopping small.


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