Managing Supply Chain Disruptions: A Guide for Small Businesses

Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.

If you run a small business, the 2020s may not have been the easiest ride. You’ve probably had to make radical operational changes on the fly, adapt to unforeseen and unprecedented disruptions, and navigate your team through some of the biggest economic and health crises of our time.

With the cost-of-living crisis impinging on demand, it’s a battle to keep every customer and provide them with value for money. What’s more, the lasting impact of Covid-19 and Brexit, combined with the rising diplomatic tensions in parts of Europe, is causing disruption to supply chains across the globe.

Here, we’ll look at how SMEs can adjust their strategies, enhance their operations and leverage technologies to better manage supply-chain disruption, mitigating its impact on their customers.

What does a supply chain flow usually look like?

There are three currents that run through a supply chain. The flow of material (products and the raw materials that make them), the flow of information (order and customer data) and the flow of funds. These flow up and down the supply chain. The links within this chain are:

  • manufacturers
  • suppliers
  • distributors (SMEs like your business)
  • consumers (your customers)

A block of any of these flows within the links above you in the chain can lead to operational disruption, which could potentially impact your customers and the experience they have with your brand.

What factors can affect your business supply chain?

We’ve seen the impact that geopolitical conflicts, health crises and legislative changes can have on supply chains. But while these are very specific events, supply-chain disruption is an evergreen issue. The better your understanding of the factors that can affect your company’s supply chain, the better equipped you are to guard against disruption.

Common supply chain issues include:

  • fluctuations in trading prices due to supply and demand (the current energy crisis is a good example)
  • seasonality
  • international relations
  • extreme weather and natural disasters

    Preventing supply chain disruption

As the saying goes, an ounce of prevention is worth a pound of cure. Keeping your company’s supply chain running smoothly is a battle on two fronts. As well as finding ways to manage existing supply-chain issues, it’s more important than ever to be proactive in avoiding future supply-chain disruption.

Here are some steps you can take right now to insulate yourself against supply chain risks in future.

Establish a business continuity plan

If recent years have shown SMEs anything, it’s the importance of having a continuity plan. Without one, supply-chain issues could bring your operation to a halt, and inevitably lead to dissatisfied customers.

A business continuity plan (BCP) shields your operations not just from supply-chain disruption but everything from cyber attacks to environmental disasters.

Business continuity planning is all about identifying potential risks and measuring their impact on your operations before setting contingency plans in place to minimise that impact.

Proactively improve your inventory management

Part of your BCP should include improving inventory management and transparency. The sooner you know that you’re about to run low on a certain product, the longer you have to replenish your stock. If your current supplier cannot furnish you with new stock before you run out, you have longer to find an alternative supplier.

To get a better understanding of your inventory, consider an inventory management solution that can help you keep up with customer demand in uncertain times. Square’s inventory management solution is free as part of your sign-up with Square Point of Sale.

Don’t be afraid to diversify

You have a great relationship with your existing suppliers. But that doesn’t mean that you have to keep all of your eggs in one basket. Exclusively using one supplier can bottleneck your supply chain and add a dimension of risk. Don’t be afraid to keep your options open.

Keep abreast of legislative changes

If you buy or sell in the EU, you’ll need to keep abreast of how the changing legislation affects shipping times and costs. The better prepared you are, the less of an impact these changes can have on your operations.

Managing ongoing supply chain problems

While preventative matters are undeniably important, you also need to know how to manage existing supply-chain problems – especially if they have a lasting impact on your operations. Here, we’ll look at some tips to help you better manage ongoing supply chain disruptions and limit the impact they have on your operations and your brand.

Focus on your biggest sellers

A diverse range of stock can be attractive to customers. But every business has some products that sell higher volumes or generate more revenue than others. At a time when supply-chain disruptions are rife, make sure your efforts are focused primarily on keeping these items in stock. Inventory management software can help you to identify your biggest sellers and help you to keep them in stock.

Don’t be afraid to ration

Scarcity can motivate hoarding behaviours among consumers. We all remember the toilet roll and canned food crises that proliferated at the start of the pandemic. Don’t be afraid to ration products per transaction if you’re worried about high-volume transactions impacting on your inventory and creating supply chain issues.

It’s better to limit the number of purchases a customer can make today than to turn customers away at your door tomorrow.

Keep customers in the loop

Supply-chain disruption will inevitably impact your customers sooner or later. It may limit the variety of products they can access, or cause them to wait a little longer for goods they’ve ordered. Don’t make the mistake of burying your head in the sand and hoping that customers won’t notice. It’s essential to keep customers in the loop. Let them know what supply-chain issues your company is facing, and all you’re doing to minimise the impact on the customer.

This also extends to your customer-facing staff. Ensure they are aware of how supply-chain issues will affect your customers, and how to explain these to customers the right way. If your customers don’t feel you’re doing everything you can to mitigate the effects of supply-chain disruption on them, you may risk losing them to your competitors.

Make your supply chain more circular

A circular supply chain is one that seeks to reuse or repurpose internal resources, thereby limiting your company’s reliance on external suppliers. A simple example of this might be repurposing unwanted printouts as scrap paper rather than recycling it and buying in notepads.

There are many other ways in which businesses can make their supply chain more circular depending on their scale and business models. The fashion industry, for instance, has seen a huge move towards repurposing and upcycling donated or reclaimed clothing rather than manufacturing new garments. The more you can reuse, recycle, or repurpose within your organisation, the better.

Hope for the best, plan for the worst

With any luck, the impact of current events on your supply chain will be minimal. But it’s always better to plan for the worst while hoping for the best. A proactive attitude and the right approach to supply-chain management can help to prevent unforeseen events from negatively impacting your operation.