This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the effects of supply chain disruptions and soaring costs on small and medium-sized businesses.
Check out some of the top commentary:
Over the past 18 months, brands and retailers have experienced several supply chain disruptions resulting from the pandemic, weather-related disasters and Suez Canal blockage, among other challenges. This is expected to continue in the future. In addition to changing consumer habits/demand, natural disasters and other weather-related problems, freight transportation has been and will be affected by geopolitical complications, posing a risk to the free flow of commerce that would result in shipping delays and limited goods.
This is having an effect on small and mid-sized brands that could result in higher prices. However, those that have experienced the worst of the last year and half are altering their strategies. Those companies that had previously relied on the shipping industry are looking to increase their supplier networks, invest in automation to gain visibility into the supply chain and diversify factory locations to ensure they have available suppliers and goods closer to where their customers are.
Government stimulus has encouraged public spending to purchase goods and services. This, in turn, has created pent-up demand that is increasing the costs of production. Companies are now short on supply, so they have to turn to expedited transportation to produce and stay up with demand, which increases their freight cost.
In addition, North America had a driver shortage even prior to COVID-19, which caused everything to slow down and drivers to go on unemployment. Many drivers do not want to return to being a truck driver on the road and away from family, so now we have a massive driver shortage. This has led to an increased trucking rate on top of increased fuel prices.
This is now the perfect storm for inflation in the trucking world. It will be a very long time before rates return back to pre-COVID levels, and they may never return. These increased costs will inevitably be passed along to the consumer.
When Covid-19 initially struck the global shipping industry in Q1 of 2020, our business was barely affected. We braced for impact — expecting a storm of customer defaults and container shortages. However, all that we encountered were slower payments and a clogged port in the Philippines.
Almost a year later, toward the end of the American shutdown, we experienced a nearly fatal rise in export costs and a critical loss of potential profit margin due to an overwhelming rise in western imports. While the costs of shipping have since reduced slightly, our company lost several profitable buyers who simply refused to increase their end-price.
Until the United States has a domestic-based shipping company, American companies will continue to operate under the will of the foreign shipping lines.
As many small businesses struggle to recover from the pandemic, disruptions in the supply chain and worker shortages have only exacerbated this issue. We have seen costs increase in both transportation and fuel. For already struggling businesses it is important that they factor in these costs and try their best to mitigate circumstances by potentially extending overtime to FT employees and offering more hours to PT employees. As for the difficulties of higher costs in shipping short of evaluating their current vendors and if at all possible moving away from goods from China and communicating these delays to your customers is essential as to set expectations. We all have to simply continue to endure these conditions, as it is projected this will continue for the next 6 months at least.
Mark Brady, CEO, One Network Enterprises:
Shipping delays across the supply chain continue to take a toll on US businesses and are only expected to increase into 2022. Most companies today have many different supply chain partners that need to be coordinated and managed, end-to-end, to get their goods produced and delivered to the market. Siloed systems and operations have complicated supply chain processes, creating blind spots and inhibiting rapid response to disruptions, which only increases delays. In order to control increases in costs caused by delays, and ultimately inflation, companies need a digital supply chain network to keep synched to demand, and to quickly address any issues.