Prior to the outbreak of COVID-19, many small businesses probably never thought much about disruptions to their supply chain.

According to a US survey, more than half of small businesses do not believe the loss of a main supplier would have a serious impact on their business, yet three-quarters of them suffer at least one supply chain disruption annually.

Naturally the business owners are focused on managing the bottom line and, consequently, are unware of the devastating impact supply chain disruption can have on that bottom line.

According to another US study of small businesses, the top five consequences of disruption are loss of productivity (58 percent); customer complaints (40 percent); increased cost of working (39 percent); loss of revenue (38 percent); and impaired service outcomes (36 percent).Here is a list of just some supply chain disruptions that can affect you:

  • Pandemics - well, we know about that impact of that one and have to live with for some time to come.
  • Natural disasters - again one familiar to us after the Christchurch-Kaikoura earthquakes.
  • Transportation failures and delays – with globalisation, even small businesses rely increasingly on using overseas suppliers and in the present world, importation is problematic.
  • Product problems - no business wants to send sub-par goods to customers or have customers’ shipments delayed because of faulty products.
  • Price fluctuations - price changes for suppliers in your chain can also create disruptions as you may need to find a cheaper supplier and that can take time.
  • Cyber attacks – someone in your supply chain can inadvertently open you up to attacks and the results can be devastating.

“Review where potential supply chain disruptions are most likely to have a financial impact”

So what can I do to counter supply chain disruptions?

Unfortunately, you don’t always get much warning when your supply chain is going to be interrupted, so planning ahead is vital to soften the impact when it happens. Some suggestions below:

Carry out a supply chain vulnerability audit

Where are the weakest links in your supply chains? Carrying out an audit is a lengthy process but it will help you be prepared and be able to put together a backup plan (see below).

Prepare a supply chain emergency backup plan

Think about what could impact on your supply chain and what you could do in the short term to get around the problem. Write out a plan with the potential disruptions and the counter measures to minimise the impact.

Have an emergency budget

Cash may always be spread thin in many small business but by having an emergency budget you can temporarily smooth over the cracks in the disrupted chain so that your customers are unaware of the issue and remain loyal.

Constantly communicate with your suppliers

Regular contact with your key suppliers can possibly telegraph a potential issue looming and by discussing it with them you may both come up with a solution.

Diversify your supply chain

If you set up your supply chain so you have suppliers in different places and different delivery operations, you still may be able to get some goods during a disruption.

Build up your inventory

By creating a stockpile of essential supplies – raw materials, components and finished goods – your business may be able to continue for some time until the disruption is over.

What will really impact on your cash flow? 

Review where potential supply chain disruptions are most likely to have a financial impact, so you can plan accordingly and make adjustments to your overheads as needed.

Find backup suppliers

Are there other suppliers in different areas or even countries that can fill the gaps if your usual supplier cannot help?

What components of the supply chain are critical?

What do you absolutely need to continue operating? Look to see where you can find alternative suppliers for critical components.

 

Be flexible when the disruptions occur

Identify areas where you can work around a disruption, for example look for alternative transportation methods. Take a deep breath and see if there is some way you can afford to let something slip, like accept slower delivery which won’t bring the business to a halt. Remember: supply chains WILL get disrupted; customers WILL be impacted, especially in these turbulent times. 
 
So it’s imperative you keep your customers informed if there are issues. Be transparent. It’s essential you keep customers informed and regularly update them on any progress on the issue. They are more likely to be understanding, especially as we are all feeling the impact of our new norm with the pandemic.
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