The Impact Of U.S. Supply Chain Problems On Small Businesses (2023)

The Impact Of U.S. Supply Chain Problems On Small Businesses (2023)

The Impact Of U.S. Supply Chain Problems On Small Businesses (2023)

American small businesses have struggled over the last few years due to supply chain woes caused by the ongoing outbreak of the coronavirus and the ripples it has caused, plus added stress from geopolitical conflicts. A global supply chain disruption can cause serious strife even for the smallest business if it can’t get the materials, supplies, or inventory it needs to sell to customers.

No one can predict when (or even if) we’ll ever return to pre-pandemic economic conditions, including in the supply chain. To stay competitive, small businesses must make modifications to how they operate to survive these bottlenecks and be better prepared for possible future disruptions.

What Are the Major Supply Chain Issues?

When the pandemic lockdowns began in 2020, there were factory shutdowns in China and other countries, which led to shortages of things like toilet paper. That was just the tip of the iceberg, as other products also became endangered, like semiconductor chips. Because so many products rely on these chips, from cars to phones, and demand for these items increased steeply through the pandemic, we are now seeing huge supply chain disruptions and spiked consumer prices.

And these aren’t the only products that are being delayed in production and delivery. Just about every industry has been hit by supply chain disruptions. In the U.S., food production was impacted by labor shortages and difficulties in distribution in the early stages of the pandemic. Grocery stores still have a hard time keeping products on the shelves, from meats and cheeses to hot sauces and fresh produce.

While the initial shock from the pandemic has mostly passed, other issues have continued to make current supply chain challenges worse, particularly political unrest and war as well as growing inflation.

What Is Causing Supply Chain Issues for American Small Businesses?

A large number of American businesses—both large and small—rely on products created in Asia and other countries. Because there are supply chain bottlenecks on many Chinese products due to lockdowns and other aspects of the ongoing coronavirus pandemic, the U.S. and other countries are suffering.

Additionally, geopolitical unrest in the last year has exacerbated the supply chain issues we are seeing in the U.S. The biggest political situation impacting the global economy currently is the Russian invasion of Ukraine, which is causing issues with the supply chain, particularly exports from Russia and Ukraine. The war is also causing problems with gas storage levels in Europe, which has raised gas prices globally and made shipping from Europe even more expensive. As natural gas prices continue to climb, European manufacturers have had increasing difficulty covering the costs of the energy needed to produce items. 

Rising fuel prices, especially of diesel, have made it difficult for businesses to ship inventory throughout the world. In the United States, freight trains and trucking have been particularly impacted, causing a slowdown in supply chains across the country. 

Another political issue affecting the supply chain is the tension between China and Taiwan and the U.S.’s involvement in it. Taiwan is the largest producer of semiconductors in the world, and their ability to ship computer chips affects many important industries in the U.S., including the automotive and computer industries. China’s increasing military pressure on Taiwan is a threat to the island’s stability. Wang Mei-Hua, the Taiwanese minister for economic affairs, said recently during a visit to the U.S., “If Taiwan is safe, the global supply chain will also be secure.” The U.S. has been stepping up their protective stance of Taiwan, introducing legislation to bar China from getting semiconductor chips made with U.S. equipment. 

Finally, inflation growth has increased prices across all industries and had a major impact on the U.S. economy. Inflation is intrinsically linked to supply and demand, and the supply chain issues also feed into it, which makes it even more difficult to solve the problems. As the U.S. Federal Reserve has raised interest rates to try and combat inflation, prices have risen for many financial products like mortgages and small business loans, which has had other ripples in terms of rising consumer prices and, in turn, supply chain issues. 

Common Supply Chain Challenges Small Businesses Face

Not only are there backlogs in the manufacturing of raw materials and products that U.S. small businesses need, but there are also ripple effects throughout the retail industry. Container ships are backed up at ports, unable to deliver the products they hold.

There is also a shortage of truck drivers to deliver products to warehouses and retailers. And with diesel fuel prices still at record highs, it’s more expensive than ever to move products where they need to go. These labor shortages, along with continuing high fuel prices, have caused shipping costs to rise and store shelves to be empty. This is especially dangerous for small businesses during the holiday shopping season when most make the bulk of their revenues.

At the same time, the costs of products have risen, which has lowered small businesses’ ability to make a profit. They’re also put between the rock and the hard place of raising prices to match their expenses versus maintaining a loyal consumer base by keeping prices lower and ultimately making less of a profit.

When Will Supply Chain Disruptions End?

While many economists predicted in 2021 that the global economy would return to pre-pandemic levels by the end of 2022 once vaccines and herd immunity changed the impact of the coronavirus, their forecasts have changed for 2023 due to new issues that may or may not be related to the pandemic. In fact, many economists and other professionals are predicting a recession, which may further contribute to supply chain slowdowns. 

A recent survey by SAP SE showed that many stakeholders and decision-makers who work in logistics and supply chain strategy believe the current issues will continue at least through the end of summer 2023. Other surveys have executives and professionals predicting the issues will continue at least through the end of 2023 and even into 2024. Overall, small businesses can expect to contend with supply chain disruptions for a while.

Tips on Better Supply Chain Management in Our Current Business Climate

Globally, governments are creating initiatives to help alleviate supply chain problems, including political solutions like diplomacy (as in the case of Taiwan). In the U.S., the Biden administration is taking measures to fix the issues with supply chains, including trying to increase manufacturing in the U.S. to reduce our reliance on foreign imports. But there are no fast and easy fixes.

Small businesses must find ways to navigate around reality so that they can stay in business and meet consumer demand.

How can they do that? A little creativity helps. Here are a few tips for small businesses to navigate the supply chain crisis:

Look for alternative suppliers. If you’re not having luck overseas, consider American suppliers. Though they may charge more than their overseas counterparts, you may be able to eliminate most of the logistical issues that come from shipping products halfway around the world and actually get your products.

Consider raising your prices. As costs go up for you, it may be impossible to retain your profit margin without charging customers more. We’re seeing prices rise across the board, and while no shoppers like it, increased pricing doesn’t seem to be slowing sales down.

Consider offering alternative products. If you can’t get your usual order of inventory, it may be a good time to try selling other types of products. Diversifying what you sell can help you future-proof your business both in the short-term and the long-term. 

Cut costs where you can. While this won’t solve the problem of a lack of products to sell, it can help you free up money to afford more inventory. It may take an initial investment, automation through software can help you save money in the long run. The right accounting software or services can help you better understand your business’s finances and cut costs, especially when it comes to taxes. 

Above all, have patience. This crisis won’t last forever, and if we can hold on a bit longer and find innovative solutions to problems like the ones that supply chains create, we’ll make it through together.

Funding Options for Small Businesses With Supply Chain Issues

If we’ve learned one thing from the COVID-19 pandemic and the ensuing years, it’s that we can never predict the future. Finding ways to make your business more resilient today will set you up for future success, and help you be even more successful when supply chain disruptions go away. One way to recession-proof your business is to consider finding financing now to help you expand.

Given the situation with supply chain blockages, you might want to consider taking out one or more small business loans to ensure you have the capital you need to make it through to better times. Payroll loans and working capital loans are both helpful ways to free up cash so you can make other purchases for your business. A business line of credit can be another good option to help with short-term purchases, like expanded inventory or new equipment, to help make your business more competitive.

Business credit cards can also be useful because they allow you to make the purchases your business needs, like office supplies and equipment, even if you can’t pay for it all right now. Just be mindful of your charges and pay them back as quickly as possible to avoid paying too much interest.

Nav can help you find the right business financing for the current economic environment. Using your business’s data like business credit scores, annual revenue, and time in business, we can pinpoint the financing that you’re most likely to qualify for, saving you time and headaches. Use Nav to find your best financing option today.

You’re far from alone in experiencing supply chain issues. While there’s no easy fix here, know that things get better slowly, and before you know it, business will be booming again. 

This article was originally written on December 21, 2021 and updated on February 17, 2023.

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