How to Deal with 2021 Supply Chain IssuesSmall Business Tips and Tools•Nov 19, 2021• 4 min read
Shipping delays and shortages are common enough during any holiday season but are even more omnipresent in 2021 due to the pandemic. In this article, we chat with small business owner and Hello Alice owner Emma Mann of Soap Cauldron about her experience with 2021 supply chain issues. We also exchange tips on how to manage supply chain disruptions.
What Is Causing Supply Chain Issues?
Several pandemic-related factors are causing disruptions in the 2021 supply chain worldwide including:
- Shortage of employees
- Shortage of raw materials
- Increased spending on hardgoods
With consumers unable to enjoy experiential activities such as dining, bars, and travel as frequently, there has been an increase in shopping for material items. This paired with shortages in employees in manufacturing and production of raw materials has all contributed to 2021 supply chain issues.
How 2021 Supply Chain Issues are Affecting Small Businesses
While supply chain issues are affecting both big and small businesses globally, it can be especially challenging for small businesses. Side effects of supply chain issues on small businesses can include:
- Increased cost of manufacturing and supplies
- Delayed shipping
- Customer dissatisfaction
- Jeopardizing retail placement
“As a smaller entrepreneur, we simply do not have the buying power that larger competitors do, nor do we have the cash reserves” Emma Mann says. Her business, Soap Cauldron, is a line of handcrafted all-natural soaps and skincare. “We are competing in a frenetic marketplace to source packaging, raw ingredients, and labor,” she adds.
Additionally, she notes that backorders put securing shelf space with retailers at risk. If they’re unable to produce enough product to fill retail orders due to supply chain issues, they lose the shelf space. This is especially frustrating as it can take small businesses years to earn this valuable placement.
Similarly, building customer loyalty is more hardfought for small businesses. To maintain customer loyalty, Emma is maintaining her prices for as long as possible while facing dramatic price increases on her supplies.
“Every vendor we have has raised prices,” she recalls. “Our bath tube supplier had four increases this year alone.” Several other vendors increased their prices multiple times as well. Simply put, maintaining these savings for customers can reduce net profit for each item sold.
When Will 2021 Supply Chain Issues Be Resolved?
As of October of 2021, Federal Reserve Chair Jerome Powell projected that 2021 supply chain issues will continue to disrupt businesses through 2022. Discouraging though this may be, it’s also a reminder for small business owners to proactively do what they can to alleviate the negative side effects as soon as possible.
How to Deal with 2021 Supply Chain Issues
Here are some strategies small businesses can take to deal with ongoing supply chain issues:
1. Tell Your Customers Now
Be open and honest about what your customers can expect and do it as soon as possible. Being proactive in communications will help to keep expectations clear for the holiday season. Let your customers know via newsletter and/or social media what challenges you are facing and how they can support your small business.
The following talking points can be a helpful to include when speaking to customers about backorders or other fulfillment delays:
- Honest and clear timelines about product availability and/or order fulfillment
- Context about why any backorders or delays are happening
- How your team is working to address these concerns
- Appreciation for your customer’s patience and support
Sincerity can set you apart and help keep customer relationships strong.
As an example, Emma chose to address shipping delays earnestly with her customers. Rather than offering free shipping as a perk, she was candid about the challenge it posed on her business. “We were transparent that as a smaller company we cannot absorb that cost,” she says. “Our hope is that the value proposition is enough to warrant them choosing us.”
2. Keep the Dialogue Open
Update your employees and customers frequently and answer all questions as quickly as possible. While no one likes to deliver bad news about backorders or delayed shipping times, it is better to keep your customers updated and informed. Consider adding a banner to your website or updating your order confirmation emails with up-to-date processing and shipping times.
Similarly, being clear with your employees about supply chain issues prepares them to act accordingly and even invite problem solving as a team.
3. Get Creative with Your Offerings
Find fun ways to encourage customers to shop early for the holidays to account for shipping delays. If supply chain issues have caused low stock in popular items, encourage your customers to buy gift certificates that they can redeem when a product/service is available. Some other ideas might include:
- A giveaway raffle for early holiday shoppers
- If you have a loyalty program, awarding extra points
- A small gift with purchase you can produce affordably, or better yet, with recycled scraps that would otherwise go discarded
- If you have a local business, offering pickup and delivery
4. Adapt Your Sourcing Strategy
Take note of any inefficiencies you experience throughout the rest of the year. Then, if you haven’t already, look into alternative sourcing for supplies and shipping for the new year. As predicted above, supply chain issues will likely continue into 2022 so it’s not too late to course correct for the new year.
For example, Emma invested in greater quantities of inventory at a time to make up for delayed shipments. She also recommends not relying on one or two suppliers. “Have four to five back up buyers in your reserve,” she suggests.
During the pandemic, she found it beneficial to reach out to unconventional vendors to continue operations. “When restaurants closed during the pandemic, we found that bakery and ingredient suppliers could not sell their drums of oil,” she explains. “So many reached out to us. This allowed us to develop a list of additional suppliers and create a symbiotic relationship that benefited both companies that were struggling.”
Without a doubt, the current challenges in the 2021 supply chain are an unfortunate side effect of the pandemic for small businesses.
“We will come out the other side,” says Emma, “but too many businesses have fallen along the way.” However, as with other entrepreneurial challenges, it also marks an opportunity to develop greater adaptability and resilience.
“The lesson in all of this is that it is critical for a business to learn how to pivot and hustle in this environment to survive,” Emma concludes. “This entails a radical rethink of established practices.”