Yahoo Finance How To Respond To Supply Chain Disruptions, According to Small-Business Owners
When it comes to today’s 40-year high inflation, there’s plenty of blame to go around — record-high gas prices are the current villain. But since the time that prices started rising in earnest around this time last year, the root cause of it all has always been dysfunction in the global supply chain.
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Semiconductor chip shortages continue to batter the auto and electronics industries. Record-high housing inflation began with a lumber shortage that was brewing before the pandemic even hit. All in all, 36% of businesses have been significantly impacted by supply chain disruptions of one sort or another, according to a report from the National Federation of Independent Businesses (NFIB).
The following stories come directly from that 36% — entrepreneurs who were almost derailed by the challenges that come with sourcing materials in today’s market. Each and every one of them, however, adapted and bounced back.
Here’s how they survived.
A Steel Business Learned the Value of Logistical Expertise
For Austin Fain, owner of Perfect Steel Solutions, freight prices were the source of most of the supply-chain headaches that were making his business harder to run.
“During the pandemic, demand rose rapidly,” Fain said. “The demand was so substantial that it led to insufficient shipping capacity and a shortage of available containers.”
Naturally, freight prices rose — and rose quickly. Like so many business owners across so many industries, Fain had to adjust. He decided to invest in the expertise of a specialist.
“I responded by partnering with a freight forwarder company to manage and track the shipment of my goods,” Fain said. “This company took the responsibility of transporting my products and negotiating the best prices and fastest routes on my behalf.”
Hiring a navigator with the skills and experience to shepherd a business through the most tangled logistical landscape in recent history doesn’t come cheap, but the partnership kept the materials flowing in.
“Although the initial cost of enlisting the services of a freight forwarder company was high, it was worth it,” Fain said. “The company’s representatives were able to negotiate reasonable prices with the shipping company and ensured the entire process was conducted as smoothly as possible. As a result, I saved on the freight costs and witnessed an increase in the overall efficiency of my supply chain.”
For a Luxury Shutter Company, Survival Meant Taking on Too Much Inventory
Kristin Meyer, owner of Southern Crafted Shutters, had always tried to avoid keeping too much money tied up in inventory. The last nine months, however, made that an impossibility — lead times for some materials shot from four to six weeks to six to seven months.
“As a result, we’ve had to pre-purchase six times the amount of material than we have done, historically,” Meyer said.
Considering that those materials consist of 20-foot lengths of aluminum extrusion, finding a place to store months’ worth of advance inventory became an impossibly expensive challenge. Meyer survived by convincing her suppliers to front her their materials and accept payment upon delivery.
“Whereas we used to pay as soon as we ordered material, we worked with our supplier to get credit terms,” Meyer said. “This allows us to now pay when the material arrives and keeps our money in our pockets until the material is on hand. We also worked with our supplier to hold some of the inventory at their warehouse for 90 days as we work through the initial bundle.”
Meyers’ advice to other entrepreneurs is to diversify their supply chains as much as possible.
“Our supplier gets aluminum extrusions from two different extruders. We are now able to get our specialized part from both extruders, so if something happens to one, we still have a backup.”
One Company’s Port Drama Proved That Being on Time Means Starting 3 Months Early
Nathalie De Clercq is a co-founder of a high-end pool float company called Loteli. Her background in sourcing proved no match for the challenges of 2021, which ran roughshod over De Clercq’s crucial summer season.
With her seasonal order set to ship at the beginning of March, De Clercq was keenly aware of a congestion nightmare unfolding at the Port of Los Angeles, so she booked a ship through Seattle even though it cost more and left a few days later. It proved to be neither money nor time well spent.
“On the day of shipping, we were told that the boat was overbooked and our container was bumped off and immediately put onto the next boat — to L.A. port,” De Clercq said. “There was nothing we could do. It was stuck in the port and then on the train, with staff shortages and other issues. All we could do was wait.”
The container arrived at the warehouse nearly three months late — after the all-important summer season had already ended.
“We lost 80% of our summer sales and on top of that, we had to pay for very expensive storage for all the extra stock that we did not sell,” De Clercq said. “It nearly destroyed our business.”
This year, Loteli is spending a king’s ransom to route through the East Coast — with plenty of time to spare.
“My only advice would be to try to do everything with three months more lead time than usual,” De Clercq said. “Timelines and costs are so unpredictable these days, the only thing that we can do better is to plan and ship earlier.”
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