How To Survive Despite Retail & eCommerce Supply Chain Shortages in 2021
Recent labor and supply shortages have caused issues for many businesses, but there are things your small business can do to survive disruptions to the supply chain.
In 2020, many Americans were shocked by the sight of empty grocery store shelves, by purchase limits on common household products, and by how hard it was to find necessities like toilet paper and hand sanitizer. 2021 delivered a new kind of inventory problem, as anyone who’s tried to buy a new car, major appliance, or computer knows. As you prepare for the upcoming holiday season, are you still struggling with the supply chain disruptions 2021 has delivered?
Supply chain disruptions and inventory shortages in 2021 are estimated to cost US businesses $228 million, according to Statista. And because the current disruptions are caused by multiple factors, there’s no quick fix in sight. Demand is still high for many common items, as the realities of supply and demand collide with post-pandemic economic recovery:
- International bottlenecks are slowing shipping containers.
- Companies are stockpiling raw materials in reaction to last year’s shortages.
- Labor shortages on the local level mean that even if products are available, there may not be enough workers to get them packed up and on the road to stores — or to unpack them and sell them to consumers at the other end of that road.
With eCommerce sales continuing to climb, up to $129 billion from $111 billion in 2020, the eCommerce supply chain is vulnerable too. If your small business has so far managed to escape supply chain disruption, your luck just may run out in the months ahead. If you’re not affected already by supply shortages, the time to plan to mitigate them is now.
In this post, we’ll tell you what you need to know to get your small business through the 2021 holiday shopping season and beyond, despite supply chain shortages that can lead to delays, disruption, and disgruntled customers. Read on for our tips for keeping your business in the black as you head through the holidays and into a happy New Year.
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9 Tips To Survive Supply Chain Shortages In 2021
The best time to react to eCommerce supply chain disruptions or any inventory shortages that may affect your small business is before it happens to you. If you’re already seeing the effects, we have strategies that can help you, too. Here’s how:
1) Audit Your Supply Chain
Be honest. How much time have you spent thinking about your supply chain? Few small business owners spend much time on the subject at all, until there’s a problem or breakdown. Then, suddenly, your supply chain can have a make-or-break impact.
Don’t wait for that moment to happen. Map out the journey your products or component parts take on their way from their source to your warehouse or facility. Look at past orders to see where hang-ups occurred, consider how you handled previous delays, and take a proactive approach to managing them if they occur again.
Make contact with your suppliers and ask what they’re seeing on the horizon. If they anticipate shortages or delays, place orders early or order more than usual. And if they see nothing but smooth and timely deliveries ahead, you can breathe a sigh of relief and turn your attention toward another part of your business.
2) Beef Up Your Inventory Management
Inventory management is an important part of the supply chain, and it’s up to you to stay on top of it. Inventory management simply refers to a system of tracking inventory that leaves and enters your business. Robust inventory management is critical, especially during times of supply chain uncertainty, because it can:
- Stop You From Running Low On Stock: By tracking your inventory, you can quickly and easily identify when you’re low on stock. Then, you can order more inventory as needed to fulfill customer orders.
- Prevent Overstock: Just as you don’t want to run out of stock, you also don’t want to have too much on hand. Perishable items can go bad before being used, some items may become outdated before being sold, and ordering too much ties up funds that could be used elsewhere in your business.
- Keeps Order On Track: Make sure that all orders are complete and correct by keeping up with your stock. Correctly tracking and labeling products are keys to preventing mistakes.
Proper inventory management lessens your risks, but it can be a lot of work. Fortunately, you can find a range of options that help you manage the process, including a number of excellent and affordable inventory management software options. If you’re running an eCommerce business, look for inventory management software that will integrate with your eCommerce platform or shopping cart software.
If you’re selling in person, your POS systems may offer advanced inventory management features. The best inventory management system may even integrate with other software that you already use, making it quicker and easier than ever to track your inventory.
3) Make A Back-Up Plan Before You Need It
You’ve checked in with your suppliers, and you’re on top of your inventory management. What should you do if you discover a hot spot or an area of weakness? It’s best to have a plan before a supply chain disruption has the chance to wreak havoc on your business.
In practical terms, that might mean locating another supplier, even if it’s not your first choice, finding a company that charges a little more, or even returning to someone you’ve had a bad experience with in the past. Placing a small test order now, to establish a relationship, could save you later. During times of supply chain uncertainty or disruption, the more options you have to work with the better.
4) Collaborate With Other Local Businesses
Normally, you might see other companies that sell the same products as competitors that you want to stay in front of. When the supply chain tightens up and your business is threatened, those competitors might look like potential partners instead.
After all, if your end goal is keeping customers happy with your products and confident in your ability to deliver, you might need to turn down their business if you don’t have the products they want to buy from you. Is there someone else in your local community or field of sales that you can steer them to? It’s possible that that other company is going through some of the same uncertainty that your business is experiencing.
To use a very simple example, suppose that you sell handmade sweaters on an Etsy store online, but you haven’t been able to get your usual shipment of red woolen yarn. If a customer wants to buy a red sweater from you, what are you going to say to that person?
Instead of saying “Sold out!” what if you could tell that customer: “I can’t supply what you’re looking for because of some shortages in the industry. In anticipation of this situation and because I value your business, I have looked around and found another company that makes excellent red sweaters and I’m happy to recommend that company to you. Oh, and if you’ll give me your contact information, I’ll let you know when I get red yarn back in stock, and I’ll even send you a coupon for 10% off a future order with me!”
If you make advance arrangements with a couple of close competitors, they may be willing to make reciprocal arrangements with you. That way, they can steer customers to you if they’re not able to fulfill orders, and you do the same for them. You won’t be able to make every sale, but by working together with competitors you’ll keep customers happy and hopefully save those relationships.
You’re probably not going to run out of red sweaters, but this arrangement can work to your mutual advantage no matter what you’re selling. And, if you’ve turned competitors into partners, even temporarily while the supply chain remains uncertain, you may find they’re willing to share some of their surplus supplies with you when you need them, as long as you’re willing to do the same. Your customers will appreciate you looking out for them and hopefully will reward you with continuing loyalty.
5) Over-Communicate With Your Customers About Supply Shortages
Delays, shortages, disruptions — no one wants them, but you might not be able to avoid them. Your customers won’t welcome them either, but you shouldn’t try to hide the supply chain problems you’re experiencing in your small business. If you’re experiencing an inventory shortage, put that news front and center for customers. When they know upfront what to expect, they’re less likely to be disappointed than if they find out you won’t be able to meet their needs only after they put an item in their shopping cart.
That might mean a carefully worded announcement on your website landing page, or a sign just inside the front door of your physical location. Without making excuses, let customers know that you’re experiencing supply shortages that are almost universal these days and completely beyond your control. And while it’s always good in business to stay positive, make sure that you’re offering a totally realistic timeline if you make promises about when items will be available again. It’s important when setting scaled-down expectations that you deliver on your promises.
You might even be able to use news of any shortages you’re experiencing as a way to reconnect with customers who have bought from you before or those who have visited without completing a purchase. Email doesn’t cost much to send, and it can be a very effective communication method, returning a whopping $38 for every $1 you invest, according to some sources.
For ideas on how you can use an email campaign to ease your supply-chain woes and connect with customers in a positive way, despite the negative circumstances, check out our post on the best email marketing strategies. You will find tips for how to use email to build trust with customers and develop better customer relationships that can come in handy even when you’re experiencing inventory shortages.
6) Recommend Other Products & Keep The Sale
The customer wants to buy Product X, exactly as it’s listed on your website. It may be a bestselling product for you, or it may be something you sell only a few of each month. You’re not selling any right now, though, because you haven’t been able to get them in stock. Does that mean the customer is bound to leave your eCommerce site disappointed and empty-handed?
Of course not! Any good salesperson knows that the techniques of upselling and cross-selling can save the sale. If you’re not familiar with those terms, they both involve presenting different options and showing the customer why they’re worth pursuing. When you’re out of Product X, that’s nothing but an opportunity to show the customer why Y and Z are great options too.
If you’re a fan of tech solutions, you may be able to use an app to do the upselling for you. (Check out our take on one free upsell add-on for eCommerce.) Automated upsell features can actually increase average order size and move more products out your warehouse doors.
You can implement a lower-tech option, too, if that’s more your style. Whenever you add an “out of stock” notice to a product, add a link to similar items that your customers might consider buying. Include links to related products that customers often buy together, like shoes and socks, and you might actually see a sales increase, despite some gaps in your inventory.
7) Network & Connect
When you’re facing supply shortages and supply chain disruptions, it’s important to remember that you’re not alone. If you’re having trouble sourcing a particular supply, it’s very likely that others are facing the same difficulty. It’s also very likely that some people have found creative solutions and effective workarounds that are keeping their sales on track despite the challenges.
What’s the best way to reach those people and tap into their creative solutions? It depends on your industry and your inclinations. You might be able to join an online group, using the power of social media to find the solutions you need (or even just sympathy from people who are going through the same things you are). Maybe there’s a trade show you can attend, virtually or in person, where you can connect with small business owners and suppliers in your industry.
Don’t forget about nearby events, too. Check with your local Small Business Association or trade group to find out what resources are available to you. Look into joining your town’s Rotary Club if you’re not already a member, attend a farmer’s or winter marketplace in your county, and scout out other local events that will allow you not only to connect with small business owners in your area but also to get the products you do have in stock in front of customers who might want to buy them.
8) Apply For A Business Loan Or Grant
When your business is facing challenges, it’s tempting to draw back and focus on basics. If you do that, though, you could be missing an opportunity to grow your business.
If you’ve exhausted your options for weathering supply chain challenges without finding solutions that stabilize your business, this might be a good time to apply for some additional funding that lets you branch out, add a new sales line, or increase your own manufacturing capabilities.
Look into a Small Business Association loan, for starters. SBA loans offer attractive qualities such as low interest rates and long repayment terms. There are a variety of loans you may consider applying for as you look for ways to ride out the current supply shortages that are affecting your business.
This could also be a good time to apply for a grant that can give you free money — yes, free, if you qualify. Although grants often involve long application processes and restrictions on the way grantees can use funds, if your application is approved, you won’t have to pay back the money. The key is to find the right grant opportunities. Once you’re ready to apply, use our top tips for writing a winning grant application.
9) Consider Shipping Alternatives
On October 1, the US Postal Service implemented changes that experts say could lead to higher postage prices and longer delivery times. If you or your eCommerce suppliers rely on the USPS to deliver products and supplies to customers, it’s definitely something that could cause even more problems in the supply chain.
That’s especially true during these last months of the year, when holiday shopping and shipping normally overload the USPS. Pay extra attention to shipping deadlines this year, and make sure you plan ahead and leave extra time when you’re ordering supplies for your small business. Update your website, too, so that your customers are aware that shipping via USPS may cost more and take longer this holiday season.
If you haven’t already done so, look into shipping alternatives. It might be time to branch out from USPS and try using another major carrier. And if you haven’t taken advantage of shipping software that makes eCommerce easier, that could be a wise investment now. You’ll find a variety of easy-to-use shipping software that fits most budgets.
Preventing Supply Shortages & Managing Risks
The term “risk mitigation” sounds a bit complicated (and intimidating!), but it’s actually quite simple. Risk mitigation is identifying potential risks that could affect your business, then developing a plan to overcome these risks.
According to a survey conducted by the Business Continuity Institute and Zurich Insurance Group, 75% of respondents reported at least one disruption in the supply chain in a 12-month period. Of those affected, nearly one out of every five companies went out of business within 18 months.
Risk mitigation can lessen the business impact of supply chain disruptions. What should you consider as part of your risk mitigation plan? Here are some areas to start with:
- Evaluate Your Supply Chain: Your supply chain has many links. Your eCommerce site, your payment processors, your warehouse, your shipping service, and your consumers all play a role. Map out your supply chain, identifying the key players in each role. You may want to create a flow chart that shows your supply chain from raw materials to delivered products. Research and record key details, such as your points of contact, shipping schedules, and other important information. If your organization is large enough, you may want to use supply chain analysis software.
- Identify Risk & Effects: Identify potential risks and prioritize them. Which factors are the biggest risks for your company? Think about various scenarios and how they would affect your business. That can deliver great insight into reducing costs, increasing efficiency, and mitigating risks.
- Work With Reputable Suppliers: While it makes sense to work with low-cost suppliers and distributors to maximize revenue, cost should never be the only factor you consider when choosing where to purchase inventory. Do your research, check references, place test orders before you commit, and work with reliable, reputable businesses that offer competitive pricing.
- Have Backups: To mitigate risk, you should always have a backup supplier or two and/or distributors standing by. If you are unable to get the products you need to run your business from one supplier, having another reputable company on the back burner could help keep your business flowing smoothly.
- Talk With Your Insurance Agent: In some cases, insurance can play a critical role in mitigating risks due to supply chain disruptions. Talk with your insurance agent about the risks identified in your business and find out what type of insurance your business needs and when it’s appropriate to use.
- Keep Lines Of Communication Open: Don’t be afraid to communicate with suppliers, distributors, data management centers, and other business partners. Learn about their risk mitigation plans to ensure you’re not overlooking anything. Keeping the lines of communication open can help you better manage problems when they occur.
- Track Inventory & Estimate Demand: Pandemic-related supply shortages may feel like a once-in-a-lifetime disruption to your business plan. But if you’re relying on popular ways of handling inventory, like just-in-time (JIT) inventory management or dropshipping, it’s important to add ongoing and recurring disruptions to your business planning and risk assessment scenarios.
Effective risk management requires an understanding of some key numbers, including how long shipping takes in normal times as well as in times of disruption, how much inventory you typically have on hand, and how many items you normally sell in a month or a quarter. Factor in your comfort with risk and the budget you’re willing to sink into stock, and you’ll arrive at an understanding of how much inventory you should be holding. Keep seasonal fluctuations in mind, of course.
Final Thoughts On Surviving Supply Shortages
There have been multiple factors affecting global supply chains over the past couple of years. The pandemic may be the biggest factor, but it’s not the only one. From unexpected demand in certain sectors to labor shortages and shipping disruptions like the blockage of the Suez Canal by the Ever Given, no matter how much everyone wishes to return to “business as usual,” the fact is that periodic or ongoing supply chain disruptions actually may be the new normal.
To protect your small business from inventory shortages and supply chain disruptions, it’s important to stop wishing and start analyzing and planning. Of course, you can’t solve the problems of global commerce. But you can take steps to mitigate their effect on your eCommerce supply chain or small business inventory.
Start by paying attention to and understanding your supply chain. Educate yourself on the importance of inventory management, and identify the risks that your business faces. Create a risk mitigation plan, look into inventory management software, and do your research to ensure that if another disruption occurs, your business will be prepared.