With global shipping in turmoil, small businesses have a chance to grab market share by following 4 principles
- Supply chain disruptions are inevitable with any business that ships products or materials.
- Last week’s blockage in the Suez Canal caused by a 1,300-foot cargo ship, cost the global economy an estimated $400 million per hour.
- Here’s how small businesses can handle disruptions, find new suppliers, and make sure their products are delivered.
- See more stories on Insider’s business page.
Ashley Merrill started 2020 with a plan that quickly fell apart.
The founder of luxury pajama brand Lunya said the team typically starts the year with an educated guess on which products are going to sell well at certain times. This informs her purchasing, manufacturing, and shipping decisions. When the pandemic interrupted supply chains, and global shutdowns caused months of shipping and manufacturing delays, the Lunya team had to improvise.
“We had to kind of just ask, ‘what can we get?’ and go that direction,” Merrill told Insider. “So, certainly not optimal from a merchandising planning point of view.”
Between the pandemic, an Empire State building-sized cargo ship that blocked the Suez Canal for a week, and a recent uptick in delays at the two California ports that handle more than a third of US container imports, it’s been a hectic year for any business that relies on shipping products or materials. However, one interesting takeaway is that these kinds of disruptions seem to hurt big businesses more, giving small business a chance to grab market share and prove their true worth to the American economy.
Small businesses can be more nimble when navigating big supply chain changes
The blockage in the Suez Canal cost the global economy an estimated $400 million per hour and could affect the world’s supply chain for months. While massive events like this can affect companies of all sizes, large firms are more vulnerable, said Paul Hong, a professor at the University of Toledo’s College of Business and Innovation.
“Smaller firms have opportunities to address the real issues,” he told Insider, “to not only think about how it will affect my company, rather, how does this delay affect our industry?”
Douglas Kent, an executive at the Association for Supply Chain Management told Insider that isolated events have minimal effects on small businesses. Instead, he said small businesses should be considering how to adjust to the rising price of doing business overseas, which is driven by container shortages and increasing transport costs. These challenges, he said, will bring more companies to rethink their supply chains.
“Small businesses who previously might have chosen to have goods manufactured in Asia because of the lower overall cost of goods — that opportunity suddenly dissipates now,” he said.
Lunya manufactures all over the world, including in Peru, the US, Taiwan, and China. One advantage to this disperse supply chain is the ability to quickly lean on other locations if one geographical area is experiencing a health, weather, or logistical crisis.
Maintain close customer communication and notify them of delays ‘early and often’
Shipping delays are bound to happen as long as your business relies on third-party suppliers. When they do come up, it’s best to communicate often with customers so they are reassured you’re doing everything you can, despite circumstances you can’t control.
Kent stressed the importance of transparency throughout these interactions, especially as a small company. “The worst thing people hate, particularly if they’ve chosen to do business with a smaller entity, is if they don’t know something is happening,” he said.
Merrill said over the last year, Lunya experienced frustrated customers as people waited in quarantine for their packages to arrive.
“When we closed the stores, a lot of the demand just shifted online,” she said. To address the “crazy spike” in inquiries, she was able to move retail employees into customer service roles.
In normal times, the holiday season is one of the most trying times for many businesses, as the volume of online orders ramp up and shipping delays are inevitable. But if done right, it can also be the most lucrative, making the bulk of sales for the year.
Vic Drabicky, retail and digital marketing expert and founder and CEO of January Digital, said that getting ahead of shipping deadlines and notifying customers frequently will prevent customer let downs. “Message to your consumers early and often,” he previously told Insider.
Regularly evolve your product to anticipate demand
At the beginning of the pandemic, the US experienced a face-mask shortage and small, local apparel businesses were uniquely positioned to quickly pivot to produce masks and meet that demand. Their size was in part what made them nimble, able to repurpose fabric and design mask patterns overnight. It took large companies months to catch up and produce masks at scale.
This kind of adaptability comes in handy when supply chain issues arise, said Hong. “Experienced chess players do not only see one step ahead, but a couple of steps ahead,” he said. Similarly, if businesses can read market demand and adapt quickly, they’ll be able to achieve a better market position.
He suggests business owners ask themselves what the company can do differently in light of changing needs. Options might include offering alternative products or services, allowing customers to pre-order for more predictable demand, or bringing in additional suppliers to ramp up production.
Turn competitors into partners to help find new suppliers
Beginning a relationship with a new supplier takes a lot of effort and research to ensure they’re credible. It’s even harder if you’re searching in an entirely different country than any you’ve worked in before, Kent said.
He recommends businesses talk to others in their industry and even form alliances with similar companies looking for the same type of suppliers. Kent calls this type of partnership a “co-opetition,” in which two businesses that might normally compete with one another are sharing resources and combining efforts to find the best supplier.
Finally, be a good customer to the new supplier you’re courting. “Don’t forget that the supplier is also choosing you as a customer,” Kent said. “Small businesses often don’t present themselves well as a customer.” He advises businesses to take their time understanding the ecosystem of that country and building up the supplier relationship.
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