FLORIDA SMALL BUSINESS DEVELOPMENT CENTER AT IRSC
22
INTERRUPTION OF SUPPLY CHAIN IS PAINFUL
FOR COMPANIES AND CONSUMERS
TCBusiness.com
If your small business is experiencing
supply chain interruptions, you are not
alone. Not a week goes by that I don’t hear
about another small business experiencing
supply chain issues.
Throughout the Treasure Coast, manufacturers
are struggling to keep up with
their clients’ demands. One in particular
has been put on a wait list for more
than15 months as it waits for a key component
truck chassis for the equipment
it manufactures.
These wait times are creating many
problems including cash flow, productivity,
long lead times, lower margins and loss
of business.
SURVEY SAYS
According to a recent Federal Reserve
survey of 1,104 CFOs across 14 sectors,
small businesses have lots of company.
Among large and small businesses, nearly
90% said they face extraordinary cost
increases because of supply constraints
with more than 60% expecting the trend
to persist at least into the fourth quarter
of next year.
Companies are dealing with higher
prices by reducing profit margins, cutting
costs, substituting or eliminating products,
adding contingency clauses to contracts
and turning down work, according to the
survey by the Fed district banks of Richmond
and Atlanta and the Fuqua School
of Business at Duke University.
They are also diversifying supply chains,
attempting to increase inventories,
switching to suppliers closer to the U.S.
and moving products by air instead of by
ship. Still, according to economists, those
adjustments “will likely increase the cost of
production over a longer period of time.”
Supply chain issues are weighing on
sales, with 55% of the CFOs reporting lost
or delayed sales equivalent to an average of
about 5% of 2021 sales revenue, according
to the survey. Smaller companies reported
an average 7% reduction in sales revenue.
Seven out of 10 companies are struggling
with supply constraints that are
increasing costs, delaying production and
shipping, and impairing efforts to meet
demand, the survey found.
“After squeezing profit margins, the only
place these pressures can go is into higher
selling prices,” economists wrote.
WAITING GAME
So, what are small businesses doing
about it?
Some are trying to wait it out. They are
also looking beyond their usual channels
to find relief. When companies are able to
get supplies, they are likely paying more
and they either absorb the added cost or
pass on the cost to consumers. Some businesses
have started adding supply chain
surcharges to the bill.
“What has worked for the last 20
years, will not work for the next 10,” said
Duane Reiff, president of Global Source
International Inc. and a manufacturing
specialist with the Florida SBDC at IRSC.
“Companies need to be innovative and
look at other options through this global
supply chain breakdown. Companies
can look for other manufacturers in
their geographical area to help in the
production or supply of key components
and they could possibly source another
Duane Reiff is president of Global Source
International Inc., where he provides
outsourced VP of sales consulting to small
and medium companies. He also serves as
a manufacturing specialist for the Florida
SBDC at Indian River State College, where he
helps with the Treasure Coast Manufacturers
Association. Reiff is a successful international
business leader with more than 20 years of
experience in the manufacturing and service
markets. He has traveled to more than 45
countries and understands the complex
global marketplace. As an outsourced VP of
sales, he implements highly effective sales
strategies and executes sales plans to help
companies achieve profitable, sustainable
revenue growth.
option for the manufacturing needs they
require to fulfill customer orders.”
The good news: Price increases due to
the supply chain are likely temporary. But
how long is temporary?
“Many companies have not passed on
all of their direct and indirect increased
costs and are settling for a lower margin,”
Reiff said. “Companies need to keep a close
eye on their costs and pass on as much as
possible to their clients to preserve their
own margins. This will help in their cash
flow situation.
“This supply chain breakdown will
eventually be corrected, but the strong
and innovative companies will flourish and
come out on the other side with increased
market share and profitability.”
BY NANCY DAHLBERG
“What has worked for the last
20 years, will not work for the
next 10. Companies need to be
innovative and look at other
options through this global supply
chain breakdown. Companies can
look for other manufacturers in
their geographical area to help
in the production or supply of
key components and they could
possibly source another option
for the manufacturing needs they
require to fulfill customer orders.”
— Duane Reiff
/TCBusiness.com
