How small businesses can weather the supply chain crisis with inventory management

Tuesday, May 24, 2022

Let’s face a hard truth: the global supply chain crisis is likely not going away any time soon. If the COVID-19 pandemic brought supply chain issues, the Russian invasion of Ukraine and the international response to future COVID variants could ensure problems remain. What can you do to weather the supply chain crisis as a small business owner?

In this article, we’ll take a look at:

Why are supply chain problems likely to stick around?

The coronavirus pandemic kicked off supply chain challenges due to heightened demand for consumer goods. Now, experts predict that supply chain operations may take years to restore to pre-pandemic normalcy for many reasons. New strains of the virus delay production and transportation due to labor shortages and public health measures taken in various countries, including China. Additionally, the conflict in Ukraine is delaying or cutting off raw materials and products that companies need due to production delays or rerouting delivery due to sanctions or the conflict itself. The ripple effects of the conflict and sanctions against Russia likely won’t be felt for months as the situation unfolds.

It’s fair to expect that manufacturing backlogs, bottlenecks, shipping delays and congestion will stay for some time.

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How are supply chain challenges affecting small businesses?

Small business affect

Product availability becomes an issue

Supply chain disruptions can result in supplier delays and product shortages for businesses within an entire vertical market. Unlike larger companies, small businesses tend to have fewer supplier relationships which can make it more difficult to secure inventory.

With less – or even worse – no products to sell, small businesses can see their cash flow disrupted, which for some, may make it hard to keep the lights on. Simply put, if you don’t have the inventory available, you can lose customers. If someone was ready to buy now and you can’t supply the order, a competitor can easily get your sale or they’ll simply opt out.

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Prices go up for goods

Whether the cause is limited product availability or transportation roadblocks (pun intended), these issues often lead to increased costs for products. These price hikes can shoot up swiftly in the short-term, and while prices can normalize, the higher prices sometimes stick around for the long-term.

Small businesses have low cash flow, no capital to spare or limited access to small business loans to afford the skyrocketing prices. In short, it has been difficult for some SMBs to replenish inventory and keep their supply chain running smoothly these days.

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Smaller staffs without supply chain management experience become overloaded

Small businesses can be tight ships with smaller crews of employees. Not every business has someone with supply chain management experience on staff that can help guide them through these supply chain woes. Smaller budgets and limited resources can make it hard to get outsource supply management help – so owner-operators and smaller teams are left to carry the burden of navigating the crisis themselves.

Small businesses can look to weather unpredictability by taking a critical look at their inventory and assessing risk in the near and long term. Having a holistic view of your inventory allows you to respond quickly to changing marketing conditions, consumer preferences and any inventory issues as they arise. Let’s explore some strategies.

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Strategies for small businesses to weather the supply chain woes


Make smarter, data-driven decisions with proactive inventory management

Inventory management can be a delicate dance – having excess stock or not enough can both cause issues.

Buying merchandise in large quantities for perks such as free shipping and vendor discounts can be alluring. But having larger quantities on hand can lead to extra stock… and pricey storage costs. Having a large amount of funds wrapped up in merchandise can cause issues if you’re unable to move it quickly.

Plus, seasonal products pose a risk of profit loss. Think of all the holiday 2021 products that didn’t hit shelves until January or February 2022. Shoppers will expect steep retail markdowns for Thanksgiving decorations outside of the season – no matter if they were stuck in shipping containers for weeks, docked in a port. Over-purchasing in this climate can be a big gamble.

The flip side of inventory management and living through this supply chain crisis is not having enough inventory or source materials on hand. Simply put, if you don’t have the inventory, you can lose customers – plus, you can’t assume potential customers will come back when you’re back in stock at your physical location or ecommerce website. If someone was ready to buy now and you can’t supply the order, a competitor can easily get your sale or they’ll simply opt out.

You run the risk of overselling, overstocking and overpromising without a real-time view that shows sales and stock across all sales channels.

No matter how you slice it, real-time data is essential to survive in today’s market. And, when it comes to inventory management, being proactive can be the difference between profitability and just keeping the lights on, even in the best of times.

Taking a proactive approach to inventory management by collecting customer data through a modern POS and responding quickly and decisively to it can give you more control in an otherwise uncontrollable climate. Using data can help small business owners anticipate demand and forecast inventory requirements, turnover and seasonal trends. Having data at your fingertips allows you to purchase smarter and avoid spending money on inventory that will sit on shelves instead of move quickly. Plus, you’ll be able to fulfill orders more easily with optimal inventory levels in your stores and warehouses.

If you’re using a manual process to track inventory, we have bad news: it’s not going to give you the results you need fast enough. If you’re having to update a spreadsheet to track everything, you’re eating up your valuable time. And your data won’t be as up-to-date as it could be. Plus, your spreadsheet can’t scale with your business, communicate with your retail POS or show how your products are selling.

Inventory management

What does proactive inventory management look like?

  • Planning inventory based on historical sales and current customer demand

  • Creating microplans by merchandise class, location, season and brand

  • Incorporating all channels in a holistic inventory plan

  • Completing assortment planning based on current trends

  • Completing full and partial inventory counts regularly

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Look for alternate suppliers

Relying heavily on the same suppliers with an unpredictable supply chain can become problematic. With product shortages and trade blockades, you never know when a certain product will be unavailable, potentially on short notice. Locating alternate suppliers or new suppliers, potentially in different locations, may help small businesses maintain stock even if one supplier is unavailable.

You can also look to source inventory through local businesses or suppliers. This can provide an added sense of control over your small business supply chain, with the added benefits of lower costs and being a greener solution to reduce your business’ environmental impact.

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Stay informed to stay ahead

Supply chain disruptions can happen at any time – this is not the first or the last time. While we can’t always predict a pandemic or war, or unfavorable weather events, we can have some warning that they’re coming. Staying up-to-date with industry news and trends in your business may help you stay ahead of potential disruptions.

Additionally, small companies can manage unpredictability by taking a critical look at how geopolitical events, weather and other issues could affect your business. Completing a stress test to understand your supply chain vulnerabilities can provide you with a view of what needs to be addressed in the near and long term.

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Be honest with your customers

By this point, almost every person in the U.S. has a personal story of how the supply chain crisis has affected them. While consumer expectations remain high thanks to the e-commerce landscape, they know what’s going on. If you can communicate early and often about challenges with stock, it can help maintain your small business' brand reputation.

Explain any delays on your website if possible. If you don’t have something in stock or it’s on backorder, communicate that before purchase. Where things can go wrong is if a customer expects an item to be in stock and at their home in three days but is later told it will be three months. You don’t want your business to be another anecdote of a brand letting someone down on social media.

An Oracle consumer survey stated that 63% of consumers confirmed they would not wait to try another brand or shop elsewhere.

Looking ahead

Looking ahead to the future

With inventory management, aiming for the right “balance & flow,” as defined by Marc Wiess, CEO of global inventory planning agency Management One, is:

  • Having the right amount of inventory

  • In the right class

  • At the right time

Understanding customers’ needs and wants requires strong retail-customer relationships and even stronger data. With the right point of sale solution you can manage your inventory efficiently, all while helping to boost your margin and sell-through.

For example, Heartland Retail was designed by veteran retailers who know exactly how important point of sale data is for your inventory management strategy. It has the right retail POS features and functionality to help small businesses stay competitive in a dynamic retail environment. With Heartland Retail, you can:

  • Create custom fields to track inventory in any way imaginable, then build custom inventory reports that help you balance your stock across all channels

  • Say goodbye to dead or depleted inventory

  • Complete partial and full inventory counts

  • Transfer inventory between locations with ease

  • Label inventory adjustments with custom reason codes

  • Easily merge duplicate items

  • Keep your warehouse organized and make replenishment quick and easy