Small Business Guide to Managing Supply Chain Disruptions
February 21, 2025 | Last Updated on: February 21, 2025
By Russ Shumaker
A streamlined supply chain is an operational advantage, the kind that most people don’t notice until a disruption occurs. Then, “business as usual” becomes a chaotic mess that can quickly lead to lost sales, damaged relationships with customers, and financial strain.
It’s no wonder that the U.S. Chamber of Commerce reports that supply chain issues are one of the biggest concerns small businesses face, second only to inflation.
For small businesses, supply chain disruptions can range from something as small as a truck breaking down to a global pandemic that closes ports and shutters manufacturing plants.
So, how can your business navigate this operational challenge? Read on for the strategies you need to manage supply chain disruptions in business.
In this article, we cover:
- What is a supply chain?
- Supply chain disruptions small businesses may encounter
- Strategies for managing supply chain disruptions
What Is a Supply Chain?
A supply chain is the interconnected network of organizations, activities, resources, information, and technologies involved in producing and delivering goods or services to customers.
It encompasses the entire process from sourcing raw materials to manufacturing, distribution, warehousing, transportation, and ultimately, reaching the end consumer.
Essentially, it's the series of steps and interactions that transform raw materials into finished products and ensure their timely delivery to the right place, at the right time, and in the right quantity.
Common Supply Chain Disruptions for Small Businesses
Sometimes, supply chains can spiral out of control, leaving businesses scrambling to pick up the pieces.
One moment, you’re operating normally with everything going according to plan, and then the next, something happens, and you’re blindsided.
Perhaps a key supplier goes bankrupt, leaving you high and dry without an indispensable component. Then, there's the ever-present risk of natural disasters like floods, fires, or hurricanes, which can shut down production facilities and disrupt transportation routes.
And let's not forget about the unpredictable nature of geopolitical events or changes in regulations, which can throw a wrench into your carefully laid plans. A recent example would be the ordeal many businesses endured during the COVID-19 period, where lockdowns, border closures, and supply chain disruptions became the new normal overnight.
To make matters worse, sometimes supply chain disruptions happen at the same time as a sudden increase in demand for your product. This happened during the pandemic, but it also happens whenever there is a major winter storm or a hurricane as people scramble to stock up on items like bread and toilet paper.
5 Strategies to Overcome Supply Chain Disruptions
So, what strategies can your small business employ to manage supply chain disruptions and keep operations running smoothly?
Here are a few tips:
1. Create a contingency plan
As much as you may want your supply chain to be reliable 365 days a year, things don’t always work out that way. That's why it's wise to have a contingency plan in place for when things go sideways. To get working on a contingency plan, start by identifying potential risks and develop strategies to mitigate them.
This could include diversifying your supplier base, stockpiling inventory, or establishing alternative transportation routes. By thinking ahead and having a plan B (and maybe even a plan C), you'll be better prepared to handle whatever curveballs come your way.
2. Build strong relationships with suppliers
Your suppliers are more than just vendors; they're partners in your business. Nurture these relationships and communicate openly and transparently with them.
When building trust and loyalty, you'll be in a better position to weather supply chain disruptions together. Plus, you'll have a better understanding of each other's capabilities and limitations, making it easier to collaborate on solutions when problems arise.
3. Invest in technology
If you’re running a blue collar business, you might be used to running things “the old fashioned way.” But modern AI-powered technology is revolutionizing every aspect of business, including the supply chain. And some time and money invested today will return with interest down the road.
For instance, if you invest in software and systems that provide real-time visibility into your supply chain, you can easily track inventory levels, monitor shipments, and identify potential bottlenecks before they become problems.
4. Diversify your product offerings
One way to mitigate the impact of supply chain disruptions is to diversify your product offerings. If one product is experiencing delays or shortages, having alternative products to fall back on can help offset any losses.
This could involve expanding your product line, offering complementary products or services, or exploring new markets and customer segments.
5. Stay agile and adaptable
Today's businesses win by being flexible. If you're going to grow and manage unexpected outcomes effectively, then you need to be ready to change your plans at the drop of a hat. Stay agile by continuously monitoring market trends, customer preferences, and supply chain dynamics. Also, be prepared to pivot quickly when necessary.
This might mean adjusting production schedules, renegotiating contracts, or finding creative solutions to unexpected challenges.
Manage Supply Chain Disruptions Effectively
Supply chain disruptions are an unfortunate part of doing business, and they can be especially painful for small companies. But like anything else, you can minimize the impact of these disruptions and keep your business running and your customers happy by proactively implementing the strategies mentioned above.
And if you need resources or financing to get you through a supply chain disruption, be sure to browse the options available on our website.
FAQs
What are some ways that lean supply chains can manage disruptions effectively?
To manage disruptions effectively, one needs to follow the below steps, like managing the defined value and risks associated with inventory levels, adopting a proactive approach, and real-time visibility of supply chain operations. You also need to emphasize lean principle training and documentation of standardized work.
What are the causes of supply chain disruptions?
Natural disasters, geopolitical concerns, shortages in raw materials, problems in labor and transportation, cyberattacks, regulatory shifts, currency fluctuation, financial difficulties among suppliers, and pandemics are the leadingcauses of supply chain disruptions.
What is an effective tool to reduce or mitigate supply chain disruptions?
Blockchain, artificial intelligence (AI), and the Internet of Things (IoT) are powerful technologies that enhance supply chain visibility, transparency, and control. Businesses can effectively mitigate risks and improve operational efficiency by leveraging these innovations.
How do you manage supply chain complexity?
Managing a complex supply chain effectively requires strategic planning, seamless coordination, and continuous monitoring to maintain efficiency and effectiveness. This complexity can become a competitive advantage when handled well, driving innovation and adaptability in an ever-evolving business landscape.
What action can a company take to reduce the impact of a supply chain disruption?
To reduce the impact of supply chain disruption, a company can invest in technology, back up inventory, diversify suppliers, and improve relations between suppliers. They should also create a management plan and increase visibility, establish backup production facilities, and implement agile management of the supply chain.
