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Fidelity Business Blog: Post

7 Mistakes Small Businesses Make with the Rising Cost of Supplies

  • Posted October 5, 2021

The rising expenses of supply chain management are taking a toll on already struggling small businesses. Small business owners have their work cut out for themselves with many challenges, from the cost of goods and raw materials to transportation expenditures.

Recently, the U.S. Census Bureau conducted a survey to measure how COVID-19 is affecting small companies and to study the extent of supply chain management disruptions. According to the July survey, 38.8% of U.S. small businesses reported domestic supplier delays. That is up from 30.9% in April. It breaks down by industry as follows:

  • Manufacturing, 64.6%.
  • Retail, 59.8%.
  • Construction, 58.5%.
  • Accommodation and Food Services, 51.4

The share of businesses that reported foreign supplier delays increased from 12.2% to 15.9% during the same time period.

A lot is at stake, and many small companies are facing significant challenges. But there is good news too. Many creative strategies are available that help you adapt to these circumstances.


Steer away from these mistakes to improve your chances of weathering the strain affecting supply chain management.

Mistake #1: Ignoring Pandemic Financial Resources

Forbes has compiled a list of loan and grant programs for companies that have been hit hard by the pandemic and related shut-downs. The stimulus package created by congress has specific provisions for small companies. Don't miss out on such a valuable resource.

Mistake #2: Neglecting Sustainable Supply Chain Management

Neglecting to understand the impact of sustainability on supply chain management is a mistake. Sustainable and green supply chains are more resilient and cost-effective. For example, increasing solar in facilities and transportation is good for the environment and reduces expenses. Additionally, consumers have indicated that they are willing to pay more for sustainably supplied products. As a result, business owners are rethinking their supply chain strategies and are incorporating long-term sustainability planning.

Mistake #3: Hesitancy in Adopting New Technologies

There are many money-saving technologies on the market. 3D printing, for example, can eliminate the need to package and ship parts and reduces the amount of inventory you have to store. It is not only cost-effective but comes with the added benefit of being greener. With 3D printing, you may expect to reduce CO2 emission of industrial manufacturing by up to 5% by 2025. Other promising technologies are AI, robotics, and automation.

Mistake #4: Not Stocking Up in Inventory

There is a delicate balance between stocking too much inventory and not stocking enough. The current supply chain management issues have altered that balance. When you have extra supplies of high-demand items on hand, it can help you bridge a gap created by delays. To navigate the complexities of inventory optimization, take advantage of inventory management software like NetSuite, Multiorders, or ShipMonk to make the job easier.

Mistake #5: Being Totally Against Raising Prices

The key takeaway is that you are not the only small business dealing with extreme supply chain-related spending spikes. Your competitors are in the same situation, and consumers face price increases everywhere. You will likely have a competitive advantage if you can find strategies to avoid passing those cost surges on to your customers. And if everything else fails and you have to raise prices, take the sting out of the situation for your clients by offering additional value. For example, you can bundle products or services, add enhanced customer service, free tech support, or find other benefits that you can easily add to provide good value to your customers.

Mistake #6: Forgetting to Draw on Your Team

Often small business owners want to tough out challenges on their own and forget what tremendous resources they have assembled in their team. Bring them together for a brainstorming session and unleash their creativity. They are experts in their field, and you will be surprised by the ingenious and innovative ideas they will produce.

Mistake #7: Using Supply Sources That are Too Far Away

Sourcing from far away places like China amplifies supply chain management issues. Cheap labor was once a good reason for going this route, but things have changed, and getting your raw materials closer to home can now save you money. Also known as near sourcing or nearshoring, there are varying degrees of applying this technique to your small business operations. You don't necessarily have to move your production operations to the location where you sell your products. Instead, look at countries or even states that are closer that may offer cheaper labor costs.

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