Smaller businesses need to get smarter to overcome supply chain crunch

With bottlenecked ports, the tight labor market and strong consumer demand, the supply chain crunch is showing no signs of easing up.

Logistics and supply chain experts say businesses will continue to have difficulty getting goods and face higher shipping costs too. They will have to ship smarter, look for cost savings and try to diversify carriers, experts say.

"The backlog that’s been created isn’t going to be rectified in a short period of time," says Rich Michals, Jr., president of Parcel Management Auditing & Consulting in Farmingdale, which provides logistics efficiency consulting.

He said companies might have to explore what they can do to be their own supplier of sorts for certain items.

For example, if a business is paying higher shipping costs and unable to get a key item or part, it might see if it could seek out, say, a local plastic injection mold maker to make the piece on demand, Michals says.

A business might pay $3,000 to 5,000 for a custom mold, but it might be worth it long-term to save on shipping and also scrambling to find the part, Michals says.

'Rinse and repeat'

Roberta Perry, owner of ScrubzBody Skin Care Products, which has a storefront in Farmingdale and also sells online, knows the frustration in getting key supplies.

She said 2022 in many ways "is just rinse and repeat" of last year.

For instance, she ordered 9-ounce caps for her Scrubz jars last July and they still hadn’t arrived by mid-January from her primary upstate distributor. She ended up canceling that order and paying twice the price to get them from another distributor.

"We have had to purchase certain jars and caps from other suppliers who are sometimes 25%-30% more money and no free shipping," Perry says.

She had overbought inventory in anticipation for the holidays, but now is starting to need more supplies including shrink wrap, which is on back-order for three sizes she uses with a delivery date uncertain.

Because of rising costs, Perry had to raise her prices on certain products a nominal amount in February. Thankfully, customers have been understanding, she says.

Going forward, Michals says businesses may have to "do a little marketing magic" with customers through such means as new sales pushes and upgrades for older inventory still on hand. They may also have to raise prices like Perry to offset rising shipping costs.

Shipping rates

The major carriers have raised their prices on average 5.9% for 2022, but that’s just an average and "could be significantly higher for lightweight and ground-economy" rates," says Trevor Outman, founder and co-CEO of Shipware LLC, a San Diego-based transportation management firm.

But small- to mid-sized businesses are not powerless, he says.

Both UPS and FedEx are "aggressively pursuing the SMB market," Outman says, noting Shipware has renegotiated contracts with carriers on behalf of SMBs, resulting in annual savings of between 5% and 30%.

He expects the shipping supply chain crunch may show signs of easing up before year-end.

Consumer demand cooling off?

With inflation so high, "consumers are paying more at the pump, in grocery stores and utility bills are soaring, which leaves consumers with less discretionary cash," Outman says. This will likely lead to some consumer spending "retrenchment," which could ease demand later in the year allowing carriers to get some capacity back into their congested networks, he says.

As a best practice, companies should develop a risk management strategy to identify weaknesses in their supply chains and a mitigation strategy to ease the supply chain pressure, says Tony Nuzio, founder of ICC Logistics Services Inc., a Hicksville-based transportation and logistics consultancy.

For now, expenses remain higher across the board, Nuzio says.

The average cost for an ocean container from China to the West Coast used to be $3,000 pre-pandemic.He now has clients paying $15,000 per container.

He doesn’t see the supply chain crunch easing any time soon and advises small businesses to seek alternatives to the major carriers and consider other last mile carriers for parcel shipments, he says, noting some of these include OnTrac and CDL Last Mile Solutions.

"You can no longer afford to box yourself into a limited number of carriers," Nuzio says.