The Biggest Supply Chain Mistakes Almost All Small Businesses Make

Here is a guest post from my friend and small business expert Eleanor Hicks.

The supply chain is at the heart of every business, big or small. Even service-based companies that don’t provide products or goods are at the whim of the supply chain, tethered by resources, tools, equipment, and more.

Because so much goes into running a business, the supply chain is often overlooked or not prioritized. That’s a huge mistake, because supply problems can bring even the largest operations to its knees. If COVID-19 taught the world anything, it’s that despite attempts to strengthen the global supply chain, we weren’t ready for a major event.

You need to take the supply chain seriously if you aren’t already. Here are some of the more common mistakes that SMBs make when establishing or maintaining operations.

1. Not Knowing Your Suppliers

Delegating supply chain operations to a third party is lucrative, especially for a small business, but it can also create friction down the line if there’s no due diligence. You must know who your suppliers are, where they are sourcing raw materials and components, and their operations’ active status.

If one or more suppliers experience a shortage or complications, it’s going to derail your business. Worse yet, you’ll have no idea how long the problems are going to persist, or when you can expect to get back on track yourself.

Take some time to explore who your suppliers truly are. Where are they located? How many more clients do they have, and what are their capacity limits? Have they ever been delayed before, and if so, how many times and for how long? Also, keep an eye on current events happening in their area.

It’s okay to go with a third party, but don’t make the mistake of going in blind.

2. Not Understanding Your Cost-to-Serve

Outlining cost-to-serve for customers is critical to maintaining and improving business performance. It helps you determine which clients are valuable for profitability and, therefore, which are most critical to your company’s growth. It’s also an invaluable statistic when making supply chain decisions.

For example, during a major resource shortage, you may need to taper production on certain products in favor of others. By having a cost-to-serve analysis already drawn up, you can see precisely which customers offer the most value. This allows you to make a more informed decision about what products or services to postpone and which to continue offering.

Oddly enough, many business leaders don’t know cost-to-serve information or do not take the time to understand it. It pays to get more in-depth with your supply chain strategies.

3. Blindly Trusting Forecasts

Supply chain forecasts are a lot like the weather. Things may seem optimistic and like everything is going smoothly, but that can change at any time.

Always have backup strategies lined up and identify which direction you and your team will take after an event. A natural disaster can destroy supply chain schedules in an instant. There are lots of other disasters that can occur, too, including human-made ones.

What are you going to do if your original supplier is unavailable? Do you have another material source lined up? Can you team up with local businesses to shore up inefficiencies or acquire missing supplies?

Put a game plan together that ensures you always have a way out. No one could have predicted COVID-19, but the havoc that’s happening now could have been mitigated with proper planning. Over 60% of supply chain and logistics companies have experienced a setback from the pandemic. There are ways around what’s happening. If only they had been put in place as a precaution.

4. Ignoring Customer Feedback

Sometimes, customer complaints can reveal problems before you know they exist. It’s especially true for brands that outsource their logistics. Customer feedback and complaints might highlight delays in shipping, changes in development, poor build quality, or inordinate price increases — like when a raw supply is becoming more scarce.

Too often, business leaders dismiss customer feedback and complaints without digging into the “why.” Why are they saying certain things? Why has customer sentiment reversed? What is the cause of customer dissatisfaction?

You don’t have to review every single customer complaint or discussion. When you see correlations or patterns, that’s when it’s time to pay closer attention.

5. No Transparency

The supply chain stretches across many locations and includes exchanges between many parties. There can be a failure at any point in the chain, and it’s not always something you can account for or control.

Every business needs access to a transparent system that provides data in real-time. Many newer technologies, such as IoT and machine learning, are making this possible. At one time, they were inaccessible to SMBs, but that’s no longer the case.

Take advantage of the solutions and technologies available to you, so you can see everything happening in the supply chain as goods move from the source to store shelves or the customer’s doorstep.

6. Ignoring Physical and Cyber Security

Most supply chain operations are digitized in today’s landscape, including third-party options. And the bigger the global supply chain is, and the more technologies and processes are involved, the more vulnerable it all is.

As a small business, you’re not responsible for other parties or providers, but that doesn’t mean you can overlook security. Ensure you have proper protocols in place to protect your systems, including specialized authentication and encrypted data streams, and don’t forget about physical security, either.

The weakest link will compromise all others. It’s a chain for a reason, so don’t be the weak link.

Do Your Homework

While some of these problems can create huge gaps, most are relatively easy to fix, especially with the right research. Don’t neglect your supply chain operations. More importantly, consider everything about it a priority. Treat it as a maintenance process, with routine updates and revisions — including the research that goes with it.

Whether working with a third-party provider or not, always ensure you know your primary suppliers. Establish a backup solution for when there’s an outage or failure. Understand your cost-to-serve data so you know which of your products and services are most important regarding revenue. Don’t trust every forecast, and prepare for contingencies.

If you can manage all of that, you’re well on your way to building a solid and reliable supply chain operation. When you’re done, it may even rival some of the largest organizations out there.


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