In the Global Supply Chain Squid Game, Small Businesses Are the Ones Wearing the Green Tracksuits

Not long ago, the chief concern of small businesses was that they couldn’t match the largest retailers’ buying power – with giant retailers, the more they buy the more they save, discounts that they can pass onto their customers and therein race ahead of their smaller competitors. Now, with much of the world’s supply chain still tied in knots due to lingering effects from the global pandemic, many small business owners are finding they can’t buy the products and supplies they need, period. For smaller retailers in particular, many of which rely on the holiday season for the bulk of their sales, months of worry could result in a bleak November and December.

It is just not smaller stores facing problems this year due to supply chain snags within the U.S. and abroad – just about every industry is taking a hit, but the smaller the company, the bigger the proverbial body blow.

Ripple effects from the ports

While stories about backlogged ports such as the ones in Los Angeles and Long Beach score copious press coverage, the challenges small businesses face, as well as all the backstories, are all over the map. Even if an independent business decides to avoid larger suppliers and decides to focus on smaller manufacturers, let's start with the question of packaging: The largest companies have been stockpiling cardboard, leaving small ones scrambling to find such materials – many have ended up empty-handed.

For medium-sized and larger suppliers, this ongoing supply chain saga confronts them with a delicate balancing act. For public companies that are in part responsible to their shareholders, it is fair to point out that they can’t risk infuriating their largest customers – a conundrum facing many toy manufacturers as Christmas approaches. “As a toymaker, once you miss your opportunity with a large outlet or have an out-of-stock, you end up on their black list. That’s enough to sink your business,” a former supply chain analyst told Abha Bhattarai of the Washington Post.

Not many are left unscathed from global supply chain snags

According to the U.S. Census, last month 45 percent of all small businesses reported some level of supplier delays, a steady increase from just under 40 percent of what they had reported earlier this summer. Such disruptions are widespread, including almost two-thirds of manufacturers and more than half of companies in the food service and hospitality sectors.

The data suggests U.S. consumers are ready to spend and the holidays are prime for unleashing those credit cards. But the problem is that the global supply chain is far from being able to catch up. “While consumer demand comes back relatively quickly after the economy reopens, supply chain capacity (ports, trucks, vessels, plants) only rolls up slowly,” said June Li, an associate professor of technology and operations at the University of Michigan. “This creates a major mismatch between demand and supply, further causing retailers to panic and inflate orders, sending the whole system into a downward spiral.”

From sheet metal to food containers to even pet food, many companies, and especially small businesses, keep feeling the pressure.

Who’s forced to wear those green tracksuits, anyway?

The result is a version of Squid Game being played out across the supply chain, with small businesses feeling as if they are the ones forced to wear those green tracksuits while the luckier and larger companies are the ones decked out in pink jumpsuits. As for who exactly is the Front Man, that remains to be seen: Intuitively we can assume it’s the giant brick-and-mortar and online retailers, though some have reportedly faced their own challenges. Another Front Man contender is China’s economy, which experienced a robust October of exports. As for China’s export competitors, many are trapped in the green track suits: smaller exporting countries such as Vietnam and until recently, Cambodia, have struggled with scoring COVID-19 vaccines for their citizens, adding to supply chain bottlenecks.

“The supply chain has been stretched, kinked and squeezed at every turn by the economic disruptions of the pandemic,” Ben Popken of NBC News wrote last month.

How can small businesses, and their customers, pull through?

There’s no shortage of advice for small businesses on helping them cope with this ongoing disruption, as in on-the-ground-solutions such as working with other local companies to identify new suppliers. At a higher level, advice such doubling down on a company’s value proposition or doing whatever is possible to maximize customers’ experience is also ubiquitous. One silver lining emerging from ongoing chaos within supply chains is that more consumers are aware of what is going on: The very term “supply chain” is no longer lingo confined to business school classes and corporate procurement offices. Therein lies the universal advice to any small business – being upfront and transparent about supply chain struggles will more than likely resonate with consumers.

As for how consumers can support small businesses at this time, the quick answer is a reminder that Small Business Saturday this year falls on November 27. The fact that's four weeks before Christmas may put more than a few people's teeth on edge: Unfortunately, fears over the supply chain have pushed many companies to start blaring out their Black Friday and holiday promotions early, which could make the ongoing disruptions even worse.

Here’s a suggestion from Terry Nguyen of Vox: Perhaps it’s time we as a society start buying less stuff. “If these supply chain problems are expected to persist, however, we must be prepared to curb our shopping habits,” Nguyen wrote last month. “Must we continue to drown in our unlimited and unfettered need for more stuff, or could we start buying less?”

That advice sounds odd at first, but dialing back consumption for a while could be what the supply chain doctor ordered till everyone across the supply chain is caught up.

It’s ingrained in many of us to keep buying stuff, especially during this time of year, yet there does lie one alternative: Consider an experience instead of things. After all, planning an afternoon or evening activity is that such a diversion won’t run into any kind of supply chain disruption (we’ll take that back if your local wine tasting venue has run out of vino or the paint night studio up the road is short on canvases). But just as small businesses have to think on their feet and become more creative during times like this, the same goes for consumers. Speaking of Squid Game, if your friends and family are fans of the Netflix phenomenon, blogger Chermaine Chee offers a suggestion on how you can plan such an activity – without any loss of life, of course.

Image credit: Vadim Bogulov via Unsplash