From geopolitical conflicts to labor actions, small business (SMB) supply chains have weathered many storms over the last few years.

With these challenges also come opportunities to think differently and introduce new ideas for growth. Emerging from the list of many critical business lessons learned during this tumultuous time is the value of supply chain resilience and its influence on business outcomes.

What Small Business Supply Chains Face Today

While the trials and tribulations encountered a few years ago may not be exactly like those faced today, SMB supply chains are still impacted by trends and obstacles that stand in the way of efficiency and agility.

Rising operating costs.

Labor expenses, lease rates, and supply costs have skyrocketed for small businesses. For 33% of SMB owners, inflation is the No. 1 concern; 52% report that the current interest rate is hurting their business. As a result, credit card debt is growing for 47%, while 71% report that their business now makes less per month than it did before the pandemic.[1]

Labor shortages.

Small businesses are responsible for nearly two-thirds (63%) of the new jobs created in the United States.[2] As a result, these businesses been impacted significantly by ongoing labor shortages. While the problem has improved in the last few years, it isn’t going away. The U.S. Bureau of Labor Statistics reveals that the labor force participation rate has fallen from 66.1% in 2004 to 62.7% as of August 2024.[3]

Growing supply chain silos and fragmentation.

Because small businesses are less likely or able to adopt new technology that enables information sharing, improves productivity, and reduces manual effort, they also tend to be organized in a way that relies on siloed structures as they adopt new solutions and collect more data. As a result, information exists in isolation across separate systems and isn’t unified to enable visibility. This can lead to higher costs, inefficiency, and longer lead times.

Consumer demand fluctuations.

Consumers are becoming less loyal to brands and companies when they can’t find what they want. As they notice price increases, for example, they may be more likely to seek alternative options.[4]They’re also beginning to prioritize features that didn’t impact decision-making in the past, such as sustainability.[4]

Resilience: The Secret to Success Amid Supply Chain Uncertainty 

A resilient supply chain is one that can predict, prepare for, and respond to variable ebbs and flows like the ones mentioned above. In other words, according to consulting firm Kearney, it must be able to “sense and pivot.”[5]

As conditions fluctuate, a resilient supply chain can help SMBs better weather disruption—and do so without compromising quality.

To accomplish this, a resilient supply chain supports capabilities like:

  • Fast changeovers (the ability to shift production from one unit or part to another very quickly) and a wide range of products and shipment types
  • Skilled, flexible workforces made up of humans and artificial intelligence (AI)-enabled technology, such as robots and cobots
  • Visibility and traceability to follow goods and materials throughout every tier of the supply chain

Small businesses are obviously getting the message. A survey of supply chain leaders from APQC[6] reveals that 55% expect to increase their budgets for supply chain tools, technology, innovation, and initiatives in 2024—all of which can improve supply chain resiliency.

How to Bring Resilience to Your Supply Chain

There are many ways you can improve supply chain resilience and prepare for uncertainty. Here are just a few examples.

Invest in tech and AI

According to Georgetown University, AI can be used to process real-time data and build supply chain resilience in many ways.[7] Consider these instances:

  • By analyzing historical sales data and real-time data from certain systems and platforms, AI can improve demand forecasting accuracy
  • By identifying inefficiencies and pinpointing areas for improvement, AI can reduce logistics costs
  • By enabling real-time tracking and advanced analytics, AI can offer insights into things like inventory management and maintenance to improve supply chain visibility

Lead Smart Contract Negotiations

Build supply chain resilience into contract negotiations by including clauses that predict and relieve risk. Consider clauses that:

  • Release you from obligations without penalty during uncontrollable events or circumstances
  • Outline conditions under which parties can exit the contract
  • Map out the necessity for regular assessments and upgrades to processes, products, and services.

Conduct stress tests

Finally, put your supply chain to the test to determine how well it can withstand disruptions.[8]

Begin by using data to assess the most supply chain common risks and unpredictable disruptions to your business.

From there, lead scenario testing that takes you through different supply chain situations so you can identify weaknesses and risks, possible impacts of events on the business, and the mitigation strategies that will work best.[9]

Summary

A resilient supply chain is one that allows you to respond quickly to changing conditions so your company can maintain productivity and customer satisfaction—and resilience is proven to help companies outperform their peers, too.[10]

By taking some of these recommended steps to improve supply chain resilience, you can play a key role in reducing the impact of uncertainty and helping your small business maintain stability, no matter the disruption. PNC Bank is here to support your business with financial products and services to help your business grow and improve resiliency.