Consultant Insight: SMEs pinched by higher costs in supply chains

Much has been written on large shippers’ supply chain pains and delays from container shortages that have led to chartering airplanes and ships and diversifying suppliers. However, for small and medium-sized enterprises (SMEs), the supply chain pain can be even more significant. SMEs are often at a disadvantage in securing transportation capacity, and volume rules typically favor larger businesses. As a result, SMEs pay higher rates due to the inability to negotiate friendlier rates. [caption id="attachment_69752" align="alignright" width="363"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] A recent survey conducted by SCORE, a network of expert, volunteer business mentors that guide U.S. businesses, found that 87% of respondents have maintained or spent more on transportation, logistics and expediting to overcome shortages. More than 60% of the small business owners surveyed further noted that supply chain disruptions have worsened over the past three months. Many businesses indicated that they expect supply chain disruptions to continue for six months or longer. Even though 62% surveyed are confident they have the information they need to make the right decisions about their logistics and shipping, 56% use multiple shipping and logistics vendors. It is likely the market will see more options for SMEs to procure favorable international and domestic transportation and suppliers over the next year or so. Retailers take control of supply chains One possibility could come from an unlikely place — a retailer. In the past few months, American Eagle Outfitters (AEO) has acquired two logistics companies : AirTerra for last-mile deliveries, and Quiet Logistics for fulfillment and distribution to help lower the retailer’s logistics costs. “This past quarter [Q3], our operating costs on our logistics were lower percentages than the last couple of years, probably the best lower percentages, and actual dollars for the quarter were fewer dollars than the previous year,” AEO CEO Jay L. Schottenstein said of the acquisitions. AirTerra and Quiet Logistics are also operating on behalf of other customers as a subsidiary of AEO. “I look at us getting a platform, which will be able to allow ourselves, our partners, and different retailers between AirTerra and Quiet to really be able to compete against the Amazons of the world and the Walmarts of the world in an efficient manner,” Schottenstein told analysts during the company’s Q3 earnings call in November. “Because in the future, and I say this to our team: logistics, logistics, logistics. If you’re not efficient there, you’re not going to win. We have the best merchandise in the world and the best looks. But if we don’t have the ability to get it there in an efficient manner, we’re not going to win.” Walmart’s GoLocal, launched in August, is another possibility for SMEs. Walmart GoLocal is a white-label delivery-as-a-service platform for businesses of all sizes. The service uses Walmart’s crowd-sourced delivery service, Spark, for final-mile deliveries. Another potential option is Mexico-based Meru.com, which this week secured $15 million in series A funding. While Latin America-focused, this startup marketplace helps SMEs identify and secure overseas suppliers. Perhaps Meru.com will expand into the U.S., or maybe a similar service will emerge. The importance of having a diversified supplier base to ensure timely deliveries of goods has been a lesson many retailers and other shippers have learned the hard way during the past two years. A number of supply chain options for SMEs are emerging and will likely continue to grow in the next year or so, allowing SMEs to grow on their own or, if they prefer, via online platforms such as Amazon, Shopify, eBay and others. SMEs represent well over 90% of U.S. businesses, according to the Small Business Administration, and play an important role in the U.S. economy. In 2020, there were 4.5 million new business applications, a 24.3% increase from 2019, and 51% more than the 2010-2019 average.

Consultant Insight: SMEs pinched by higher costs in supply chains

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