Business Challenges – Buy The Container

Let’s Talk About Supply Chain Issues

Few mainstream outlets spoke of the global supply chain before the COVID-19 pandemic caused severe disruptions to its operation—the New York Times confessed to not even having a logistics beat until the international pathway of materials and goods suffered unprecedented shocks. Now,
over two years removed from the coronavirus’ onset, variants of the phrase supply chain issues continue dominating headlines even as much of the world settles into a new normal. Renewed lockdowns in China, the Russia-Ukraine war, and worker shortages have contributed to ongoing sourcing, manufacturing, transport, and distribution challenges across industries.

Lack Of Capital, Expertise, And Relationships: Why Smaller Businesses Are Feeling The Most Pain

Persistent supply chain instability has especially squeezed small and midsize enterprises (SMEs). According to the MetLife x US Chamber of Commerce Small Business Index for Q1 2022, majorities of small businesses are concerned about the impact of supply chain disruptions on their company (76%); have had their supply chain disrupted by the pandemic (63%); and state it is difficult to cope with supply chain disruptions (65%). Moving into Q2 2022, a growing share of small businesses lists supply chain issues as their foremost problem. Per a separate survey of retail SMEs, 91% express that their lack of prioritized vendor status and limited ability to switch suppliers put them at a disadvantage in acquiring inventory against larger companies.
Certain characteristics of SMEs explain why they are particularly vulnerable to supply chain disturbances.
First, SMEs generally have lower levels of capital and cash flow. Their smaller scale makes them less able to meet minimum order requirements imposed by vendors and keep up with the rising cost of goods due to limited availability.
Further, with smaller budgets, SMEs may struggle to afford in-house supply chain professionals. As a result, they lack operational expertise, crucial for navigating complex circumstances like the present. Per Indeed.com, average annual salaries for purchasing, transport, quality control, and warehouse managers are approximately 75k, 66k, 85k, and 52k, respectively. Factoring in employee benefits only heightens the barriers to hiring supply chain specialists.
Lastly, SMEs often have fewer supplier relationships, which makes it tougher for them to adapt quickly to shortages and delays.

Compliance & Regulatory Risks Of Weak Supply Chains

Weak supply chains expose SMEs to compliance risks. SMEs that import products/components from abroad must follow a host of US Customs and Border Protection (CBP) standards. An incomplete understanding of procedures raises the likelihood that goods may be detained at the border, among other enforcement actions.

SMEs must also adapt to ever-evolving federal and state laws impacting supply chains.

For example, in December 2021, Congress passed the Uyghur Forced Labor Prevention Act prohibiting imports from China’s Xinjiang region, except if the importer clearly proves they did not source products made using forced labor. Given that Xinjiang is a leading producer of cotton, textiles, hair products, tomato-based products, pepper-based products, and polysilicon, SMEs must either pivot to new suppliers or have their imports confiscated at ports of entry by CBP.

In California, a piece of labor legislation called Assembly Bill 5 (AB5) has rattled the state’s trucking industry and threatens to further undermine global supply chains. Under the measure, the 70,000 California truckers that have long functioned as owner-operators leasing their services to carriers are now to be designated employees of those carriers entitled to a range of benefits. Merits of AB5 aside, it is sure to cause supply chain chaos going forward. Already, truckers opposing the law on the grounds that it will limit their freedomto define their schedules have staged protests at the Port of Oaklandand brought operations there to a near standstill. In the longer term, truckers may leave California altogether, posing a potential capacity issue for a state with the nation’s two busiest container ports—the Port of Los Angeles and the Port of Long Beach—that collectively process 40% of all containerimports.

Legal Risks Of Weak Supply Chains

As the Harvard Business Review wrote, “…there is one unhappy certainty: in this litigious society, companies cannot escape being sued. A business is always vulnerable to a lawsuit.” According to The Zebra insurance company,

36% to 53% of small businesses are sued every year.
43% of all small businesses are threatened with a lawsuit every year.
About 45% of small businesses are currently involved in litigation.
90% of all businesses experience a lawsuit at some point in their lifespan.
There are around 12 million contract lawsuits filed every year against small businesses.
The average liability suit costs at least $54,000.
Over 75% of small business owners are concerned that they’ll be targeted for a lawsuit.
A small business earning $1 million a year would typically have $20,000 in litigation fees.

The reasons for the lawsuits vary from retaliation to a list of discrimination-related charges based on disability, race, gender, age, religion, etc.

Another area of concern for SMEs struggling to coordinate their supply chains is product liability. This area of the law holds any or all parties on the product’s chain of distribution—from the manufacturer of component parts to the assembling manufacturer, wholesaler, and retailer—responsible for a range of defects that could potentially harm the consumer. SMEs with insufficient resources to properly vet suppliers and take quality control measures suffer a greater chance of getting hit with a product liability lawsuit. Settlements in such cases can inflict significant expenses, not to mention reputational damage.

Outsourcing To A Third Party: A Cure For Supply Chain Woes

The above obstacles may seem daunting, but there exists a simple answer: outsource supply chain management to a third-party provider.

Working with an external supply chain partner allows SMEs to take advantage of economies of scale, so they no longer get pushed out by large purchasers.

It also lets SMEs capitalize on their partner’s stronger capabilities to boost efficiency, productivity, and agility in the face of changing market conditions and regulatory landscapes. Having experts oversee all aspects of a supply chain mitigates the risks of failing to abide by import/export rules or receiving a product liability lawsuit.

Importantly, outsourcing enhances profitability, as it is often more cost-effective to enlist a third-party than to run supply chain activities in-house. Beyond explicit cost savings, SMEs conserve time and energy by no longer needing to concentrate on supply chains themselves. Instead, they can direct additional funds and attention towards their core business.

The previous two years laid bare the vulnerabilities of the global supply chain and the resulting complications for SMEs. Finding the right third party to navigate increasingly uncertain conditions is the key to transforming supply chains from sources of anxiety and loss to instruments of growth and empowerment. Click on to learn why BTC is the ideal partner for your business.