A new survey from CNBC and Momentive shows the majority of SMBs are facing disruptions and rising costs in their supply chains. More than 2,000 small business owners were surveyed between July 26 and August 3 to get a better understanding of current business conditions and their outlook for the rest of 2021.
Of the respondents, 70 percent reported experiencing rising costs of supplies and 55 percent reported disruptions in the supply chain. This is especially significant in light of the current labor shortage and climbing rates of positive COVID-19 cases. Recent research from Gusto found a positive correlation between COVID-19 vaccination rates and SMB employment growth, so it’s likely that eradicating COVID-19 will be the solution to resolving supply chain challenges as well.
Implications of supply chain disruptions
Small business owners who reported disruptions in the supply chain revealed these challenges had bigger implications for their businesses. The most significant consequences include:
- Inability to meet customer demand (46%)
- Higher overall input costs (34%)
- Inability to repair or maintain property/equipment (15%)
Source: CNBC|Momentive Small Business Index Q3 2021
At best, this means businesses have to contend with a larger-than-usual number of unsatisfied customers. At worst, it means long, expensive downtimes that can threaten the livelihood of the business.
Most survey respondents (66%) said they would be able to continue operating their businesses under current conditions for more than a year, but supply chain obstacles can put an insurmountable strain on businesses that are already struggling to stay afloat.
How SMBs are addressing rising supply chain costs
There are three primary ways SMBs have reported they are dealing with a spike in the cost of supplies:
- Raising prices because of higher input costs (39%)
- Planning to raise prices if costs continue to increase (38%)
- Absorbing rising costs without rising prices (21%)
Source: CNBC|Momentive Small Business Index Q3 2021
Unlike large companies that have more padding in their budget in times like this, small businesses have less of a safety net to fall back on when their expenses increase. To make matters worse, these rising costs are hitting SMBs while they’re also faced with the rising costs of wages and tightening COVID-19 regulations.
Supply chain challenges will slow recovery for SMBs, which will in turn delay the return to “normal” for the rest of the economy. When layered atop other economic and public health pressures, this may drive some small businesses to a breaking point. Some SMBs may even be forced to shut their doors if the global vaccine distribution is too slow.
