Supply chain chaos hits small businesses ahead of holiday season

  • Delays in the supply chain and skyrocketing freight prices hit small businesses particularly hard.
  • Large retailers can limit the pain with contracts that make their operations more profitable.
  • As the holiday season approaches, smaller players are often stuck with the volatile spot market.

The holiday shopping season is still a few months away, but U.S. shippers and retailers are already feeling the heat as they scramble to stock up.

The ongoing freight backlog hits small and medium-sized businesses particularly hard as they face a double whammy of freight delay and explosively high freight prices.

“We are seeing significant price increases in the transport of goods from Europe or Asia to North America,” said Aaron Saks, president of West Coast Seeds. “It takes forever to achieve and the shipping costs are a challenge.”

This challenge stems from delays throughout the supply chain: congested west coast ports, port operations on hold, trains waiting in queues of several kilometers outside of freight centers. Weekly sea freight prices between China and the United States climbed to $ 20,586 per twenty-foot equivalent unit, a 450% year-over-year increase.

Part of the problem for small businesses is that, unlike big box retailers, they can’t limit the pain with contracts that make their operations more stable and profitable. “They usually don’t have contractual rates with the shipping lines and end up paying much higher cash rates,” said Raj Patel, senior director of the Blue Yonder supply chain management platform.

The “spot” market is generally used for last minute shipments, by shippers who do not contract capacity well in advance. This short-term nature makes shippers vulnerable to price volatility, making it more difficult for them to compete with larger companies. While they can find space on board a ship, smaller players need to figure out how to pass the higher cost of delivery on to customers.

To cushion the impact of this volatile freight environment, Patel said shippers need to be determined about which products are worth the import price and think about their entire supply chain. “I would have to make some tough decisions,” he said. “I would also check if I have any warehouse capacity available after the freight reaches the United States, as well as the window of time I have for storage,” Patel said.

Another way for shippers to deal with rising freight prices is sales growth. “If we increase our volumes, we can try to get better discounts from freight forwarders,” Saks said. “So the more we sell, the better our freight rates will be. And that, in turn, leads to more buying and inevitably leading to better contracts with our suppliers. So sales solve part of the problem.”

Sales figures are on the rise for West Coast Seeds. The business normally experiences increased sales in January and February, when gardeners get ready for spring. However, concerns about the availability of seeds are prompting consumers to place orders as early as this month.

That aside, customers continue to demand free or cheap shipping options, often putting shippers up against the wall. Saks explained that West Coast Seeds charges customers for shipping costs based on the size and cost of the order. Typically, large and expensive orders have high shipping costs, while small orders have low shipping costs to encourage people to buy more often.

“There are several technology companies that are improving the delivery process and providing visibility into the movement of goods,” Saks said. “At this time, it is essential to compensate for the increase in transportation costs, and we plan to counter this by constantly seeking new opportunities to ship faster and be more efficient in operations, especially at the edge of the sea. rush in demand for vacations. “