Big Ideas for Small Companies
Small companies take big steps to navigate supply chain challenges.
Over the past 15 months, inland freight transportation costs more than tripled, says Nathan Vazquez, chief executive officer with Pipsticks, a subscription sticker service. His company currently pays almost as much to move its product about 200 miles from Long Beach to San Luis Obispo, California, as it does to ship it from China to Long Beach. On top of that, some established carriers have canceled shipments at the last minute.
Vazquez isn’t the only small business executive facing supply chain challenges. More than half of small business owners responding to an April 2021 National Federation of Independent Businesses survey indicate supply chain disruptions are having either a significant or moderate impact on their operations.
Businesses of all sizes are confronting supply chain disruptions and delays. The largest enterprises, however, can take steps that are often out of reach for smaller companies. The Home Depot, for instance, has leased its own containership.
Supply chain disruptions can be more damaging to small and mid-sized businesses (SMBs) than to larger ones. “For many SMBs, one shipment could contain all of their inventory or enough product to turn a profitable month into an unprofitable one,” says Harris Rainbow, chief operating officer with NTG.
In addition, SMB employees often handle multiple roles, limiting their ability to also troubleshoot logistics issues.
Congestion and a lack of containers has led to more convoluted transit routes. Until recently, some shippers would send international containers directly to their customers’ door. Now, more are routing them to their own facilities and then transloading them to domestic trucks for delivery.
“This creates more freight touches, more delays, and more cost,” says Tim Carey, executive vice president, strategy with Target Freight Management.
Another challenge is a greater number of lost shipments, especially in the less-than-truckload network. One reason: labor shortages mean a greater number of less experienced employees are moving packages. That can lead to more mistakes.
While the challenges are real, smaller companies can address them. A first step is boosting visibility.
Technology is key. For example, to address the post-pandemic buying frenzy that led to “exploding” sales, says founder and CEO Stephanie Carter, Wallaroo Hat Company implemented radio frequency (RF) scanning to assist in packing orders. RF scanning allows for easier, more accurate, and faster tracking of products.
By capturing and transmitting data, technology boosts worker efficiency, says John Wirthlin, industry principal, manufacturing, transportation, and logistics with Zebra Technologies, a provider of barcode printing, mobile computing and data capture solutions. For instance, real-time locationing solutions, as the name indicates, can track the location of workers, items, and equipment such as forklifts in real time.
By linking this data with ordering and transportation systems, the solution can direct workers to pick the items closest to them. Then, other transport mechanisms can move the products to a staging area for shipping.Without such a system, workers may traverse much of the warehouse to fill each order.
The emergence of autonomous mobile robots (AMRs) facilitates the next step in efficiency, Wirthlin says, by eliminating much of the item transportation in the fulfillment process.The worker pulls items off the shelf and places them on the robot; the robot then travels to the next location, perhaps to retrieve another item or straight to a staging area.
“This approach increases worker and order fulfillment efficiency and reduces unproductive foot travel time,” Wirthlin adds.
Solutions Work Within SMB Budgets
Costs for many Industry 4.0 technologies, such as sensors, 5G implementations, and artificial intelligence, continue to decline, says Jason Alexander, national manufacturing sector leader with consulting firm RSM U.S. All these technologies provide greater visibility to operations, enabling more informed decision-making, he adds.
While technology integrations in the past often consumed shippers’ time and attention, many solution providers today can handle integration and implementation. “That’s mainstream now,” Wirthlin says.
Following a few steps can boost the chances of a successful technology implementation.
First, identify the supply chain problems that are having the greatest impact, suggests Robert Steward, CEO of End2End Solution, a software visibility system. Is it, for instance, one of the handoffs in the supply chain? Once you know this, you can narrow your focus.
Second, identify any gaps in your capabilities, Wirthlin says. One example: Does your business have technicians who can maintain the equipment you plan to install? If filling the gaps internally isn’t feasible, consider working with a logistics provider that can offer the skills you need.
While technology is often part of a visibility solution, simple, no-cost steps can also help. To minimize the risk of lost shipments within the LTL carrier network, Carey recommends using boldly colored labels or shrink wrap to better identify shipments at terminals. He and his colleagues can then check if the terminals have seen the brightly colored pallets.
Partner With A Provider
To combat increasing labor costs, Pipsticks asked its supplier in China to handle many of its product kitting requirements. The company also shut down its self-run warehouse in California and shifted operations to Bulu Inc., a subscription fulfillment company in Lincoln, Nebraska. “They are able to manage fulfillment and pick and pack far more affordably,” Vazquez says.
Logistics providers can help small businesses in several ways. Many third-party logistics (3PL) providers can justify technology investments that would be out of reach for some companies because they can spread the costs across multiple clients.
With the increase in e-commerce, many businesses are looking for 3PLs that can integrate with Shopify or other e-commerce platforms. “It has become more of a standard to ensure the warehouse can turn orders the same day,” says Stephen Cagnio, warehousing sales and account management with logistics provider Mainfreight Inc.
Logistics providers also can offer expertise, such as in transportation planning, that may not make sense for a smaller business to keep on staff, Harris says.
Communicate & Manage Expectations
Even advanced technology, stellar processes, and strong partners won’t magically alter the logistics challenges occurring across the globe. Supply chain professionals need to communicate with their carriers and customers, manage expectations, and often, adjust lead times.
To manage delays of up to six weeks in ocean freight from Asia, Rise Gardens, which offers an indoor hydroponic gardening system, added lead time to its ordering process, says Hank Adams, founder and CEO. This consumed more working capital, but was needed to maintain reasonable delivery time frames, he adds.
When talking with carriers, the goal is to gain a sense of operations, Carey says. For instance, if LTL carriers face congestion in a certain terminal, his company diverts some other carriers from the area, so new freight doesn’t add to the congestion.
Also use a solid mix of national and regional carriers, Carey advises. “Nobody out there can work through this on their own,” he says.
Finally, communicate with clients and try to manage expectations or suggest alternative solutions. When shipping delays mean some popular SKUs at Wallaroo Hat Company are out of stock, Carter and her colleagues point customers to similar products they know are strong sellers.
Focus on the Future
Many experts expect supply chain disruptions to continue well into 2022, Carey says. Supply chain professionals need to leverage technology and processes to enhance visibility and flexibility, and manage through the upheaval.
They also need to be proactive, says Hitendra Chaturvedi, professor in supply chain management with Arizona State University. While the daily blocking and tackling of operations can feel urgent, supply chain leaders need to make time to consider where they want to be five years out, he says. Then, they need to plan how they’ll get there.
Among other steps, this may mean investing in technology and cultivating additional suppliers to hedge against supply risk. While resource constraints often are a challenge, Chaturvedi says, “start by taking baby steps.”
A Small Company’s Move to a Larger DC: ‘A Silver Lining’
Shipments from overseas have been “extremely inconsistent” during the past six to nine months, says Denielle Finkelstein, co-founder and president of The Organic Project, or TOP, a provider of organic feminine hygiene products. Orders placed the same day would arrive months apart. The inconsistency was on top of generally longer ocean transit time.
These delays were occurring just as TOP was planning to launch in another supermarket chain, and with new packaging. “The key to success was communication with the manufacturer, retailer, broker, and distribution center,” Finkelstein says. She and her team tracked the shipments each day. Once the shipment arrived at the distribution center, employees knew they had just two days to receive, process, and get the products back on the road. Because of the ongoing communication, the retailer also knew when its shipments would hit.
At about this same time, TOP outgrew its previous distribution center. So early in 2021, and even as business was booming, TOP moved to a new distribution center operated by logistics provider Mainfreight Inc. In addition to helping TOP move product from overseas, Mainfreight handles trucking within the United States, eliminating the need for TOP to broker transactions, as it did before, Finkelstein says.
“We didn’t think we were ready for a larger DC, but Mainfreight’s efficiencies and previous work with retailers has proven to be invaluable,” Finkelstein says. For instance, Mainfreight employees know how to meet retailers’ detailed labeling guidelines. In contrast, Finkelstein and her team often had to educate employees of their previous 3PL on these requirements. TOP’s growth “forced our hand faster than we would have anticipated,” Finkelstein says. “But the move to a new 3PL turned out to be a silver lining.”