Business owners generally focus most on the sales that bring in the income, rather than on their suppliers. That’s understandable, but it can also be short sighted. Recent research by retail bank Aldermore has found that well over half of SMEs have suffered supply-chain problems in the past year — and this has cost a total of £1.9 billion.
Why Are There Supply Chain Delays?
Disruptions to supply chains have been going on for some time now, and there are a number of reasons, some global and some specific to the UK.
The COVID pandemic obviously affected business and trade globally, and the issues this caused were made worse by the war in Ukraine. Besides difficulties in obtaining goods from Ukraine itself, especially food, sanctions against Russia have cut off many supplies.
Besides the global issues, the UK has been further hit by the consequences of Brexit. Since we no longer have an open border with Europe, both imports and exports are harder, more expensive and more time consuming.
Supply Chains and SMEs
Aldermore’s SME Growth Index makes for alarming figures, with 3.3 million SMEs reporting disruption in their supply chains over the past year — that translates as 60%. The average loss has been £625,000, adding up to a total of £1.9 billion.
Of these, 27% have seen a significant financial impact on their businesses. These effects include increase in costs, delays to existing projects and problems making new deals.
Naturally, the biggest impact has been on businesses that involve physical goods, such as retail, wholesale and franchises. On the other hand, no business operates in isolation, and even service sectors can be affected if their trading partners are suffering from supply issues.
Are You Aware of Your Supply Chain?
According to Tim Boag, Group Managing Director of Business Finance at Aldermore: “With delays still making headlines and impacting profits, it’s important for every business leader to consider if there are any vulnerabilities that expose them. This can be done through a supply chain audit or the development of a contingency plan. This will help build stronger relationships and clearer communications so businesses can react quickly should they be notified of changes that might impact their supply chains.”
Unfortunately, though, Aldermore’s research suggests this is by no means always the case. 65% of businesses show a dangerous lack of awareness of the risks, with decision-makers at best only aware of their direct suppliers, rather than the wider chain.
Are you aware of every stage of your supply chain? As Tim Boag suggests, it’s important to discover any vulnerabilities and plan for them — but it’s also vital to be aware of any problems your trading partners might have. Give me a call if this is impacting your cash flow from customers with supply-chain delays.