With holidays ahead, small businesses struggle with supply chain disruptions

WASHINGTON (Oct. 22, 2021)—Cecily Habimana, co-founder of Sew Creative Lounge, a sewing school in Mount Rainier, Maryland, normally imports her fabric from China and West Africa, but international shipping and customs delays have become unaffordable for the small business owner.

"I can't afford to bear the cost of a big shipment so I pre-order fabric, but this season because of delays, there is no way for me to know exactly when it's coming in," Habimana told Capital News Service.

With the holidays approaching, small businesses like Habimana's are feeling the brunt of supply chain delays that have drawn the intercession of the White House and the attention of Congress.

"I can't remember a time in history when (the supply and demand model) has been inverted, where one side dictates to the other in a way that has never happened before," Rep. Kweisi Mfume, D-Baltimore, said at a Wednesday hearing of the House Small Business Committee's oversight, investigations and regulation subcommittee. The panel heard testimony about the impact of supply chain disruptions on small companies.

The pandemic forced many factories overseas to shut down, dramatically reducing production. There are also shortages of ships, containers and truck drivers.

The lack of coordination among transportation and logistics industries is at the root of the disruptions, said Dr. Martin Dresner, professor of logistics and public policy at University of Maryland's Smith School of Business.

"Just saying let's have more throughput at the port probably will not solve the problem if there's not enough truck drivers to take those containers away from the port," Dresner said.

The Port of Baltimore, however, is an exception to supply bottlenecks.

"The Port of Baltimore is not experiencing supply chain congestion issues that are impacting other ports," Maryland Port Administration Executive Director William P. Doyle told CNS in a statement. "In fact, due to congestion at other ports we have recently attracted two new container services totaling 21 new ships."

He added that the port "has been preparing for over a decade for the expanded Panama Canal and we are one of the only ports on the East Coast with a 50-foot deep channel and berthing for ultra large vessels."

"In addition, our local market has built up an efficient warehousing network over the past six years with millions of square feet of distribution, sorting, and fulfillment centers spread throughout Maryland and the mid-Atlantic—Amazon, Home Depot, IKEA, Fed Ex, and Floor and Decor to name a few," Doyle said.

Nevertheless, some Maryland small businesses are struggling with supply chain disruptions.

"It's not a new problem, it's something that's been going on for a really long time," said Patty MacCrory, owner and president of AwardsPlus, a company that makes trophies, plaques and promotional items in Clinton, Maryland. She said she has seen supply chain problems since January 2020.

Larger companies like Walmart and Target have leverage to demand products in a way smaller businesses just cannot do, said Rich Weissman, adjunct professor of supply chain operations at Lesley University in Massachusetts.

"Big business gets what they demand and small business doesn't," Weissman said.

Supplies on ships at a standstill out in the ocean are causing cash flow issues for these small businesses, said Michael Kelleher, executive director of the Maryland Manufacturing Extension Partnership, a non-profit funded by industry and the state of Maryland that works in coordination with the National Institute of Standards and Technology. Each state has a similar program.

U.S. manufacturing that migrated overseas needs to be re-established domestically, according to Kelleher.

"Long term this is very eye-opening for Maryland, and for domestic manufacturing, in that we need to bring some things back on shore and build back some of the expertise that we've lost domestically over the last 20 years," Kelleher said.

In addition, Kelleher said, "most of what we make in Maryland is not direct to the consumer and most of it goes into other products."

"Those delayed repercussions tend to have an exponential effect as they trickle downstream," he said.

Kelleher's program aids small businesses in handling supply chain backlogs by showing them how to communicate with customers, manage customer expectations and adjust cash flows.

Such steps can help to save small businesses from devastating consequences, Kelleher said.

Habimana, who began purchasing locally-made fabrics when shipping costs first skyrocketed, said she will return to buying fabric in China and West Africa once prices go back down.

China is the only reliable manufacturer she has found, Habimana said. With a customer base predominantly purchasing her African-printed fabrics, Habimana wants her purchases to benefit the people living in those countries.

Still, even with a domestic supplier of materials, inventory selection has been greatly affected, MacCrory said.

Customers have been reasonable and understanding when it comes to product availability, MacCrory said, but the current situation has really impacted her ability to get inventory, especially wood.

When a customer requests an item that is not in stock, MacCrory said she turns to a stockpile of substitute products that she offers instead.

To accommodate the growing alternatives, MacCrory said she will add a second warehouse next month.

Teaching small businesses how to manage during supply chain disruptions is imperative because the current shortages are not an isolated event, Kelleher said.

In an effort to alleviate the supply chain backlog, President Joe Biden last week won agreement from the nation's busiest port, the Port of Los Angeles, to remain open 24 hours a day, seven days a week.

That follows a similar expansion in operations at the neighboring Port of Long Beach. The two ports together account for about 40 percent of container shipments into the United States.

"…The commitments being made today are a sign of major progress in moving goods from manufacturers to a store or to your front door," the president said.

But there is no immediate fix, something consumers and businesses will need to adjust to, Transportation Secretary Pete Buttigieg warned.

"A lot of the challenges that we have been experiencing this year will continue into next year," Buttigieg said on CNN Sunday.

Weissman does not believe regulation or government intervention will make a difference in the supply chain disruptions in the coming months.

"We need to realize we have been through a massive economic shock and it's not over," Weissman said. "Let the system play and let it work."

For small business owners especially, the next few months could determine who survives and who goes under.

After holiday shopping sprees last December, many of her customers stopped spending for a bit, Habimana said.

"I try to make sure whatever we are doing we try to circumvent those profitability issues that could hurt us this season," Habimana said.