Navigating the Supply Chain Crisis: How to Minimize Supply Disruptions to Your Business

The supply chain crisis has impacted businesses of all sizes, including craft businesses, but there are ways to minimize the impact. Knowing when to stock or liquidate inventory, change product fulfillment practices, or find a helpful supply expert, could mean the difference between having a profitable few months or sustaining a financial loss.

Having a detailed understanding of your business’s supply needs and how to adapt, can mean the difference between success and failure.

Perform an audit and inventory analysis of your business

As a business owner, it is quite easy (and tempting) to order a wide array of products and supplies (both top sellers and shelf fillers) to maintain a robust inventory so that you can quickly fill customer orders. This is especially true for seasonal products that must usually be ordered several weeks or months ahead. However, with many products extremely limited or unavailable without a firm restock date right now, it’s important to have a realistic and accurate understanding of your true inventory needs.

The first step is to perform an inventory of your current stock and compare it against your sales records for the last six to twelve months. Identifying top-selling products as well as underperforming products will show you which items customers are buying and which they’re ignoring. This knowledge will help you make better buying decisions, especially when many products are limited.

Identify your top-selling and slowest-selling items and your current product inventory

Do you have enough supplies on hand of your top sellers to fill orders for the next three months? six months? If not, prioritize acquiring additional inventory of your most critical supplies first and seasonal or secondary materials later. According to top economic experts, supply chain issues may last into the latter half of 2022, so it is important that you procure enough inventory to sustain your business and locate additional suppliers who can fulfill orders in a timely manner. This may be an expensive, but a necessary investment to keep your business operating. One way to offset the cost of new inventory acquisition is to sell stale or aged inventory at reduced pricing.

Move or Liquidate Excessive Inventory of Slow-Selling Items

Sometimes customers lose interest in items (especially seasonal or passing trends) and stores are left with aging inventory. When you identify such items in your business, it is important to determine if it is worth keeping them in active inventory or moving them to “special order” status. Moving such inventory allows you to free up resources, focus on top-performing items, and make space in your shop for new merchandise.

Develop a Realistic Supply Needs Forecast

If you have never projected your supply needs, here is a simplified formula to help you.

Look at the actual sales of your top items from the last twelve months and make notes of when your top products sold and the actual dollar amounts. This is a baseline guide you can reference if you sell the same items on a regular basis. If you sell a lot of different items, narrow your focus to the top five or ten items in each category. If you carry a large quantity of items such as DMC thread and want to see the actual sales for all SKU’s, consider building a spreadsheet that includes all items and the monthly sales of each style. It is helpful and enables you to clearly see top performers and the quantities of each item sold.

Spreadsheets and charts also allow you to quickly see when items sale, and if there were any increases or decreases in product demand at a specific time. This data is extremely important to understand when forecasting future inventory needs and placing re-orders.

Build Your Supplier Network and Industry Contacts

Lauren Venell, owner of Maydel, a needlework and craft supply business, had wonderful suggestions for makers and business owners who are struggling to locate out-of-stock items that are normally sold thru distributors.

Order directly from the manufacturer or get as close to the manufacture as possible

Often, distributors do not stock the full product lines of brands. Instead, they will offer a limited selection of a line’s most popular products and omit specialty items that do not sell as well as popular SKU’s. This practice forces retailers to search elsewhere for the specialty items. Manufacturers understand distributor inventory management, so they usually maintain a limited inventory of their products in their office warehouse or storage facility to fill specialty item orders. Items may not be packaged for individual sale, but if you have some packaging flexibility, this is a great option. Keep in mind, not all manufacturers will sell to individual businesses and will refer the order to a distributor, but it is a great place to start your product search.

Establish genuine, connections with manufacturer office staff or sales representatives

These are the individuals who will answer your product questions and help you locate products. If you are ordering supplies thru a distributor request an assigned sales representative. Most distributors will have ‘in-house’ and ‘outside’ sales staff who are assigned to businesses in a specific regional area. Inhouse representatives can enter orders, provide inventory availability, and estimated restock dates. Outside sales representatives often represent several companies, work on a commission basis, and may know alternative suppliers who are holding inventory of the products you need and will assist you in locating products.

Go outside the craft supply chain

Many tools, like paint sponges, cross multiple industries and are packaged under alternate names. Searching for supplies under alternative keywords (i.e., paint sponge, natural sponge, textural sponge) will often lead to new suppliers with available inventory.

Determine if drop shipping or virtual Inventory would be a good fit for your business

While drop shipping, or third-party fulfillment, is not a new business concept, it is one that is growing in popularity as turnaround times for custom services such as book printing are greatly extended.

Small businesses can ‘partner’ with larger businesses that will oversee product production, manage inventory, and shipment. This enables small businesses to offer a broader range of products to their customers without carrying physical inventory or spending money on products until items sell. Dropshipping services do not work for every business model and there are trade-offs:

• Profit margins are typically narrower
• Merchants have little control over product details such as turnaround times, quality, or shipping

When placing her show book orders for the Wool & Folk and Rhinebeck Festivals in Fall 2021, Shannon Okey of Cooperative Press learned that her contracted printer’s lead time had quadrupled leaving her without enough inventory for show sales. Her workaround was to take one copy of each book for customers to preview in person and place orders. Every book that was ordered was shipped directly to the customer a few weeks after the shows. Shannon reported mostly positive customer feedback and would use this selling option again.

Alanna Rothschild Wilcox, a fiber artist, recently experienced a significant delay in her book printing and offered paying customers either a free digital download of her book or a discount coupon for a future purchase as a thank you for their patience while the printer produced her book. She reports that the thank you gifts were well received by her customers.

Understanding the actual supply needs of your business and how to locate supplies will help you make better, more reliable buying decisions. Building genuine professional relationships with industry experts and manufacturers help you to quickly locate product, find answers to your questions that are not readily available, and keep your customers happy.