Supply chain delays and interruptions are increasingly impacting small business operations and will result in higher prices.
This comes from the Canadian Federation of Independent Business (CFIB) in a new report, The Logistics Impact of COVID-19on Small Businesses.
Business owners have become increasingly concerned about logistics, such as getting and shipping products or managing inventory, over the past year. In May 2021, 41 percent of business owners said they are worried about business logistics, up from 29 percent in April 2020.
This April, CFIB dug deep with special questions on the topic for its 95,000 members and found more than half (55 percent) of business owners had experienced delays in the previous 30 days, with the majority (90 percent) reporting the delays came from their suppliers. Businesses in the wholesale, construction, manufacturing, retail and agriculture sectors were the most affected by delays.
“Recently, one of the more intensely felt impacts of the pandemic has been on supply chains and business logistics. If even one link in the chain, such as a factory producing vital materials, is delayed because business restrictions slow down or limit production, the entire chain can grind to a halt,” said Simon Gaudreault, senior director of national research at CFIB.
“As we move towards economic reopening and especially as government support is phased out, we need to be mindful of the fact that these disruptions add up and will significantly slow down many affected businesses as they are trying to go back to normal operations.”
Higher consumer costs
Shortages, scarcity and delays have pushed up the prices of some goods, in particular raw materials and metals, like lumber or iron. Lumber, for example, increased by more than 100 percent since January 2020, while tin and iron spiked by 50 percent.
According to Statistics Canada, 26 percent of businesses expected to experience cost increases over the summer. In comparison, CFIB’s Business Barometer reported in May 2021 that 36 percent of SMEs had production input cost issues. As a result, stuck between a rock and a hard place, many businesses may need to raise the price of their goods and services to cover the additional cost.
“On average, businesses indicated they will increase prices by 3.3 percent over the next twelve months, the biggest increase we’ve seen since 2009,” added Gaudreault. “This is concerning because it will further hurt small businesses’ capacity to rebound and make sales, at a time when many are already in a precarious position due to the debt they have accumulated over the pandemic.”
CFIB suggests governments can also help offset some of the logistical issues and price increases facing small firms by keeping taxes and other costs low and by reducing red tape (such as internal trade barriers), which should ultimately help keep consumer prices lower.
“This is another pandemic challenge that shows many Canadian small businesses are still into a turbulence zone. The spectre of inflation will have serious repercussions for Canada’s economic recovery if we don’t get these logistical issues under control. More than ever, governments must show they are staying in the fight for small businesses, by acting quickly and creatively to alleviate their lingering Covid-19 burdens,” concluded Gaudreault.