In the last years, society, the global market, governments, and several industries (including logistics) have been afflicted by strong, rapid changes such as COVID-19, war, restrictions, and the consequences that these caused; including high inflation. The latter has deeply affected businesses and their customers across the globe. According Deloitte’s Consumer Tracker in fact, 37% of the consumers surveyed felt “their financial situation worsened over the past year—considerably impacting their spending plans.” This statistic has dire repercussions for companies and their plans.
In situations like these, is it possible for businesses to grow? The short answer to this is yes, but it is largely dependent on the awareness of companies, their ability to stay resilient, and the presence of certain key capabilities within their action range.
How difficult market conditions affect SMEs
Generally, global central banks have a target of low and constant inflation between 1.5 - 4 % per year. However, as highlighted by Statista, global inflation rose from 4.7% in 2021 to 8.8% in 2022. Obviously, when rising, the negative effects of inflation on businesses include, but are not limited to, higher costs in relation to employees’ wages, raw materials, office space, warehouse space, transportation, etc. Because of this exponential increase, the market experienced lower purchasing power as prices grew before wages.
Currently, with global inflation in high numbers, small and medium-sized enterprises (SMEs) impacted are trying to keep a healthy cash flow while considering whether to increase costs (therefore affecting their buyers or lower the enterprise’s profit) to potentially avoid losing customers but while also decreasing business growth.
Due to this situation, impacted SMEs are also changing their habits when it comes to logistics. Some changes include:
- Requesting multicarrier solutions to establish contracts with vendors that can deliver goods and services at the lowest price, but still being able to control the supply chain over one platform.
- Trying to keep a better control on the productivity of supply chain management.
- Finding solutions to get longer credit periods and as well ensuring being paid on time.
- Needing tighter control and visibility over the supply chain management.
Key capabilities to grow
In high inflationary periods, the logic behind business growth is that consumers and businesses tend to change their spending habits, often spending less, as their economic awareness increases. So, how can small and medium enterprises grow while inflation is high? SMEs aiming to grow their businesses must stay one step ahead of the market, able to shift their operations and grow a selected product category fast, while ensuring that scalability is guaranteed to avoid losing later in the race.
What can a solution be for SMEs given all the difficulties? As mentioned before, certain key capabilities can be a strong foundation to help to create business growth in such disadvantageous conditions. These are:
- Market monitoring and opportunity identification.
- Rapid product development.
- Visibility on Stock Keeping Units (SKU).
- Visibility at container level.
- Great vendor management (especially when managing an increasing number of products).
- Digitalisation of their supply chain from production to consumption.
- Smart investing.
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Visibility and resilience for SME growth
When looking closer at resilience and visibility foundational capabilities for growth, these two pillars can be interconnected. When small and medium-sized enterprises aim at increasing market growth, increasing visibility and resilience in the supply chain offers a holistic view and adds extra strength, helping to anticipate and predict new market and customer opportunities. Visibility can give power to businesses to, whenever possible, be prepared for contingencies, delays, changes in customer’s spending, and changes in the market. This kind of view can then boost resilience when companies are ready to circumnavigate these hurdles or react with a plan.
Additionally, to make sure that a supply chain is resilient and can withstand complexity - particularly when the economy isn’t favourable - digital solutions can come to the rescue. Such solutions can be, for example demand forecasting, 5G, cloud computing, etc. To grow business during high inflation times, it’s also important for SMEs to optimise all steps of their supply chains, particularly transportation. This means having good insights into supply chain performance, as well as identifying and eliminating bottlenecks that can cause a less productive supply chain. In this area, digital solutions can also help SMEs boost cost-effectiveness and growth by:
- Decreasing time-consuming manual workload
- Decreasing delay and extra costs due to missing documents
- Increasing supply chain control
- Increasing suppliers of goods
- Increasing visibility when all parts (importers, shippers, consignees, etc.) have access to the same integrated digital platform for document-upload, booking- and order details
- Including access to purchase orders, bookings, shipments present status and historic performance data
- Supporting with key insights to clarify any bottlenecks or trends
Smart investments for SME growth
Now, when it comes to smart investing, small, and medium-sized enterprises with an agile and resilient business strategy may experience a competitive advantage when being able to quickly adapt to the market conditions.
SMEs can stay ahead by taking mindful steps on what they choose to allocate energy and budget towards. Apart from investing in digital opportunities, sustainability can be a sure way to gain long-term gains. Forbes suggests that success comes to those that are responding to circumstances—like the change in consumer habits—by building “market share and customer engagement as well as transforming their portfolios and sticking to their ESG objectives”.
According to a Deloitte report, 8 of every 10 executives know that “keeping up with the changing consumer demand” is a great challenge, with “93% naming it as a top 2023 priority”. Amidst these changes, understanding target audiences can be a significant obstacle. A difference in the spending habits of businesses often creates new market segments, so SMEs that can identify and quickly adapt to the new market conditions and appearing segments increase their opportunity to grow their business.
Last but not least, another helpful solution for investments to battle inflationary challenges is the acquired ease of operating from one platform. This can help with taking advantage of the benefits of integrated logistics solutions, getting the help needed, streamlining efficiency end-to-end, and getting full ownership of their supply chains through partnering with a truly integrated provider. Once this is taken care of, they can be strong enough to resist sudden changes, and grow market share.
Thus, though market conditions may be less than favourable, there are still opportunities for SMEs to embrace growth during this time of inflation. By increasing visibility, companies can be more resilient and able to adapt to shifting consumer demands and unforeseen costs. Additionally, by investing time and finances in digitalisation and future-proofed sustainable practices, SMEs can take control over their entire supply chain, bringing forth a period of growth that will outlast this inflationary period.
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