Economic Concerns, Talent Shortages, and Cybersecurity Are Top Challenges for SMB Supply Chains

By: Olivia Montgomery, PMP on April 24, 2024
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The current economic climate presents challenges for supply chain management (SCM) leaders, particularly at small to midsize businesses (SMBs). Concerns about the potential for both recession and inflation top the list of challenges reported by SCM leaders in Software Advice’s 2024 Supply Chain Plans* international survey, covering the U.S., U.K., Germany, France, and Australia. 

Along with these macroeconomic concerns, our recent study finds that supply chain leaders are struggling to hire skilled workers, safeguarding supply chain operations against cyber threats, and increasing technology investments.

SMB supply chain leaders should adopt diverse, strategic measures to address these challenges and build resilience in effective, scalable ways.

Key highlights

  • Focus on diverse cost management strategies

45% of all survey respondents cite inflation as their top concern, and 33% cite a recession. Concerns over inflation are the highest in France (50%), while U.S. respondents are the most concerned about a recession (38%).

  • Improve workplace strategies to address a lack of skilled workers

80% of all respondents report struggling more to attract and retain supply chain-focused employees over the past two years.

  • Invest in cybersecurity to safeguard your supply chain

41% of SCM leaders report experiencing one or more disruptions linked to a cyberattack in the last 12 months. Investing in technology to advance cybersecurity capabilities is the top priority for tech spend in 2024.

  • Increase technology budgets to improve supply chain resilience

At least half of businesses in the U.S., U.K., and France each allocate 6% or more of their company’s budget to supply chain tech spending. Compared to Australia, where over half (51%) report supply chain technology gets 5% or less of the annual budget.

Focus on diverse cost management strategies

With the economy as a top concern for SCM leaders, a diverse approach to cost management can better position you to withstand economic challenges, whether inflation or a recession. Fluctuations in the economy can impact consumer demand, supplier availability, and pricing, leading to disruptions and uncertainties. Small businesses are especially vulnerable as they often lack the financial buffer to absorb sudden increases in costs or navigate through prolonged periods of economic downturn.

45% of SCM leaders cite economic inflation as their top concern, and 33% cite economic recession as top concern.

SCM leaders should look for innovative ways to not only reduce costs, but also address product and budgeting issues. For example, having backup suppliers gives you leverage to not only negotiate better pricing with current suppliers but can also allow you to pivot quickly in cases of product availability issues, the top challenge SCM leaders report facing in the past 6 months (40%).

Cost management recommendations

  • Negotiate with suppliers and have backups: Renegoiating prices with your strongest, current suppliers is typically the best first step to take when trying to reduce costs. But it’s also beneficial to explore alternative suppliers so you have backup options to mitigate risk events, such as product shortages, geographic or logistical disruptions, or price fluctuations from current suppliers.

    • 28% of SCM leaders say they plan to start negotiating supplier/logistics contracts this year, while 53% are already doing so. 

  • Join a group purchasing organization (GPO): GPO’s leverage collective purchasing power to negotiate discounted prices and favorable terms with suppliers for the group members. By pooling buying volumes, SMBs can often access cost savings offered by manufacturers, suppliers, and logistics firms, ultimately helping you manage costs more effectively.

    • 39% of SCM leaders report being in a group purchasing organization (GPO) or similar and another 26% plan to join one in the near future. 

  • Enhance demand forecasting: 23% of surveyed businesses report challenges from inaccurate forecasting in just the past six months and this can negatively impact and strain cash flow. Invest in demand planning software to better anticipate fluctuations in consumer demand and adjust production and procurement more effectively. This will help you plan better budgets more predictably.

Improve workplace strategies to address a lack of skilled workers

Our study finds that 80% of SCM leaders are struggling to attract and/or retain skilled talent, and 30% say talent shortages have impacted their procurement abilities in the past 6 months. Delays due to being short staffed impact not only affect your bottom line, but also strains the employees you do have as they work harder to try to make up for the shortage. Addressing the challenges of workforce management requires strategic approaches, especially for physically and mentally demanding positions in supply chain management. 

Here is a breakdown of the top 5 areas in which SMB supply chain leaders report struggling to find qualified employees.

Top 5 positions SMB supply chains struggle to attract or retain SCM-focused employees

A shortage of capable workers in these critical areas can hurt your ability to deliver products efficiently, maintain quality standards, resolve customer concerns, and maintain IT systems, ultimately hindering your competitiveness and growth prospects.

56% of U.S. businesses report being short-staffed and struggling moderately to severely to hire/retain SCM-focused employees. Some of their counterparts overseas express more workforce challenges, notably 71% in Germany report moderate to significant struggles in retaining staff in the past two years.

Recommendations for attracting and retaining talent

  • Enhance employer branding and reputation: Develop a strong employer brand that highlights the company's values, culture, and opportunities for growth to attract talent. This can be especially helpful when seeking highly-sought after IT professionals and certified truck drivers.

  • Foster a positive work environment: Create a supportive and inclusive work environment that prioritizes employee safety and well-being, recognition, and gender equality. 

    • The trucking and IT fields have both struggled to retain women workers due to unwelcoming attitudes, therefore the businesses who target attracting them are likely to be more successful in building a quality workforce.

  • Implement flexible work arrangements: Hybrid and remote work options, flexible hours, and compressed workweeks that accommodate the diverse needs of employees will improve hiring and retention rates.

Check out this real world case study [1] of the surprising benefits Ohio-based, manufacturing company, Advanced RV, saw when they tested a 4-day work week.

Invest in cybersecurity to safeguard your supply chain

Over half (55%) of surveyed businesses report advanced cybersecurity as very important to the success of their company and it tops the list for the type of technology businesses plan to maintain or increase investing in for 2024. 

Cybersecurity is crucial for safeguarding sensitive data, protecting against cyber threats, and maintaining the trust of your customers and suppliers. Failing to invest in the right cybersecurity tools can result in devastating consequences, including data breaches, financial losses, damage to reputation, and legal liabilities, ultimately jeopardizing the viability and sustainability of the business.

Top 3 technologies SMB supply chains plan to maintain or increase investment in for 2024

Strengthen your cybersecurity defenses, mitigate risks, and safeguard valuable assets and sensitive information from cyber threats by considering the following recommendations.

Cybersecurity recommendations

  • Invest in employee training: Provide ongoing cybersecurity training and awareness programs to educate employees about best practices, such as recognizing phishing attempts and safeguarding sensitive information, helping to mitigate the risk of human error.

  • Conduct regular risk assessments: Begin by conducting comprehensive risk assessments to identify potential vulnerabilities and prioritize areas for improvement within your business’s IT infrastructure. Then schedule recurring audits and improvement work, including patching and updating all systems.

  • Use secure remote access solutions: If you have any hybrid and/or remote workers, implement secure remote access solutions such as virtual private networks (VPNs) software and multi-factor authentication (MFA) to ensure that remote employees can access company systems and data securely.

Investing in cybersecurity it’s only prioritized by supply chain leaders, it’s a dominant trend in SMB software adoption across industries. Check out The Biggest Spend Category for 2023 Is Cybersecurity: Here’s Why and What’s Next to learn more.

Increase technology budgets to improve supply chain resilience

Over 30% of surveyed SCM leaders say they plan to adopt new supply chain management software in 2024. By strategically investing in technology, especially at SMBs facing economic uncertainties, you can strengthen your supply chain resilience and optimize resources. SCM software can help you mitigate risks and adapt quickly if a disaster disrupts logistics capabilities, ultimately enhancing competitiveness and long-term sustainability. 

But how much you should be spending on updated or new software will be dependent on your specific needs and budget? To give you a starting point, here’s a breakdown of how SCM leaders at the companies we surveyed are budgeting for technology spend.

Percentage of business's annual budget allocated for technology spend by SCM SMBs

Specifically in the U.S., spending has increased. 56% of U.S. respondents report allocating 6% or more of their company’s 2024 budget to supply chain technology spend, up from 45% from in 2023. Compare your companies’ budgeting and evaluate if you’re investing enough to support effective and modern supply chain processes.

Recommendations for getting the most out your tech investments

  • Improve visibility: The more you can see, the more you can control and most SCM systems offer visibility features such as tracking and tracing technologies. These can give you real-time insights into inventory levels, shipments, and potential disruptions across your supply chain so you can take action quickly when needed. 

  • Leverage predictive analytics: Forecast demand, identify potential risks, and optimize inventory levels, enabling proactive decision-making and mitigation of supply chain risks, disruptions, and bottlenecks. As artificial intelligence (AI) and machine learning (ML) continue to advance, predictive capabilities will become more powerful and accurate.

    • 43% of surveyed SCM leaders say they plan to increase or maintain their investment in advanced data analytics in 2024. 

    • In advanced data analytics, U.S.-based companies are investing the most at 48% and Germany reported the lowest number of businesses investing at 35%. 

  • Consider digital twin technology: Create virtual replicas of your physical assets and processes, allowing you to simulate and perform scenario analysis to identify vulnerabilities and improve resilience. A digital twin can be an invaluable tool for modeling the impact of actions you could take in the event of extreme disruptions, such as cyber attacks or cargo ship pirating. 

    • Only 10% of surveyed SCM leaders report spending on digital twin technology and this is a missed or misunderstood opportunity. Especially if your supply chain network is complex or higher risk, a digital twin is an overlooked and underestimated risk management tool.

Build supply chain resilience to thrive

As SMBs find themselves at the intersection of economic uncertainty and workforce challenges, technology emerges as a reliable partner. Software solutions can help fortify your supply chain operations, optimize workforce strategies, and enhance cybersecurity, helping SMBs navigate challenges with confidence and agility. If you’re looking for new SCM software, check out Software Advice’s list of top solutions, read thousands of real user reviews, and get detailed info on what to look for when evaluating new tools.

Here’s a short roundup of the top recommendations shared in this report.

Build a resilient supply chain to protect against top challenges.

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Survey methodology

Software Advice’s 2024 Supply Chain Plans Survey was conducted online in February 2024 among 1,100 respondents in the U.S. (n=300), U.K. (n=200), France (n=200), Germany (n=200), and Australia (n=200). The goal of the study was to learn about the challenges and plans of supply chains. Respondents were screened for employment at a small- to midsize-business (<USD $500M in annual revenue, employing <1,500 people).