1). Covid-19

The pandemic remains a problem unsolved, with new variants emerging more frequently than expected.

Unfortunately, this situation forces supply chains to continuously plan, invest in and implement expensive contingency arrangements that they will normally not do.

SMEs within such volatile supply chains with their limited resources are not left out in this struggle.

There has been a lot of rethinking and remodelling over this period of Covid-19. Businesses should take advantage of the lessons learnt over the last 20 months or so to strategise for 2022.

SMEs that can give businesses that rely on China imports an alternative UK-based organisation will be able to expand their client base.

2). Labour shortage, including transportation

This is another supply chain challenge that will continue into 2022.

Whilst this is generally attributed to the outcome of Brexit and disruptions caused by Covid-19, policies proposed and implemented by the UK Government to combat labour shortage are yet to remedy the situation.

These crucial features can threaten the existence of any supply chain, as supplies, commodities and/or finish goods need to move between the upstream and downstream supply chain axis to satisfy the final customers.

SMEs are crucial players in any area of the supply chain and therefore need to recognise that employees are now looking for flexible ways of working.

With most traditional supply chains not offering this kind of flexibility, hence workers are moving to other industries.

Implementing some incentive measures could be a short-term possible solution, but SMEs must look beyond such measures to attract and retain the best talents to remain sustainable in the long run.

3). Rising inflation

In this instance, it is a result of labour shortage and increase in the cost of supplies and/or commodities triggered by Covid-19.

Reliance on imports for capital goods is expected to put pressure on supply chains in difficult times, such as the one we are experiencing.

This pressure is generally expressed in monetary terms, such as an increase in cost of supplies, commodities and/or finish goods.

This is exacerbated by the weak Pound Sterling, which is on the average declining against major currencies including the Chinese Yuan, including the last quarter of 2021.

Mitigating inflation resulting from inflated cost of supplies and/or commodities is generally difficult for SMEs who are battling against multinationals.

4). Government policies

Government policies dictate happenings in business environments.

This is evident in the different regulations and restrictions businesses had to deal with over the early period of the Covid-19 pandemic till now.

Of crucial importance is the UK government’s commitment in the just-concluded COP26.

Whilst the direction of the UK government is predictable, this still remains a challenge for businesses, especially SMEs, as they generally lack the financial capability to react speedily.

Whilst businesses may not be completely prepared for external changes, they must have in place buffers and/or flexible business operations/models to mitigate unfavourable policies.

The UK government commitments at COP26 is a challenge, but for proactive businesses with flexible operations and innovative capabilities, this could actually be a breakthrough.

As noted earlier, it is not all about economic benefits anymore, meaning SMEs can compete in all aspects, as businesses strive to meet their sustainability targets.

Literary evidence shows that innovativeness and being proactive can improve performance in times of crisis, such as, the one we are experiencing.

Innovation can happen anywhere within the supply chain – the products, the process of making the products, and the process of delivering the products.

UK SMEs must therefore look beyond their immediate environment and seek to develop strategic partnerships to access these innovative capabilities if they want to remain competitive.

Dealing with the above challenges

Planning in an uncertain business environment is a challenge top management executives tend to avoid due to obvious reasons.

However, challenges do not always bring about negative impacts.

In fact, literary evidence suggests that organisations with the right mindset, strategies and innovative capabilities are likely to gain from challenges facing their business environment.

This is evident in the growth experienced by Amazon and other tech related firms as reported in the Financial Times.

There is already evidence of digital disruption, which has been exacerbated by the Covid-19 pandemic that forced businesses, including SMEs, to rethink their business models.

This trend will continue to rise in 2022 and beyond, as businesses strive to reduce lead times and make informed and real time decision.

To remain relevant, competitive and successful within their supply chains, SMEs must therefore embrace and/or continue to embrace and invest in digitalisation and innovative approaches that guarantee integration, agility, and considers economic as well as social and environment benefits.

Interested in discovering/adopting innovative solutions to industry challenges? A Knowledge Transfer Partnership with Birmingham City University could offer you the support, funding, knowledge and skills needed to enhance your competitiveness and sustainability.