Nearly 1 in 4 Small Businesses Need a New Supplier

• 24% of small businesses are in need of a new supply chain option as of April 2022, up from 14% a year ago.
  
  
• In some states, one out of every three small businesses is in need of a new supplier.
  
  
• 44% of small businesses have experienced a recent delay with a domestic supplier, up from 31% a year ago. 

Supply chain problems dating back to 2020 have created longer wait times for products and materials, increased prices on consumer goods, slowed global trade and dominated the news cycle. But just how bad is it really?

Nearly one in four small businesses in the U.S. are reporting the need to find a new supplier within the next six months. In some areas of the country, the number stretches to one in three.

Those findings are according to our analysis of the most recent data (April 2022) from the U.S. Census Bureau’s survey of small business owners across the country. We identified the states and the cities where the highest percentages of small business owners reported supply chain issues, as well as some potential contributing factors.

More than one out of three small businesses in Wisconsin report they will need to find a new supply chain option in the next six months. Nationwide, 24.2% of small businesses are reporting such a need, nearly doubling the rate of 14% a year ago. 

The table below shows the states with the highest percentage of small businesses that need a new supply chain option within the next six months. 

Click on image to enlarge in a new tab

More than a quarter of small businesses are in need of a new supplier in the very near future in 22 states. Several large manufacturing states such as West Virginia, Ohio, Pennsylvania, Indiana, Tennessee and Georgia are found near the top of the list. 

States with small business supply chain issues favor those that are inland and in the central or eastern part of the U.S. Only three of the top 14 states border an ocean, and just two states among the top 20 are located in either the Pacific or Mountain time zones.

When broken down by metro area, the percentage of small businesses needing a new supplier remains consistent with the national results.

Buffalo tops the list, with 34.3% of small businesses in the city reporting they need to find new supply chain options. 19 metro areas report a rate of at least one in four businesses having supply chain problems. 

Click on image to enlarge in a new tab

But within those numbers is some stark contrast between certain metro areas and their respective states, as well as a few other notable facts. 

• Buffalo has the highest rate of small businesses in need of a new supply chain option (34.3%). But the state of New York ranks just 39th out of all states, at a rate of 21.5% of small businesses. No other New York metro area ranks inside the top 40.
  
  
• Just 19% of small businesses in Connecticut are in need of a new supplier (48th out of all states), but 26.6% of businesses in the Hartford/Middletown area do (12th among metro areas).
  
  
• West Virginia ranks second among states but does not place a metro area within the top 30, suggesting supply chain issues there are more evenly distributed across the state.
  
  
• Ohio, which ranks fifth among states, placed both Columbus and Cleveland among the top five metro areas.

Delays in the supply chain are overwhelmingly domestic. More than 44% of small businesses nationwide have experienced delays with a domestic supplier in the last six months compared to just 19% that have experienced delays with a foreign supplier.

• One year ago, 31% of small businesses reported domestic supplier delays and 12% reported delays from foreign suppliers. 
  
  
• Wisconsin, which already tops the nation in the need for new suppliers, also leads the country in domestic supplier delays. 55% of small businesses in Wisconsin experienced domestic supplier delays in the last six months. 
  
  
• More than 50% of businesses in Mississippi, Maine, New Hampshire, Idaho, Arkansas, Ohio, Pennsylvania, Vermont and North Dakota have experienced a delay from a domestic supplier in the last six months.
  
  
• Small businesses experiencing the most foreign supplier delays are in Vermont (24.4%), Puerto Rico (23.5%), Washington (23%) and Georgia (22.8%). Minnesota (22.5%), Florida (22.3%), Iowa (22.3%), Arkansas (21.4%) and Oregon (21%).

Reasons for supply chain issues are varied, though COVID-19 pandemic-related closures and disruptions are a common denominator for many current supply issues. 

Robert Swinney, operations professor at Duke University’s Fuqua School of Business, outlined three interconnected issues that have contributed to supply shortages and delays during a video discussion on the school’s LinkedIn page. 

1. A shortage of workers because of COVID and COVID restrictions that reduced capacity around the world
   
   
2. Changes to usual demand due to changes in consumer purchasing behavior during the pandemic
   
   
3. Manufacturers operating at near capacity, which keeps costs down but makes it easy to become overwhelmed in a time of crisis

Arzum Akkas, Boston University’s Questrom School of Business assistant professor of operations and technology management, also cites the “great resignation,” or the record number of workers voluntarily leaving jobs that are critical to the supply chain such as warehouse jobs and truckers. 

Russia’s invasion of Ukraine has added another layer of supply chain issues. The war has contributed to rising gas and oil prices that have disrupted the transportation of goods and materials. Many Asian and European manufacturers rely on the Russian railway and Russian airspace to move goods, both of which are currently suspended for most routes. 

A high and growing number of small businesses in the U.S. need to find a new supplier as nationwide supply chain issues continue. Small businesses around the country are mostly dealing with delays from domestic suppliers. 

The data used for this report came from the U.S. Census Bureau’s Small Business Pulse Survey, specifically Phase 8 data last updated April 21, 2022.