4 Strategies to Mitigate Supply Chain Risks for Small Businesses

Small businesses have always been vulnerable to supply chain risks, but the COVID-19 pandemic has magnified this vulnerability.

As of March 2022, roughly 26% of small business owners considered supply chain disruption as their top challenge, which has increased by 8% from Q4 of 2021. It is quite alarming that a whopping 76% of small businesses were anxious about how supply chain disruptions could affect their operations. 

These are concerning figures from the U.S. Chamber of Commerce, forcing small business owners to take immediate action. As a small business owner, it’s essential to mitigate supply chain risks to ensure that your business remains resilient and competitive in today’s market.

In this blog post, we will discuss four strategies that small business owners can use to mitigate supply chain risks. By implementing these strategies, you can better prepare your business for potential disruptions and safeguard your operations and reputation.

Identifying and Evaluating Supply Chain Risks

To effectively mitigate supply chain risks, small business owners need to first identify and evaluate potential vulnerabilities within their supply chain.

The lack of visibility remains a significant challenge to managing supply chain risks efficiently. Lack of visibility can lead to unanticipated disruptions, making it crucial for small business owners to have a clear understanding of their supply chain and associated risks.

In addition, natural disasters can cause disruptions that pose a risk to the supply chain. Such disruptions can cause delays in the production process, increase costs, and negatively impact the reputation of small businesses. Thus, small business owners need to identify potential risks arising from natural disasters or climate change and develop contingency plans accordingly.

Another potential risk is cybersecurity threats. In 2022, the cost of a data breach has risen to an average of $4.35 million globally, according to a recent report by IBM. Security breaches can compromise confidential information and proprietary knowledge while also leading to reduced customer confidence. Hence, small business owners need to identify potential cybersecurity threats within their supply chain. 

Moreover, small business owners need to evaluate their supplier’s financial stability. If a supplier goes bankrupt, it can result in production delays, quality issues, and, ultimately, damage the reputation of small businesses. Therefore, small business owners need to assess their supplier’s financial stability to mitigate any potential disruptions.

Keeping Critical Infrastructures Intact

Small businesses rely heavily on critical infrastructures such as IT systems, transportation networks, and power grids to keep their operations running smoothly. Disruptions to these critical infrastructures can significantly impact the operations of small businesses, making it essential to implement measures to keep them intact.

According to the Department of Energy (DoE), power outages are causing an annual loss of approximately $150 billion to the US economy. Small businesses are especially vulnerable to power outages as they may not have the resources to cope with such disruptions. Thus, small business owners need to implement effective measures to ensure their critical infrastructure is resilient against power outages.

To keep critical infrastructures intact, small businesses need to embrace digitalization despite the associated costs. Gartner predicts that more than 50% of global companies will integrate advanced analytics, artificial intelligence (AI), and the Internet of Things (IoT) into their supply chain operations by 2023. 

Another critical infrastructure that small businesses rely on is transportation networks. Disruptions to transportation networks can lead to delays in product delivery, resulting in lost revenue and damage to the reputation of small businesses. Therefore, small business owners need contingency plans to manage transportation disruptions and maintain their critical infrastructures.

To learn more about how small businesses can keep their critical infrastructures intact and secure, it is essential to stay up to date on the latest trends and best practices in supply chain risk management. 

Small business owners can benefit from working with supply chain experts or attending industry conferences and events to gain valuable insights into the latest tools and strategies for securing their critical infrastructures.

Diversifying Suppliers to Reduce Dependency

Small businesses can mitigate supply chain risks by diversifying their suppliers to reduce dependency on a single supplier. This strategy helps to ensure that small businesses have access to critical supplies and services, even if one supplier experiences disruptions or failures. 

A diversified supplier base also gives small businesses more leverage in negotiations, as they can choose to work with the supplier that offers the best quality and price.

Today, many companies are taking steps to diversify their supplier base in response to the COVID-19 pandemic. This includes working with new suppliers, renegotiating contracts, and increasing transparency and collaboration with existing suppliers. By diversifying their supplier base, small businesses can reduce their vulnerability to supply chain disruptions and improve their overall resilience.

However, diversifying suppliers can also come with its own risks and challenges, such as increased costs, quality control issues, and a need for additional resources to manage multiple suppliers. Small businesses should carefully evaluate potential suppliers to mitigate these risks based on their reliability, responsiveness, and capacity to meet demand. 

Furthermore, small businesses can also consider implementing a backup plan for critical supplies and services. This can include maintaining emergency inventory levels, identifying alternative suppliers in advance, and developing contingency plans for supply chain disruptions. 

Implementing Redundancy in the Supply Chain

As supply chains become increasingly complex, implementing redundancy in the supply chain is becoming an essential strategy for small businesses to mitigate supply chain risks. Redundancy involves creating backups or duplicates of critical components or systems in the supply chain to ensure continuity of operations in the event of disruptions.

One way to implement redundancy is to establish backup suppliers for critical materials or components. This allows businesses to quickly switch suppliers in case of disruptions or delays from primary suppliers. It also provides leverage in negotiations with suppliers, as they know the business has alternative options.

Another approach is to establish redundant transportation routes or modes of transportation. This could involve having backup carriers or alternative modes of transportation to mitigate the risk of disruptions due to weather, geopolitical events, or other factors that may affect the primary transportation route.

Implementing redundancy can also involve duplicating critical production equipment or having backup facilities. This allows for the rapid ramp-up of production in the event of a disruption or breakdown of critical production equipment. It also ensures that production can continue even if there is damage to the primary facility.


Supply chain risk management should be a top priority for small businesses, as disruptions can significantly impact their operations and financial stability. The four strategies outlined in this article are crucial for mitigating these risks.

Small businesses must prioritize supply chain risk management and adopt proactive strategies to mitigate potential disruptions. By taking these steps, they can build resilience and protect their operations against unforeseen events, ensuring their long-term success and growth.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.