100% of Australian SMEs hit by supply chain disruptions - Two thirds increasing prices in response

All 718 small and medium enterprises (SMEs) engaged in the latest round of ScotPac’s SME Growth Index Report reported experiencing some form of supply chain disruption in the six months to September 2022.

Three out of four SMEs reported their cost based expanded in the period, by an average of 15%, due to inflation and other input cost rises.

As a direct response, almost two-thirds of SMEs increased pricing for their products and services by an average of 14.5%, while one in three SMEs said they were absorbing rising costs. Interestingly, five per cent of SMEs lowered their prices in a bid to stand out from competitors.

Further insights related to supply chain disruptions for SMEs included:

• Larger SMEs (A$5M-20M revenue) experienced average production and other input cost rises of 20%, compared to12% for smaller SMEs ($1-$5M revenue).
• Larger SMEs increased the price of their goods and services by an average of 18%, compared to an average increase of just 1.5% for smaller SMEs.
• The key areas of advice SMEs felt they needed to better navigate supply chain disruptions included:

– alternate business funding tools, such as invoice finance (25%)

– general risk advice and guidance (20%)

– new supplier network referrals (16%)

ScotPac CEO, Jon Sutton (pictured), said despite the easing of COVID restrictions in 2022, severe pockets of supply chain disruption were still being felt by SMEs.

“Supply chain disruptions affect a huge range of the goods and services we rely on every day, and the businesses that supply them,” Sutton said. “Anyone who has tried to buy a new car in the past two years will have first-hand experience.”

“Just this week we have seen reports of pallet shortages that could impact the delivery of food, groceries and medicines to supermarkets and pharmacies across the country, which again will affect the cost of doing business.”

“A lot of business owners we work with are looking to invest in making their supply chains more resilient by purchasing reserve inventory, building or leasing warehouse space, sourcing additional suppliers or adding digital solutions.”

“ScotPac has the breadth of products and experience to help more businesses invest in their supply chain than any other non-bank lender. However, we know that many SMEs are not sure how to fund purchases or upgrades.”

“That is why we encourage SMEs to talk to their advisors about releasing working capital through options like invoice or asset finance, because you may have more solutions available than you realise,” Sutton said.