Rising logistics worries could mean higher prices: CFIB report

TORONTO — Supply chain delays and interruptions are impacting small business operations and will result in higher prices, warns the Canadian Federation of Independent Business (CFIB) in a new report entitled The Logistics Impact of COVID-19 on Small Businesses.

“Recently, one of the more intensely felt impacts of the pandemic has been on supply chains and business logistics,” said Simon Gaudreault, senior director of national research at CFIB. “If even one link in the chain, such as a factory producing vital materials, is delayed because business restrictions slow down or limit production, the entire chain can grind to a halt.”

Business owners have become concerned about logistical issues, such as getting and shipping products or managing inventory, over the past year — 41 per cent of business owners said they are worried about business logistics in May 2021, up from 29 per cent in April 2020.

This April, CFIB dug deeper with special questions on the topic for its 95,000 members and found more than half (55 per cent) of business owners had experienced delays in the previous 30 days, with the majority (90 per cent) reporting the delays came from their suppliers. Businesses in the wholesale, construction, manufacturing, retail and agriculture sectors were the most affected by delays.

Shortages, scarcity and delays have pushed up the prices of some goods, in particular raw materials and metals, like lumber or iron. As a result, many businesses may need to raise the price of their goods and services to cover the additional cost.

“On average, businesses indicated they will increase prices by 3.3 per cent over the next 12 months, the biggest increase we’ve seen since 2009,” added Gaudreault. “This is concerning because it will further hurt small businesses’ capacity to rebound and make sales, at a time when many are already in a precarious position due to the debt they have accumulated over the pandemic.”

CFIB suggests expanded rapid testing in manufacturing and warehouse settings can help by allowing production to increase. Governments can also help offset some of the logistical issues and price increases facing small firms by keeping taxes and other costs low and by reducing red tape (such as internal trade barriers), which should help to keep consumer prices lower.

“This is another pandemic challenge that shows many Canadian small businesses are still into a turbulence zone. The spectre of inflation will have serious repercussions for Canada’s economic recovery if we don’t get these logistical issues under control,” said Gaudreault.