The pandemic and SME supply chains: Learning from early experiences of SME suppliers in the U.S. defense industry

ABSTRACT

While the COVID-19 pandemic has been disrupting supply chains in an unprecedented fashion, one type of firms that has been particularly affected are small- and medium-sized enterprises (SMEs). We focus on these SMEs, specifically on SME suppliers to the U.S. Department of Defense (DoD), and investigate the impact that the pandemic has had on these suppliers, as well as the effectiveness of various government procurement efforts to alleviate the challenges. In doing so, we rely on survey data collected by the National Defense Industry Association (NDIA) during the early stages of the pandemic in March and April 2020 to assess initial government responses and SME supplier receptions. To derive more granular insight, we scrutinize the results across firm size, dependence on the DoD, whether the SME is a first-tier supplier or not, and industry. Through this investigation, we for instance find that the weakest suppliers are the very small SMEs (1–49 employees), and that most government measures were judged to not be that effective—at least in these early stages of the pandemic. Overall, our study leverages insight from one of the few large-scale surveys conducted on the impact of the pandemic on SME suppliers and their relationship with government agencies in the very early phases of the pandemic.