Supply Chain

Supply Chain Management 

The term ‘supply chain management’ often conjures up images of big companies with huge factories and workforces. But the reality is, supply chain management is just as vital for small businesses as it is for large corporations.

Whether you own a local cafe or florist business that needs to ensure a steady flow of fresh produce, a brick and mortar retail shop or an ecommerce store, most small businesses experience common issues, challenges and setbacks in their supply chain. 

Our goal at SavvySME is to help you understand how supply chain management works for small businesses and what you can do to start building and improving your operations.

What is supply chain management (SCM)?

Supply chain management (SCM) is the entire production flow of a product or service. It encompasses all of the operations, activities, resources and people involved in manufacturing raw materials into finished products or services and delivering them to your customers. SCM includes:

• Sourcing
• Manufacturing
• Logistics
• Warehouse management
• Inventory management
• Shipping and delivery

When you invest the time and resources into building a strong supply chain that is well integrated with other areas of your business, suppliers and customers, you can streamline your processes, improve your customer journey, reduce waste and increase your profits.

Why is supply chain management important for small businesses?

It’s easy to overlook the importance of supply chain management as a small business. However, if you want to scale your business and increase profitability, supply chain management is a key piece of the puzzle. Below are some of the key benefits of SCM for small businesses:

• Increased efficiency:Maximise your resources and boost efficiency across different operations by reducing waste, time, raw supplies, overheads and staffing requirements.
• Cut costs: Reduce your operating costs by identifying only the processes, raw materials and people that you actually need to produce and deliver your products and services to your customers.
• Better customer experience and satisfaction:Gain better insight into manufacturing and delivery times. You can also produce and deliver products/services to your customers in a timeframe that meets or exceeds their expectations and provide them with more accurate updates.
• Boost productivity: Eliminating wastage and reducing costs allows you to better allocate your resources and increase your productivity and production capacity.
• Have more resilience:With more control and visibility comes more resilience to disruptive events or sudden changes in your industry or market.

What are the most common small business supply chain problems?

Like with all business operations, supply chain management has its challenges - some will be unique to your particular business model and industry, while others are more universal (e.g. digitalisation, global disruption and consumer trends). Below are some common supply chain challenges and issues that might resonate with your small business:

• Disruption
• Supplier and distribution relationships
• Fluctuations in demand
• Risk management 
• Keeping up to speed with technology 

1. Disruption

Internal disruptions like machinery breakdown or external disruptions like extreme weather events or COVID-19 can have severe impacts on small businesses including staffing, inventory management, supplier relations and sales and revenue. Disruption poses a big threat as small businesses don’t always have the budget to withstand it. 

What can I do to minimise supply chain disruption?

The best way to manage these risks is by understanding your business’s unique disruption risks and putting plans in place. You should aim to:

• Stock up on essential supplies (if possible) that would see your business through temporary disruption
• Diversify your networks with backup suppliers
• Stay on top of trends and market fluctuations and plan accordingly
• Choose reliable logistics partners that also have a plan of attack for disruption.

2. Supplier and distributor relationships

Suppliers and distributors play a pivotal role and it’s important to work only with those you trust. Working with unreliable suppliers and poor communication channels can result in errors, delays, wasted resources and profit loss. 

How can I build and maintain good supplier relationships?

You can build and maintain good supplier relationships by:

• Monitoring supplier performance using key performance indicators (KPIs) such as quality of supplies, on-time delivery, etc. Supply chain management software has a specific tool for this
• Paying your suppliers on time - it may seem obvious but it’s crucial to maintain good relationships
• Ensuring you communicate frequently and clearly with your suppliers and inform them of any changes to your strategy. This goes both ways.

3. Fluctuations in demand

It can be difficult to keep up with changing consumer demand. Planning and allocating resources for fluctuating supply and demand often results in waste and revenue loss. 

How can I keep up with market fluctuations?

You can keep up with market fluctuations by:

• Using supply chain management to monitor, analyse and forecast demand
• Classifying regular and seasonal inventory
• Understanding your product lead times. 

4. Risk management

Operating with a weak supply chain strategy or not identifying the risks your business faces can have a negative impact on your suppliers, partners, customers and profits. 

How can I manage supply chain risk?

Supply chain risk management is an entire category of its own, but some steps you can take include:

• Plan. The most critical thing you can do is identify likely scenarios and what you will do to navigate your business through them.
• Just like disruption, broaden your supplier and logistic networks so you’re not reliant on any particular company. 
• Consider hiring a supply chain consultant to develop a risk strategy. 

5. Keeping up to speed with technology

SCM is constantly evolving and new software is being introduced to automate and streamline supply chain management. Not keeping up to speed with supply chain solutions can result in you working harder or less efficiently than you need to.

How can I keep up to speed with technology advancements?

You can stay updated with the latest technology by:

• Keeping tabs on changes and trends (particularly for your industry) by reading articles and having discussions with other business owners
• Making time for training 
• Attending webinars and other events 
• Speaking with a supply chain consultant about how you can stay one step ahead of the game

What are the best practices in supply chain management for small businesses?

Good supply chain management boils down to a solid strategy and allowing enough room to be flexible. Here are some best practices to follow:

• Keep a vendor/supplier database:Create a database detailing vendor classification and supplier contact details.
• Record keeping:Understand the administration requirements for each vendor/supplier and retain all documents and paperwork (this is particularly important for resolving disputes).
• Source suppliers strategically:Look for suppliers that work with small or similar businesses. Aim to collaborate as much as possible and involve them in key decision making to improve your processes.
• Work smarter, not harder:Using software makes record keeping and maintaining a supplier database much easier. It also increases visibility across your supply chain and track updates and correspondence in real time.

What are the key considerations when building a supply chain for your business?

Whether you’re fleshing out your first supply chain strategy or improving your existing processes, there are some important considerations to add to your checklist:

• Do your homework:It’s important to vet your suppliers as you would a new employee. How reliable, competent and affordable are they? Do their core values align with your business? Read reviews and client testimonials.
• Plan for risk:As the old phrase goes, fail to plan equals planning to fail - and this definitely rings true for risk. Different supply chain risks include demand risk, supply risk, manufacturing risk and planning and control risk.
• Set up a reliable tracking system:Track all paperwork, packages, and documents from suppliers, couriers and customers - preferably on a cloud system. 

We understand that supply chain management can be a lot to think about as a small business owner, especially when you need to wear so many other hats. But by looking closely into your current operations and with some careful planning, you can improve the efficiency and cost-value of your supply chain. Supply chain consultants are experts in SCM and provide tailored advice and solutions based on your unique business needs. Learn more about supply chain consultants and the services they offer.

You can also find a variety of supply chain resources here on SavvySME including articles, Q&As and community discussion.