You know how critical it is to get customers what they want—when they want it. As a business owner, you need to accomplish this task in the cheapest, most efficient way possible, without sacrificing on quality. That’s where supply chain management comes into play.
Supply chain management for small business
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Supply chain management 101
Beyond logistics, supply chain management governs everything that has to happen to get your product from Point A to Point B. Think of it as a magic mirror, giving you a 360-degree view and better control over supply chain activities like production, inventory management, planning, transportation and more.
Supply Chain Management is critical to the success of any business, large or small. Yet, 69% of companies surveyed say they don’t have full visibility into their supply chains.
Why is it important?
Once the realm of large corporations, supply chain management is now a must-have for businesses of any size. Consider, for example, how big of an impact a cost-effective distributor could have on your business or a supplier that provides a better-quality product. The good news is that small businesses can react quicker than the big guys, making it simpler to optimize your supply chain processes and reap the many benefits. Some benefits include:
Reduced costs. By isolating any processes that, for example, pile on expenditures without building value, or use up resources and increase production costs, you’ll achieve better efficiency and a smoother flow.
Better relationships. By building stronger, one-on-one connections with suppliers to ensure on-time fulfillment, you’ll forge better relationships with existing customers, while attracting new ones, as well.
Bigger profits. By cutting costs, developing efficiencies and establishing better relationships with suppliers and customers, you’ve got a formula for success.
Let’s take a closer look at how to start building your supply chain and optimizing it for your small business.
3 mission-critical considerations when building your supply chain:
1. Supplier and stakeholder relationships
- Build partnerships. This one seems fairly straightforward. Find suppliers and stakeholders that bring value to what you do by providing goods, materials and services to your company. They need to be cost-efficient, reliable and easy to work with. Already have established partnerships? Don’t rely on loyalty alone. While an occasional late delivery or cost increase isn’t a make-or-break scenario, make sure they’re performing up to the task, meeting expectations and helping you do right by your customers. If not, it may be time to find another supplier.
- Create security with your relationships. Once you have a good relationship, keep fostering and building on it. This rapport will bring you the security of supply you need, even in times of market instability, extreme weather, environmental risks and more (see Risk Management below).
2. Ethics, sustainability and responsibility
Three factors are arguably more critical today than ever before. Not only do customers seem to be placing a tremendous emphasis on ethics, sustainability and responsibility, so are potential employees. That means when working with suppliers and contractors, it’s vital that you’re all on the same page:
- Make sure you and your supplier align on ethics. This positioning can help to strengthen the relationship and help to set up a long-lasting partnership.
- Talk about human rights and ethics policies before forming a partnership.
3. Risk management
Management is critical to the management of any business supply chain. Why? Companies that proactively manage supply chain risk stand ready when supplier disruptions happen, and they inevitably will happen. Here are two things to keep in mind:
- Market intelligence. While larger businesses can use third-party companies to stay “in the know” about what’s going on in their industries, most small businesses don’t have that luxury. Instead, many adopt a DIY process. Marketing intelligence can come in the form of staying up-to-date on the news, searching Google, scanning social media sites, reading trade publications and other homespun approaches. From trade wars and wild weather to material shortages and new regulations, marketing intelligence keeps you informed of things like when it’s safe to grow engagements, when to reduce, and when to hold pace.
Economic environment and landscape. The supply chain risk environment and landscape continually evolve, with each year bringing new challenges for companies via unexpected events and unpredictable consequences. Using market intelligence helps you re-evaluate your risk environment in light of events like product recalls, safety scares, industrial unrest and so forth, so you can stay agile and protect your bottom line.
5 things to consider when optimizing your supply chain management
1. Go global, stay local
Buying globally at attractive prices is tempting and offers a lot of options. But what about procuring items locally for quicker delivery and on-site quality control? Companies who do both will likely be the big winners. Know how to use the global market to your advantage, but make sure you still keep solid local networks in place.
2. Use strengths, outsource weaknesses
- Delegate. Delegate. Delegate. Know your strengths and your weaknesses. Once you’re honest about that, you can use other resources to build proficiencies into your process, which leads to fewer mishaps and lost revenue. Doing too much at once will come back to bite you.
- Outsource. This term is just another word for delegating. While there are costs involved, strategic supply chain outsourcing can save companies, big or small, up to 20% of their expenses over five years.
- Invest in good software. The right software can simplify your tasks, possibly eliminating the need for outsourcing. Recent statistics speak to its popularity. By some estimates, the supply chain management market is expected to hit $19 billion in total software revenue by 2021 as demand for agility increases.
3. Use data to improve supplier and retail relations
- Using data to track inventory management and drive forecasting leads to a leaner, more efficient supply chain. Mining, interpreting and sharing that data will help you stay on top of inventory, boost fulfillment rates, build better relationships with retailers/customers and more.
- Try predictive analytics. This is simply using the data at hand to predict future events. Staying proactive and spotting potential problems and opportunities in advance allows for better reaction time and improved strategy and performance.
4. Leverage mobile technology
Bringing SCM to mobile devices facilitates a faster flow of info and data between everyone involved. This can uncover any unexpected delays and issues, and help you address them immediately. It also lets you:
- Gather location-based data to inform pricing and promotion information
- Build relationships between your brand and the local market
5. Build a responsive supply chain
Use data and market intelligence (see Risk Management above) to find out how trends are responding in the market can give you valuable insights into forecasting, planning and inventory—allowing you to pivot in real-time.
Finding better ways to get your customers and partners what they need, when and where they need it, is essential to every business, big or small. Supply chain management offers a solution for delivering on your promises in the most efficient way possible.
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Business Insights and Ideas does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation.
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