5 Reasons Why Your Small Business Needs to Focus on Its Supply Chain

January 14, 2023

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Small and medium businesses (SMBs) play a vital role in the global economy. Many SMBs serve as the backbone of their respective industries. These businesses are typically defined as companies with fewer than 500 employees. They can include many entities such as brick-and-mortar stores, service providers, and e-commerce platforms like those powered by Shopify or selling on Amazon. In our experience working with these small Shopify or brick-and-mortar businesses, we have found that many founders or someone from a non-related team, like sales or marketing, handle the supply chain. To them, the supply chain means placing some orders, raising some POs to the vendors, or fulfilling the orders from their customers. But such attempts often spiral down to the companies ending up with large inventories not to be sold anywhere. Or on the other hand, it can be a continuous loop of running short of stocks. This problem was aggravated much further during the COVID situation when companies sought to reduce costs.

Contrary to what these small companies try to do, supply chain management is the systematic approach to managing a company’s production, handling, and distribution of goods and services. It is an intersection of science, mathematics, and management principles. It involves combining various components, including the procurement of raw materials, the creation of finished products, and the delivery of those products to customers. Effective supply chain management is crucial for businesses of all sizes. It can significantly impact a company’s efficiency, cost structure, and competitiveness. By focusing on their supply chains, SMBs can streamline their operations. They can reduce costs and improve their ability to meet customer demand. Such focus on the supply chain helps serve the customers better in the long term. A competitive supply chain can be vital in building a great brand.

How can SMBs improve their supply chain management: The 7-step action plan

When managing their supply chain, small and medium-sized enterprises (SMEs) face unique obstacles. These obstacles include limited resources, lack of expertise, and the inability to forecast demand. However, with the right approach, SMBs can improve their supply chain management and grow their business.

Here we discuss a seven-step action plan for SMBs to improve their supply chain management. By adhering to this action plan, SMBs can increase efficiency and customer satisfaction, decrease costs, and build a brand.

1. Identify and prioritize areas for improvement

The first step in improving supply chain management is to assess the current state of the supply chain and identify areas that need improvement. This can include analyzing lead times, delivery accuracy, inventory management, fulfillment rates, and other vital metrics. Then with this blueprint, conduct a thorough review of the entire supply chain process. This process should be strictly data-driven because what can’t be measured can’t be improved. This step narrows down the company’s two priority areas to meet industry standards.

2. Invest in technology and automation

Once you have identified these two areas, check for a technology-based solution to the problem. Many out-of-the-box solutions are available for most supply chain processes today. Solutions are available for planning, order management, customer service, or logistics. Such technology and automation can improve supply chain management. Many of these automatons are available as SaaS solutions with a monthly subscription. This saves money for small companies that can only invest little in their IT infrastructure. Implementing supply chain management software to streamline processes can provide the following:

Real-time visibility of the different parts of the supply chain

Using data analytics to identify inefficiencies and optimize operations, and

Flag the concerns immediately so that action can be taken on them immediately

Help save money with price comparison, optimization, and efficiency improvements.

3. Establish contingency plans

The next critical aspect of supply chain management is the development of contingency plans. Such plans are needed to address unexpected disruptions. If there is one takeaway from the COVID impact on small businesses, it is always to have a plan B ready. Create a blueprint of your supply chain and think critically about how you will react if that part of the supply chain breaks down. Keep an alternate supplier list, a backup sales channel, and a small secondary warehouse in a different geographical location.

4. Collaborate with suppliers and partners

While we suggest having a contingency plan for everything above to ensure business continuity in adverse circumstances. It would be best if you were involved and worked closely with your suppliers during normalcy. Work with suppliers and supply chain partners to optimize their processes and establish clear communication channels. Collaborate with them on initiatives to increase efficiency and reduce costs. Such partnerships can help scale the business without much hard work and headaches. It can optimize costs and get greater value with the partnership. This is vital because, as a small business owner, you need to spend time growing your business instead of firefighting the operations daily.

5. Prioritize sustainability

Build partnerships with suppliers and supply chain partners focusing on sustainability areas. Businesses can improve their supply chain management by prioritizing sustainability. This can involve reducing waste, optimizing transportation and logistics, and partnering with suppliers that prioritize environmental and social responsibility. By adopting sustainable practices, businesses can minimize their environmental impact and contribute to a more sustainable future. Sustainable supply chains also help attract a growing customer base today ready to give a premium for sustainability.

6. Implement effective inventory management techniques

There are many pillars of a successful supply chain that helps to scale a business. But we are highlighting inventory management as one of the biggest areas. Proper inventory management is crucial for an efficient supply chain. It is because poor inventory management can bring a small business to a crashing halt. We have seen small companies being paranoid and buying excess inventory that they struggle to liquidate later. This can be due to changing market needs or the product going out of fashion quickly in the era of social media. Small companies must understand that inventory is real dollars in their warehouse. These dollars can be used elsewhere, like marketing or adding another product line. Effective inventory management can be done in many ways. Some ideas can be implementing just-in-time strategies with your suppliers, using data analytics to optimize stocking levels, or implementing real-time inventory tracking systems to improve visibility and accuracy.

7. Consider outsourcing certain aspects of the supply chain.

Outsourcing some aspects of the supply chain can improve efficiency and reduce costs for some businesses. This can include outsourcing warehousing, transportation, or other non-core functions to specialized providers with the expertise and resources to manage them more effectively. Here are five examples of what small companies can try to outsource without any risks:

7.1 Supply Chain Planning

A small business that designs and markets a line of jewelry may outsource its planning to a consulting firm specializing in supply chain planning and optimization. This will help the company plan for future demand and ensure the right products are available at the right time and place.

7.2 Inventory Management

A small e-commerce business may outsource inventory management. The outsourcing company will maintain optimal inventory levels, forecast demand, and manage stockouts. This will assist the business in increasing inventory turnover and decreasing carrying costs.

7. 3 Creating a customer impact

A small logistics company may outsource its blogging. This can be to a content marketing agency specializing in writing and publishing blog posts, articles, and social media posts. This will assist the company in increasing its online visibility, establishing itself as an industry thought leader, and reaching a larger audience.

7.4 Procurement

A small company specializing in electronic components production may outsource procurement. The procurement service provider handles all aspects of sourcing and purchasing raw materials, components, and other supplies.

7. 5 Transportation

A small company specializing in the packaging and distribution of fresh produce may contract with a third-party logistics (3PL) provider to handle the shipping of its products to retailers and distributors. This will aid the company in ensuring timely delivery and minimizing the risk of perishability.

Supply Chain Star can help you with all such supply chain needs. With decades of experience in all areas of the supply chain like transportation, planning, inventory management, purchasing, manufacturing, and blogging to create a customer impact, we make the supply chain easy for you. Your business will enjoy reducing costs, and increasing efficiency, and you can focus on its core competencies. Contact us for a solution tailored to your particular needs and budget.

5 Benefits of focusing on the supply chain for SMBs

Small and medium-sized businesses (SMBs) can considerably benefit from optimizing their supply chains. It can help in many areas and free up time for the entrepreneur to focus on other critical areas of the business. With a well-managed supply chain, small companies can respond swiftly to demand, have a competitive edge in their market, mitigate risks, and scale their operations as their business grows. Here are the top 5 benefits for small companies of focusing on their supply chains:

1. Enhanced customer satisfaction

A well-managed supply chain can also improve customer satisfaction. Businesses can meet customer expectations and build loyalty by ensuring that products are delivered on time and in good condition. Additionally, by offering a more comprehensive range of products and responding quickly to changes in customer demand, businesses can differentiate themselves from the competition and build a brand.

2. Increased competitiveness

By focusing on their supply chain, SMBs can also increase their competitiveness in the market. This can be achieved through cost savings, improved efficiency, and enhanced customer satisfaction. Also, a robust supply chain can allow businesses to enter new markets, expand their reach, and open up new growth opportunities.

3. Sustainability

Finally, a well-managed supply chain can lead to increased sustainability. By reducing waste, optimizing transportation and logistics, and partnering with suppliers that focus on environmental and social responsibility, businesses can minimize their impact on the planet and contribute to a more sustainable future.

4. Risk management

Another benefit of focusing on the supply chain is managing risk better. This can include reducing the reliance on a single supplier, implementing contingency plans for unexpected disruptions, and using data analytics to identify potential risks and mitigate their impact. By managing risk, businesses can protect themselves from potential issues in their operations and maintain continuity in facing challenges.

5. Improved efficiency and cost savings

SMBs can reduce waste and eliminate unnecessary steps by streamlining their supply chain processes. This leads to enhanced efficiency and cost savings. This can include implementing just-in-time inventory management techniques, using data analytics to identify bottlenecks and inefficiencies, and automating specific tasks to reduce the need for manual labor. Companies like Ikigai Labs provide world-class supply chain data analytics and automation products.

Conclusion

Small and medium businesses (SMBs) benefit greatly from focusing on their supply chain management. By streamlining their operations, reducing costs, improving customer satisfaction, and increasing competitiveness, SMBs can position themselves for success in a competitive marketplace. SMBs can follow the seven-step action plan to improve their supply chain management.

SMBs must remember that supply chain management is not a one-time fix but an ongoing process requiring constant attention and improvement. Hence, they should also outsource certain supply chain areas to the experts. This will help them scale up quickly without worrying about the operations’ scalability.

By making supply chain management a key focus of their business strategies, SMBs can gain a competitive edge and position themselves for long-term success.