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The Importance of Supply Chain Management (SCM) for Small Businesses

A reliable supply chain is a key element of any business's success.
Without it, you will not have the assurance that you will get what you want, when you want it, and at the price you expect.

Although it may seem a better option to find suppliers here and there, it is important to have a solid supply chain in place.

Small to medium size businesses face enough problems without needing to worry about what is happening further up in the manufacturing process - so good supply chain management is not something only large to enterprise organisations should be placing emphasis on.

What is supply chain management and why is it so important?
SCM is about building positive relationships between yourself and the people who you rely on to help fulfil your orders and keep your customers happy.

Poor supply chains can lead to substandard materials and delays in your customers' orders, which could result in increased costs, unhappy customers and ultimately, loss of revenue.

Your customers won't care about the reason you don't fulfil an order on time. They just know that they didn't get what they wanted; your supply chain and you are one and all to them.

How can you improve your supply chain?
  • Communication
What materials and components are you looking for? What are your lead times? How often do you need them?
Customers expect certainty from you and the same should be expected from your suppliers; but they can only do it right if they understand what you want.

Suppliers are business owners and want to be able to deliver on time. Many suppliers will be small businesses trying to establish their own customer base and they will want to accommodate you, but they need to know your requirements.

These requirements may change as you grow. You may be able to start new lines of production or enter new markets; or you might just be increasing your current output.

Regardless of the outcome, your supply chain must adapt to you. However, it will still need guidance from you.
  • You are in control
Do not fall for the trap of believing you are too small to make decisions. It doesn't matter if you aren't their biggest customer right now, your suppliers should want to contribute to your success as this will only benefit them in the long run.

Get to know them. Establish regular communication channels and communicate with them often. They will value your feedback just as much as you do from customers.

The relationship should be mutually beneficial, with your key suppliers sharing your success thanks to bigger and more frequent orders.
  • Manage the risks
Although risk cannot be eliminated, it can be managed.

Your established supply chain should be able to last for many years. However, it is important to do your research before you make any decisions.

Which country are your suppliers located? What are their other commitments What is their track record?
You shouldn't rely solely on Google searches. You can ask any members of business groups for information about potential suppliers if you are a member. Are they punctual? Do they have good working relationships with other manufacturers?

It is important to keep an eye on everything throughout your relationship. If a supplier begins asking for payments terms, such as cash up front, it may be worth making discreet inquiries to understand if this is part of a wider issue with cashflow or losing contracts elsewhere, for example.

Even though you may want to stay loyal, it is important to know the details of other suppliers. You need to be able take immediate action if something goes wrong in your supply chain, to mitigate the risks of business interruption while looking for an alternative source for your materials.
  • Other things to consider
It is a good idea to discuss confidentiality agreements with suppliers, especially if you have trade secrets that you wish to keep private.

This is not just to prevent your suppliers from doing you a disservice, sometimes they may not realise the commercial sensitivity of your business. Ask them if they have any internal procedures that prevent employees from taking your information with them when they move.

Traceability is another key concept here. Are you aware if all the components further up the supply chain are ethically sourced? If you use components made using slave labour or the supplier has poor environmental records, it runs the risk of impacting your reputation – and sales.

Software for Supply Chain Management
Taking these basics into consideration, it is worth thinking about the type of supply chain management software that can assist with your SCM. 

This type of investment will repay you over and over and can be used to coordinate your entire business' supply chain, including inventory planning, production, storage, and distribution.

SCM software will keep everything running smoothly, regardless of whether you use Just in Time manufacturing.
Explore the supply chain software solution we provide which is tailored for small and medium sized businesses.

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