Supply Chain Management is essentially a collaboration between a retailer and its manufacturing and wholesale distribution channel partners. This collaboration is usually driven by technology and is beneficial for all types of businesses; small and big, new and old. But while big, old, and big and old businesses often take full advantage of supply chain management, new small businesses don’t give it the importance and attention it deserves. It is important to note that in order to have an effective Vendor Managed Inventory system, companies should try to integrate advanced practices and the latest technology available.
There are four key ways in which an effective supply chain management can assist new small businesses:
Increase in Output
When done right, supply chain management opens a reliable communication channel between the management and the suppliers and customers which can be used to ensure the timely fulfilment of orders. As delays are eliminated from the process, outputs increase significantly.
Increase in Efficiency
A new small business’ operation efficiency takes the biggest hits when it comes to resource wastages, whether it be time, manpower, or raw materials. However, a good supply management strategy takes resource management into consideration and ensures the highest possible efficiency by promoting only the value-added activities. An increase in efficiency also means the business processes flow smoothly and the output stays in line with the company’s needs.
Reduction in Costs
Supply chain management identifies the processes that increase the cost without contributing value to the final product. These processes are trimmed down or removed entirely, resulting in lower operating costs.
Increase in Profits
As the new small business increases in output and efficiency and reduces its costs, the increase in profits becomes apparent. This, in turn, pushes the new small business towards becoming an established one.
Important Supply Chain Points Worth Focusing On
1. Supply Chain Network Design
Supply chain network design deals with outbound distribution from plants and warehouses. Most new small businesses don’t want to concern themselves with a predefined structure for moving materials and products through the stages of fulfilment. In most cases, a supply chain network design arises from a need rather than a plan.
Such an approach leads to a lack of resilience, unnecessary costs, and unwanted challenges in meeting customer service requirements. Thus, every new small business should consider the benefits of a design review and optimization exercise. You can keep the following pointers in mind while undertaking one:
- It should follow a disciplined approach towards collecting, cleansing and standardizing the supply chain data.
- It should efficiently perpetuate the knowledge surrounding supply chain network chain design.
- It should use a continual process of high-powered modelling and network design analysis.
- It should include a component for training the business’ supply chain teams.
2. Supply Chain Strategy
Most new small business owners consider supply chain to be a standalone business operation function. This means they fail to see the integration that should be present between supply chain and general business strategies.
A supply chain strategy makes achieving commercial goals possible, if not easier. This step then puts the company on track to achieve its corporate success as well. But what is it that defines a good supply chain strategy in the first place? The broad answer is that it should be able to support the overall strategy of your business.
3. Supply Chain Service Performance
Customer service and customer satisfaction shouldn’t be the end goal of supply chain management. Rather, it should diffuse every step of the business’ operations. It has been observed that customer satisfaction is directly linked to the performance of the supply chain.
This means the customer should by the primary focus when considering supply chain strategy, network design, and performance management. To put this into perspective, here are supply chain performance-related factors that can negatively affect customer experience:
- Long delivery lead times
- Inventory shortages
- Poor product and service quality
- Slow time to market
- Delays in response to customer service requests
All-new small businesses should be wary of these factors, no matter which type of business they’re running. For example, an innovation company that has slow time to market may lose to a bigger firm that’s targeting the same market segment, an online casino like Monster Casino could quickly lose its hard-earned trustworthiness after only a few delays in response to customer service requests, and a new speciality brand could stop dead in its tracks if it faces inventory shortages.
In conclusion, all new small businesses should give primary focus on supply chain management and ensure that it complies with all three supply chain points descrived above.