The Small Business Guide to Supply Chain Management

As a small business owner, making improvements to your supply chain could mean something as simple as assessing how and where you're storing your inventory, through to a far larger exercise, such as inspecting your ongoing production targets.

Anything that your business can do to improve the supply chain will help to minimise cost, and hopefully increase profit margins thereafter. 

The Supply Chain Briefly Explained

A supply chain is a network of businesses or individuals involved in helping a company to achieve its production objectives. Essentially, it's everyone and everything involved within the process of making products and then shipping them to customers.

Committing to continually improving your supply chain, is no insignificant undertaking, but as a small business, it could have a monumental impact going forward. 

An efficient supply chain makes optimal use of all available resources, such as:

·        Physical components.

·        Technology.

·        Finances.

·        Human resources.

In this piece, we're going to explore how to increase the efficiency and effectiveness within small business supply chains, and how your business could benefit from making such changes.

Efficiency & Effectiveness

Simply put, supply chain management comes down to how well you're managing the logistics of your business. This is categorised into two main objectives: efficiency and effectiveness; and although they may sound similar, they are two completely different things within a supply chain context.

·        Efficiency – relates to the way you're using your resources; how well they're organised; how they're used; when they're used and where your team is using them.

·        Effectiveness – is more about how your production workflows produce the desired outcomes, such as customer satisfaction, for example.

The perfect balance comes when your business can achieve both ideals and meet or go above and beyond the expectations of everyone in the chain.

The twist here though is the fact that your supply chain could be efficient but not effective, or effective but not efficient.

For instance, you may have ensured that your logistics are set up to work efficiently within a supply chain, where your products are manufactured and delivered to customers quickly, but this isn't the same as ensuring that these products will arrive in a condition that meets the expectations of the customers.

It might be the case that it takes absolutely no time at all from receiving raw materials to producing your products – but if these products aren't of the quality expected (your contractual obligations with your suppliers and customers will demand a certain level of quality), then you're failing to meet effectiveness standards.

On the other hand, if you're providing a consistent, high-quality service or product that always meets the expectations of the customers, then your supply chain is considered to be effective, but again, this doesn't mean it's as efficient as it could be.

Remember:

An efficient supply chain requires a review of all your internal structures to ensure that each aspect of production is performing exactly how you want it to.

An effective supply chain demands that external factors are taken into consideration, such as supplier constraints and the demand placed upon you by your customers.

If you’re to ensure that your business is working both efficiently and effectively, it means that you need to ensure that resources, such as time and capital are used in a way that both reduces waste and minimises the chance of error. It's also crucial that you remain in an ongoing dialogue with any external points of contact – including suppliers and customers – to ensure you're in a position to continue to deliver on expectations.

Supplier Management

It's of crucial importance that you're reviewing your suppliers and subsequent contracts regularly. To do this, ask yourself:

·        Are they delivering the quality you desire?

·        Are they there when you need them?

·        Are they consistently meeting Service Level Agreements?

·        Do you work well with them?

·        Are payment terms working in your favour, or theirs?

Understand Your Margins

Now we're on the verge of officially leaving the EU, major businesses in the UK will be targeting larger proportions of the UK market to compensate for the potential loss from EU operations – this will impact smaller businesses. However, of those small businesses, it's those that understand their economic surroundings and agreements with their suppliers that are least likely to suffer.

Everything in business is driven by the data (which is covered further in the point below), whether that's sales and marketing to production and HR. Smaller companies must dig deeper into the information they have available to them to give them the edge.

Analytics

Many smaller businesses rely on a well-oiled supply chain to ensure their business can continue to work both effectively and efficiently. As a consequence of the pandemic, Brexit and President Trump's trade wars with China, many businesses have been forced to adapt and even defer growth during these challenging periods.

However, by gaining a good grasp of the data you have to hand and using it successfully, it can make the difference between surviving and thriving in these turbulent times.

Cost Reviews

With a Brexit deal looking more and more unlikely by the day and the increase in the cost of goods sold due to the increased likelihood of needing to do business with countries outside Europe, now is the ideal time for small businesses to look for creative ways of lowering their costs.

This isn't to say that you should slash costs arbitrarily and damage strong relationships, since this could well do irreparable damage to your operation, rather it's an excellent time to take things back to basics to determine where you can safely cut costs to benefit the business in the long run, we’ll cover this in more detail below.

Communication Should Never Wane

Collaboration and interaction are important facets to any successful supply chain since it allows businesses to work closely together to improve one another's operations.

That said, collaboration can only be as good as the communication it's based upon, and that communication between your staff and those outside the operation is absolutely crucial if you're to achieve the much-desired efficiency and effectiveness that we've already talked about.

Why Quality Supply Chain Management is Critical

If you're handling your logistics correctly, and you've put together an efficient and effective supply chain, then it stands to sense and reason that your business is in the best possible shape to deliver financial success and keep the customers happy too.

But, there are some other good reasons why you should be on top of your logistics at all times, such as:

·        Suppliers will want to minimise the return of manufacturing materials.

·        When you're working with a 'right time logistics' model, it gives you scope to pay suppliers on a schedule that works in your favour, therefore improving cash flow.

·        Customers expect to have their purchases within a timeline that suits them, and you’ll be putting yourself in a great position to deliver this time and time again, with no lapses in quality.

You might be delivering a finished product, as a small business that makes bespoke stationery, for example. Or you might be playing a different role further up the supply chain, as a manufacturer of components for large machinery, such as cars, for instance.

However, wherever you are in the supply chain, ultimately, you have suppliers and customers, both of whom you need to retain a good relationship with to succeed.

Supply Chain Management Can Create Growth Opportunities

As a small business, striking the correct balance in how you manage your supply can create a significant change to your financial situation. In fact, even the slightest tweak can help to gain a greater semblance of control over the entire process, which could make a considerable difference from a cost perspective.

You could do this by employing the following methods:

·        Rolling out the Just-in-Time methodology to reduce unnecessary inventory and potential waste by receiving materials in precisely the right condition.

·        Creating a reduction in production overheads by managing the supplier services and retaining as much control as possible over incoming deliveries.

·        Cutting back on superfluous spend by installing an efficient workflow.

At one end of the chain, you need to inspect your storage infrastructure. From here you can then find ways to slim down your operation, which could help you cut back on warehousing overheads and any costs related to staffing. This could then result in a decrease in the number of assets you need to deliver a successful operation.

However, on the other end of the spectrum, if your operation is picking components from several different stock points within a production workflow, and you're able to realign the supply of these components into the production line itself, then you'll save time and money.

Of course, this may seem somewhat granular and time consuming, but once you're able to instil this detail-oriented approach right across the chain, any efficiency increases can very quickly translate to a healthier bottom line.

As your business develops, frequent reviews of how your business is managing the supply chain should be undertaken to continue to pinpoint greater improvement. The primary benefits of doing this are two-fold:

·        Improved management of supply chain processes increases delivery speeds to the customer.

·        You can turn around your product or service more quickly, which means you can send out invoices faster too.

Takeaways

The critical component of good supply chain management is a commitment to detail, which gives you a better understanding of your workflows, and opening and maintaining communication channels.

It's also a good idea to review components and products throughout the process – this could mean you’re tracking the chain from one end of the country to the other, or simply across the warehouse – either way the entire chain must be reviewed consistently.

Supply chain analysis must also become an integral part of the ongoing strategy, and this should ideally include partners, customers, suppliers and those who are crucial to the integrity of your own operation. 

At PacWolf, we're committed to ensuring we find the very best balance between efficiency and effectiveness.

Of course, this becomes even more crucial during this incredibly busy time of year. However, our staff are timely and efficient at handling this considerable increase in orders, which we manage for a range of clients on the run-up to the festive period.

If you require any assistance, then why not contact us today, to see how we can help to support your business?