When it comes to supply chain challenges, SMEs usually find themselves in the same leaky boat as their larger-enterprise cousins. But small-business owners invariably have fewer fixit options than do the captains of the behemoths and hence, are at a higher risk of steering into the rocks.
Supply Chain Operations: Corporate Playing Field, SME Minefield
The supply chain challenges are largely the same for all businesses, big and small. However, due to the scale of economies, the small business owner invariably has fewer resources to face up to the challenges than does the large scale industrialist.
And what are often little more than minor logistical irritations for big businesses, can be gigantic hurdles for small-business owners, and a struggle to surmount.
Let us first look at some of the supply chain challenges common to SMEs and larger enterprises. After that, we will examine why these challenges may be tougher for small businesses to overcome.
Leading Supply Chain Challenges for All Businesses
If you are the owner of a small to medium-sized enterprise or are involved in supply chain management for such a business, you will in all likelihood be familiar with the following challenges:
- Meeting ever-demanding customer-service expectations
- Keeping a tight grip on costs
- Ensuring a constant cash flow
- Attaining supply chain visibility
- Building and sustaining partner and supplier relationships
- Keeping abreast of technological developments.
Let’s look at these challenges in turn, and explore the different ways that they impact small businesses and large enterprises.
The large corporation can afford to splurge on the best marketing talent available and to build entire teams dedicated to keeping the customer satisfied by:
- Maintaining tight control on the supply chain to prevent delays in the fulfillment of orders
- Facilitating the movement of products from the warehouse to the store
- Making sure that home deliveries are carried out timeously.
The small business, by contrast, often falls short when it comes to customer service, usually for the following reasons:
- The management team does not know how to develop a formalised customer service policy.
- If policies are in place, their goals are often unrealistic and inappropriate.
- Policies are developed without a real understanding of what customers want or expect.
- Appropriate measurements are not in place to drive customer service performance.
Reining in Costs
Once again it comes down to calibre of talent. Large enterprises can trawl the deeper waters for the biggest fish, while small business owners have to get by with the local ‘catch of the day’.
Top financial controllers employed by large corporations enforce a disciplined approach, cutting down costs by drafting an annual budget, setting spending targets, and tracking sales and expenses.
The small-business team, by contrast, often comprises members wearing many hats while adopting a plate-spinning approach, plugging gaps as they arise rather than formulating sound business growth strategies.
The biggest danger for the small business owner: Unplanned spending when times are good.
Cash and Finance
Of all supply chain challenges, this is the one that besets small to medium-sized enterprises more drastically than it does larger enterprises.
There are numerous reasons for this:
- SMEs have limited access to loans from banks and financial institutions, forcing the entrepreneur to borrow money from friends and family and to use savings to set up her or his business.
- Many SME owners struggle to understand the ins and outs of alternative credit facilities and therefore do not make use of them.
- Because they have limited clout, SMEs invariably have to pay procurement costs in advance, while their clients, often large organisations, insist on 30-90 day payment options.
- The small or mid-sized entrepreneur generally has few assets available to serve as collateral for borrowing.
Supply Chain Visibility
Without IT budgets commensurate with those of large corporations, SMEs will find it tough to attain the levels of visibility needed for their supply chains to be competitive.
Even large enterprises struggle to achieve full transparency, despite investing heavily in sophisticated solutions.
Unlike other supply chain technologies, which are seeing falling prices, supply chain visibility (SCV) costs are escalating. Additionally, SCV specialists are focused on the visibility problem of the larger corporations, leaving SMEs with a limited range of options.
Partner and Supplier Relationships
This challenge, for once, is at times easier met by SMEs than by larger enterprises, provided they choose local suppliers and partners that operate on a similar scale to their own companies.
Example: Adeline runs a thriving fish and chip business in a seaside resort. Two local fishermen supply her with all the seafood she needs, and she often meets them in the harbour on their return from a night’s fishing to personally select the best of the catch. Potato farmers in the area supply her with her spuds.
But this type of partner-supplier relationship is becoming more and more the exception rather than the rule. Typically, the SME does not have sufficient clout to call the shots with large suppliers, especially as globalisation cultivates markets with fewer and larger participants.
Keeping up With the Technological Joneses
Once again SMEs come out second best in the scramble for limited IT talent, with the big-budget corporations luring away the leading lights. Without a wealth of expertise to draw on, the small-business owner can find it tough to implement the technology needed to achieve efficiencies and reduce supply chain costs.
Despite the Challenges, the SME Future is Bright
SMEs remain the backbone of the European and United States economies, representing 99 percent of all businesses in the EU, and accounting for 98 percent of all identified exporters in America. In Australia, SMEs account for 97.4 percent of all businesses.
So, despite all the obstacles, small to medium-sized businesses—and their supply chains— are not only thriving, but are a collective force to be reckoned with.
Challenges may have more impact, and solutions harder to implement, but by leveraging external assistance from expert partners and consulting professionals, SMEs can be supply chain leaders too… But don’t tell the big boys we said so.
If you’d like some assistance with supply chain issues, whether they be customer services, financial management, cash flow problems, supply chain visibility, building partner-supplier relationships, and/or technological expertise, Dawson Consulting is here to help you. Contact us today and speak to one of our team members.