How Supply Chain Collaboration Can Save Money for SMEs
It stands to reason, doesn’t it? Instead of a half-empty truck travelling between one warehouse and a single retail outlet, why not adopt a co-operative approach in which multiple companies book pallet space for their products within a shared truck?
Transport costs are reduced for all the outlets involved and the number of half-empty trucks clogging the roads and spewing out harmful greenhouse gas emissions is reduced. It’s a win-win situation for everyone.
Collaboration as a Cost Saver
The above is just one example of the type of supply chain collaboration that can be negotiated between Small to Medium-Sized Enterprises (SMEs) and suppliers. The scope is far broader than this, of course. SMEs are increasingly exploring ways to collaborate with one another, with service providers, and with retailers, to reduce supply chain costs.
In a nutshell: Supply chain collaboration takes place when two or more distinct entities work together to attain shared goals, such as cost reduction.
However, when it comes to inter-SME collaboration, there are plenty of success stories but also some notable failures. When the wheels do come off during attempts to collaborate, one or more of the following issues is, more often than not, at the heart of the problem:
- Lack of diligence in choosing the right partners and matching inter-organisational needs
- Inadequate leadership and coordination among partners
- Absence of trust and reluctance to share important business information
- Failure of the partners to agree clear, shared objectives for the collaboration.
What Does Successful SME Collaboration Look Like?…
1) A clothing store and a footwear outlet who have set up small businesses in the same part of town agree to procure product from the same supplier but pledge not to overlap when it comes to items they will stock. They launch joint advertising campaigns, share marketing efforts, offer referrals to each other’s stores, and redirect business to each other’s websites.
2) A fast-food outlet would like to offer deliveries to boost orders, but doesn’t have the resources to invest in a delivery vehicle or to pay a driver. Solution: Outsource the job to a company that specialises in restaurant/fast-food deliveries.
3) Online exercise machine vendor Sam needs premises where potential customers can try out the equipment before buying. He approaches gym owner Paula and offers her a substantial discount on exercise machines if she will allow potential customers to drop by to make use of his ‘try before you buy’ offer.
…And What Does it Get you?
SMEs like those in the examples above, who do manage to get collaboration right, stand to gain some, and perhaps all, of the following cost-saving benefits:
- Lower inventory levels
- Improved customer service
- Lower transportation and warehousing costs
- Higher revenue growth
- Fewer supply disruptions
- Increased supply chain visibility
Learn More About Supply Chain Collaboration
Collaboration in the supply chain is becoming increasingly essential for businesses, big and small. If you’d like to learn more about this important subject, Dawson Consulting is here to assist you. Contact us today and speak to one of our team members.
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.