As a consulting company specialising in helping small businesses improve their supply chains, we like to think we’re well aware of the specific challenges SMEs face in managing the balance of supply and demand.
Many of those challenges are similar to the ones faced by larger enterprises, but are there any supply chain challenges unique to smaller businesses?
In this article we’ll explore that very question. Let’s begin with some of the challenges SMEs share with larger enterprises, and take a look at how and why they might be tougher for small businesses to overcome.
Top Supply Chain Challenges for All Businesses
If you’re running a small to medium-sized enterprise, or are engaged in supply chain management for such a business, you can probably relate to all of the following challenges:
- Meeting increasingly high customer-service expectations
- Keeping control of costs, especially those related to transportation
- Risk identification and mitigation
- Achieving supply chain visibility
- Building and maintaining supplier and partner relationships
- Keeping up-to-date with technology developments
All of these challenges exist for large enterprises too, but the last three on the list above can be particularly tricky for smaller businesses to get to grips with. For example…
Supplier and Partner Relationships
Smaller companies often find themselves at a disadvantage when it comes to supplier relationships, since unless suppliers or partners are also small businesses, the buyer does not have the scale to create leverage.
If yours is a company with a $50 million annual turnover for example, it’s not going to be easy to create a balanced relationship with a supplier turning over $500 million.
You’re always going to be a small customer with little in the way of clout. One way to avoid this issue is to choose suppliers and partners that operate on a similar scale to your own company, but in reality, this is often not possible, especially as global consolidation continues to cultivate markets with fewer and larger participants.
Supply Chain Visibility
Without the information technology budgets to match large corporations, it can be a huge challenge to achieve the levels of visibility required for your supply chain to be competitive.
Let’s face it, even the majority of large enterprises struggle to achieve full transparency, despite heavy investment in increasingly sophisticated solutions.
While many supply chain technologies are subject to falling prices, supply chain visibility (SCV) is not one of them, and vendors, in the main, are focused on solving the visibility problem for multinational corporations, leaving SMEs with a limited range of SCV options.
Keeping Pace with the Technology Race
It seems that ever since spreadsheets gave way to powerful enterprise computing platforms, such as ERP, WMS, TMS, and SCM, the pace of technology development has left even the largest corporations struggling to keep up.
Many large supply chain organisations are struggling with the transition from legacy solutions to the latest cloud platforms, and it’s not at all unusual for a company to have a “patchwork quilt” of systems and applications in place.
Small and medium-sized enterprises typically have modest IT budgets, making it even tougher to apply technology to gain efficiencies and supply chain cost savings. They are less able to upgrade capabilities frequently or invest in expensive warehouse automation, even though to do so could save significant sums of money over the longer term.
Cash is the Biggest Challenge for SMEs
If there is one supply chain challenge that besets SMEs more emphatically than larger enterprises, it’s cash and finance, as you might have surmised from the commentary in this article thus far.
However, this issue extends far beyond the ability to invest in digital systems and negotiate favourable prices with suppliers.
Cash-flow in particular, can be a constant source of worry, with little resilience to issues like late payments from customers or overestimation of inventory requirements. The need to minimise working capital requirements is ever-present, but it’s never easily met, given constant pressure to ensure inventory availability is not compromised.
Where There are Challenges, There are Opportunities
Early in the life of a small or medium enterprise, supply chain challenges can be a major cause of concern, but they don’t have to threaten performance or growth. Indeed, there are opportunities hiding within every challenge and in some respects, SMEs have the edge over larger companies when it comes to unlocking them (greater agility and shorter reaction times, for instance).
That doesn’t necessarily make SME supply chain challenges seem any less overwhelming though, which is why it can often be a good idea to engage some external help to address them.
If you’d like some help confronting procurement, inventory, freight, warehousing or customer service challenges in your company’s supply chain, Dawson Consulting is here to help. The chances are that whatever your supply chain challenges, we’ve the skills and experience to help you overcome it, so why not contact us and speak to one of our team members?