Managing the Mini Supply Chain

How SMBs can better manage their condensed supply chains for competitive advantage


As the United States continues to shift its focus toward consumerism and convenience, the mega-companies of the world have come to dominate the attention of the media. However, we rarely hear how the nation's small and medium businesses (SMBs) are largely unprepared to meet the supply chain's new rules and technologies, as they are often forced to adapt in order to continue doing business with the "Wal-Marts" and "Fords" of the world. Thus, the gap between SMBs and large business supply chains has widened, and the challenge presented to today's SMBs is how to do business and compete with large companies.

A supply chain is a coordinated system of entities, activities, information and resources designed to move a product from supplier to customer. The components of a supply chain typically consist of manufacturers, service providers, distributors and retail outlets, all working to fulfill customer demands through the most efficient use of resources.

Just what is the difference between the supply chain of an SMB and a large company? The main differences between the two entities come down to financial resources, staff size, expertise and overall critical mass. As one would predict, large supply chain companies typically have strong cash reserves and/or access to credit on favorable terms, which enables them to spend significant amounts of money on the newest emerging technologies. In contrast, SMBs need to balance their need for new technologies with cost-effective business strategies due to their limited resources. Large supply chains have more human resources, therefore allowing multiple people to complete tasks, whereas SMBs are often left relying on a limited staff to perform a variety of functions. In a demanding market, large businesses often dominate because they have the tools necessary to process an order from start to finish in record time, whereas SMBs often need extra time and resources to complete the same tasks. These differences are also directly linked to the challenges SMB supply chains face today.

The Challenges of Today's SMB

The challenges facing today's SMBs are numerous but include the need to keep pace with rapidly changing rules and technology requirements, anticipating changes in customer buying patterns and developing a supply chain that starts with the supplier and ends with the customers' customers.

Large customers will inevitably place more responsibility onto their SMB suppliers by demanding timely market forecasts and inventory management. Practices such as just-in-time delivery, on-time delivery, fulfillment of sales based on market demand and lower prices will eventually become standard operating procedure. In return, SMBs will be expected to anticipate changes in their customers' customers buying patterns to help their customers increase inventory turnover and raise profitability (1). The following questions naturally result: How does a small or midsize company satisfy the demands of large customers? In addition, is there a product that can enable SMBs to meet the demands and expectations of larger companies?

In order to effectively manage their supply chains and large customers, SMBs will often acquire new technology to improve their efficiencies. In a recent research survey, it was noted that 52 percent of manufacturing SMBs bought or upgraded their business management applications to drive operating efficiency, and 58 percent did so in order to increase their work productivity (2). However, investing in new technologies also presents a challenge to SMBs, as cost is a major factor. Large companies can justify expensive purchases of software for optimization, but smaller companies do not have this luxury, as most traditional supply chain management software is too expensive and complex to meet the needs of SMBs. Furthermore, smaller suppliers often do not have a sufficient volume of transactions to justify the purchase of a costly business management solution, and many of these suppliers do not have the capability or resources to avail themselves of advances in technology. Thus, the challenge for the SMB lies in balancing the need to gain efficiencies through technology with the cost and resource commitments associated with deployment of such new technology.

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