Understanding Supply Chain Management for Small Businesses

Supply chain management, as the name suggests, is the process of ensuring a company’s supply chain works smoothly. This involves several steps, from sourcing the necessary goods to delivering finished products to customers. Many business owners think that SCM only applies to manufacturers or huge national brands. In reality, it’s something that many small businesses can and should implement right away.

The Basics of Supply Chain Management for Small Businesses

At this point, a common question is what SCM really is. The best way to explain it is to think of streamlining every step in the journey of your business’s products. SCM focuses on helping you get the things you need to offer high-quality products to customers, and then be able to deliver those goods to your clients on time. This area of business is closely related to effective and profitable sales operations.

There are several main parts of SCM that are applicable for manufacturers and distributors alike: planning, sourcing, production, distribution and customer returns. The only differences depend on your business model. For manufacturers, the sourcing phase involves acquisition of raw materials. For distributors, it means finding suppliers of high-quality goods with prices that allow your business to make a profit.

The production phase differs as well. Manufacturers control production in-house. Distributors, resellers, wholesalers and exporters don’t produce goods themselves, but they do handle inventory management, storage and similar processes.

Ways To Improve the Supply Chain for Your Small Business

While your annual sales may not stack up against national or international companies, that doesn’t mean that you can’t benefit from good SCM practices. The same techniques that work for the bigger fish can also help your company increase profits and reduce costs.

Start by planning. This often-overlooked phase can have a huge impact on your finished results and total profits. For one thing, it allows you to understand what your customers really want. The better you understand their needs, the better equipped you are to deliver every time.

For example, do your clients always order the same amount every month, or do they follow a pattern throughout the year? Some businesses never check for this information, and they end up running short of inventory when clients order a larger-than-normal amount of goods. By looking at the past few years of client habits, though, patterns often emerge that can help you plan your business operations.

Pay attention to seasonal variations as well, both in terms of sourced goods and customer ordering habits. There may be certain times of the year when raw materials or goods have a lower price. Stocking up then can save you money. Knowing ahead of time that clients are likely to increase their ordering habits allows you to avoid back orders, make your clients happy and maximize your profits during the busy seasons.

The Importance of Vendor Relationships

While saving money is important for your bottom line, price shouldn’t be the only factor that comes into play when you choose which suppliers to work with. Industry experience, dependability and flexibility are often just as important. Consider this: A single botched order for a large-scale client can end up costing you that client if you don’t resolve it quickly. Suppliers that are willing to be flexible and help you out in emergencies can help you keep your clients and continue profiting long into the future. That’s worth more than saving a few pennies in the short term.

At the same time, if you notice strange chargers or pricing that isn’t what was agreed to, it may be time to look for a different supplier. Trust is everything for small businesses and their customers.

Good Returns Policies

SCM also includes a step that many small businesses don’t think about: returns. It’s incredible the difference it makes for client relationships when you make it easy to return defective products. Mistakes are inevitable in business, but by turning negatives into positives, you can retain your company’s reputation for quality and customer satisfaction.

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