Supply chain
management for small and medium sized businesses
It is time that a solution was
available
If you are an executive or owner of a small or medium-sized business, you are unlikely to receive many phone calls from supply chain management
(SCM) consultants, software suppliers, or systems integrators The
reason is simple: supply chain optimization systems are so expensive that almost all small and medium-sized businesses can not afford them.
The old model of integrated
manufacturing by large corporations, generally seen as inflexible, is now
being transformed into distributed manufacturing (and
outsourcing and offshoring are two additional enablers of this
approach). With today’s modern communication technologies, companies can now increase system flexibility by creating a supply chain involving multiple vendors rather than trying to do everything themselves. And who are these vendors? Well, while many are large companies, most are small and medium-sized companies.
 Think of Wal-Mart. The world's largest retailer buys from almost all Fortune 1000 companies that sell retail but many of Wal-Mart's suppliers are small companies. A client of mine that did almost $100 million business with Wal-Mart used to joke: When Wal-Mart tells us to jump, we all simply ask, "How
high?" My discussions with entrepreneurs and small business owners lead me to believe that while a business relationship with Wal-Mart is a matter of pride, it is not truly a business
relationship because they do not even ask how high they have to
jump. They simply start jumping hoping that it will make the
buyers happy. The Little Guy literally has no standing
next to the 800-pound gorilla. Now we all know that when doing business with Wal-Mart, you have to synchronize everything with its supply-chain. And if you have no supply chain management at your end, all you end up doing is spend a great deal of resources making sure that you don't screw up Wal-Mart's order. So who wins? Wal-Mart. And who loses? You. Because you don't know the value of supply chain management and can not afford to have all the sophisticated tools and systems used by large corporations.
(Related link: e-Procurement strategies for small businesses)
Supply chain focus is key in today's economy
Most large companies are already treating all their product-related needs as a components of the overall supply chain management. Think Nike. Make
nothing, just design and market. Transferring most of the responsibilities to the suppliers, these companies can then focus on what they do best, that is, their own product line. So what happens if you are a supplier to company like Nike? What happens if you do the same for half-a-dozen giants like Nike? If you do not know how to manage your supply chain, chances are you have a high-cost model that will soon make your uncompetitive.
Two major advantages that you will realize as a result of implementing the latest supply chain management systems are economies of scale and higher system efficiencies. Secondly, you can more efficiently manage your production schedules and inventory levels because these would be driven by demand from a pool of customers that you serve and by how efficiently you can meet the demand based on maximizing your internal resources.
This implies that supply chain management will need to become a major consideration for small and medium-sized businesses in the near future. You will have to integrate your information systems with those of your customers and suppliers in order to meet your obligations in the most cost-effective manner. Some of you will find it difficult to implement these systems because this can mean significant upfront capital investments but it might
soon become a matter of survival.
Right now, Microsoft and IBM are the only two companies that have
clearly identified small businesses as a target for their supply chain management offering. I am hoping that emergence of such systems on a wider scale will benefit not only small businesses, but their customers and other myriad industry players who are part of this group. By letting each company focus on its core business and getting better at managing alliances and partnerships, higher profits should result for everyone.
A focus on maximizing supply chain efficiencies will not only result in strong competitive advantages to each participant, it can also mean higher rates of innovation in the entire American
economy.
Related links: Ecommerce
for small and medium sized businesses Innovation
and globalization are linked
Supply chain efficiency improvement
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