By TradeIndia Team in General — 26 Nov 2022

Supply Chain Management for SMEs: An Overview of the Implications for the Sector

Introduction

Do you have a good understanding of supply chain management (SCM)? It implies that a significant amount of logistics and management labor is required to create an ecosystem of product supply critical to the company's proper operation It directly impacts the manufacturing process, enhancing several operational factors. This method may be beneficial to small company owners as well. With that in mind, we've put together a guide to show you how supply chain management may help your small company expand. You are undoubtedly searching for strategies to increase your profits as a small company owner. Improving your supply chain is one of the first things you should do if you want to enhance the amount of money your company produces.

So, do you want to learn more about supply chain management? Keep reading to know everything about supply chain management and how it impacts small and medium enterprises (SMEs).

What is Supply Chain Management?

Supply chain management refers to managing a product's or service's complete manufacturing cycle, from raw materials accumulation all the way to the delivery of the end products to the customer. It includes all the players that play a part in the chain that is critical to the production and sale of manufactured products. A business establishes a network of suppliers ("links" in the chain) right from the raw material suppliers to retail outlets directly selling products to the consumers.

What is SME Supply Chain Management?

Owners of SMEs must recognize sitting on an untapped gold mine. It's the system they use to manage their supply chain. Although SMEs have access to a plethora of software that helps them make difficult decisions daily, such as what to purchase when to buy it, how much to buy it, and where to buy it from. It's astonishing because, although we've been living in the information age for decades, many SME owners still don't understand that IT solutions, such as SCM systems, are only as good as the data put into them.

In what ways supply chain management impacts the sector?

Companies continuously seek to improve their efficiency by re-evaluating their internal business processes in an age of globalization and severe competition. Supply Chain Management is a concept that allows businesses to collaborate with consumers and suppliers by sharing vision, expertise, and information to create a collaborative supply chain that may help them gain a competitive advantage. SCM is very critical to the success of SMEs all over the world. Companies that manage supply chains well gradually build their credibility, capability, and scope for expansion in the future.

Impact of supply chain management on the SMEs

1. The supply chain's digital transformation

The foundation for its effective execution is a comprehensive supply chain digitization plan. Assessing how sustainable and prosperous a firm will be in the future relies heavily on evaluating the current process—focusing on key performance indicators (KPIs) such as cost reduction and process optimization. The digital adoption wave is driven by evaluating customer service performance metrics, optimizing machine workload, and upgrading a facility. It necessitates a technology-first approach to product development, from conceptualization to design to component manufacture. Second, a corporation should not digitalize its whole supply chain at once. Initially, optimizing the supply chain at the proper spots is enough to enhance the process significantly. Another significant factor is data transparency.

These are the imperatives that a firm must examine before starting initiatives to digitize its supply chain:

Making critical information available to everyone engaged in the supply chain
Providing data transparency
Optimizing the supply chain

2. Transparency and a solid foundation for long-term decision-making

Implementation of a single business platform that integrates all departments and provides a user-friendly interface and a linked, interactive environment. The process is further simplified by creating a transparent data pool accessible to all departments and containing centrally kept firm data, allowing for improved decision-making and faster production processes.

Such integrated solutions are suitable for accelerating supply chain management's digital adoption. It provides applications for computer-assisted decision-making in addition to a central data pool. It is accelerating a company's process of evaluating its supply chain from many perspectives and optimizing it appropriately.

Also Read: Impact of Digitalisation on B2B Ecommerce during Covid-19 Pandemic

3.Made-to-order vs. made-to-stock

The way items are made now will continue to evolve. In the supply chain, there are two traditional concepts: make-to-stock (MtS) and make-to-order (MTO). The so-called order penetration point in the supply chain varies depending on how a firm creates its goods. MTO puts a more significant strain on supply chain procedures than Mts, which depends on order penetration to meet public demand. And it is here that supply chain digitization plays a critical role. Nowadays, many businesses must choose between cost and service when developing their supply chains.

4. Personalization

Enhancing customer experience and maintaining consumer engagement is the primary problem and priority area for businesses now, and much more so in the future. We recently discovered that, regardless of their location, most customers would buy customized items with a quick delivery service. It indicates that the market has a sizable demand for businesses and their supply networks. And its trend prediction demonstrates why organizations must act quickly to address the digitization of their supply chain.

Many businesses are on the verge of digital transformation due to the worldwide Covid-19 pandemic. Future expectations and requirements can no longer meet without a supply chain that is fully integrated and digitized. That means examining, challenging, and improving existing processes may lead to becoming a market leader in various industries.

As a result, processes may be designed and executed throughout the company, allowing for holistic choices. The worldwide pandemic has accelerated consumer and business digital adoption in only seven months by five years. Businesses should concentrate on supply chain digital remodeling as one of the main foundations of their company dynamics in light of the shifting global marketplace.

What are the potential benefits of supply chain management to SMEs?

The proper implementation of management methods may result in considerable cost savings, which directly influences the company's financial outcomes. Its model has six competitive advantages, which are listed below.

1. Cost-Cutting

Supply chain management, as previously said, allows for exact and professional behavior in the management of supplies and other related elements. Consequently, extra expenditures and production surpluses are significantly reduced, lowering costs.

2. Profits Increase

It is self-evident that the lower the expenses, the higher the activity's profits. It is one of the most significant competitive benefits of implementing supply chain management for small enterprises.

3. Improved Customer Experience

Promoting a positive shopping experience benefits both consumers and the company's organic development. Customers are essential to a company's growth and success of its business.

4. Improve your Competitiveness

The outcomes will increase competitiveness if the product has higher quality, a reasonable price for the buyers, and excellent delivery.

5. Operational Integration

Supply chain management also allows for the integration of operations, which is a distinct advantage in today's globalized world, where there is so much information and commercial opportunities since integration allows for the improvement of all processes. Technologies like barcodes and the newest RFID (Radio Frequency Identification) are examples of how information may be exchanged via integrated systems, making it more straightforward for people to communicate.

6. Adaptability

Nowadays, processing speed is critical for improving billing and acquiring additional clients. It is feasible to employ various strategies, such as ‘Lean Manufacturing’ and ‘Just in Time, to shorten the time that inventory stays stalled if you know how to use supply chain management in the organization. The sooner the procedure is completed, the cheaper the inventory and transportation costs, distribution, and other charges will be.

Conclusion

There seems to be some ambiguity when it comes to the word “supply chain”. There is also the prevalent norm of equating supply chain management to logistics though the latter is only a part of the former. When they hear of SCM many people think of tractor-trailers, enormous container ships, forklifts, and massive warehouses when they think of the service business, but what about it? Many people are unaware that a “supply chain includes not just physical goods but also services. With the steady influx of digital start-ups, many young entrepreneurs lack the necessary business experience to develop a viable supply chain strategy for their new firm. Of course, the product is essential to a successful company, but so is a solid technique for continuing to create or offer that product or service. It is where logistics and supply chain management come into play.