The year 2020 has been quite challenging for small and medium enterprises in India. The lockdowns and restrictions on travel have surely disrupted the supply chain for many of you, leading to major losses. And as you know, achieving the right balance between demand and supply is essential if your B2B business has to operate smoothly and stay profitable. So, what is the silver lining? As an SME, you are inherently nimble and can adapt to changes pretty fast. Complicated processes and hierarchies that usually slow down decision-making in big organizations won’t hinder you. Hence, as a small business, you are in a better position to embrace supply chain management quickly, even if it seems overwhelming initially. So, read on to know about the different ways in which small businesses can benefit from supply chain management.
What is supply chain management?
Supply Chain Management (SCM) is the centralized management of the entire production flow of a good or service which involves understanding customer demand to sourcing, procurement, production and logistics. The main purpose of using supply chain management is to fulfil demand, increase customer value, improve responsiveness and ensure financial success. Efficiently running supply chains will enable you to lower your supply chain costs, increase overall productivity and maintain the required level of inventory for raw and finished goods.
Here are few of the key benefits of SCM:
• Improved Inventory
Supply chain management enables SMEs improve the flow of a product by forecasting demand and sales precisely. It helps avoid under-production and aids in determining the ideal amount of inventory required and where it should be stored in the supply chain to fulfil market demand. Supply chain management provides you with complete insight into the movements of goods from the supplier to the customer. It can help you design accurate supply schedules and avoid excess usage of warehouse space and resources, thus helping you cut costs. Supply chain management helps track products, information and finances, which help prevent delays.
• Cost reduction
Supply chain management helps you reduce costs by optimizing the warehousing, logistics and delivery processes. Costs are controlled by improving your inventory system and adjusting space for the storage of finished goods as per market demand. Supply chain management also helps identify potential areas of cost reduction by tracking information about orders, payments, storage details, transportation, stock and wastage. This enables you to be more cost-effective by automating processes which are duplicate or redundant. Supply chain management also provides better accounting features that can make your billing process more accurate and error-free.
• Vendor tie-up
For a small business, vendors play an important role in supply chain management. It is very important for you to know which vendor would be able to give the best prices for products and services. Supply chain management can help you evaluate vendors based on their charges, past performance in fulfilling orders and quality of services. This will, in turn, save time and money while selecting a vendor for your company. Supply chain management will help you partner with the best vendor available and also improve vendor performance and renegotiate contracts based on actual performance.
• Increased efficiency in delivery time
Establishing a proper channel for communication among the various parties involved in a supply chain is essential for avoiding last-minute delays. Lack of communication can impact the trust of customers and may also lead to loss of business for your company. Supply chain management helps SMEs synchronize data in a central location, which in turn increases the seamless flow of information to the various sections of the supply chain. Availability of information in real time will allow you to better plan delivery schedules and prevent any delays. Supply chain management can also provide your customers with a platform to track their orders and be aware of any changes in the delivery time.
By optimizing supply chain management, SMEs can achieve transparency across all activities and put together an efficient system that reduces risk and provides a competitive edge. Supply chain management can help you save money on total operational costs, reduce supply cycle time and mitigate delivery challenges.