A Publication of WTVP

With the world continuing to become an increasingly global and competitive marketplace, the focus on supply chains will undoubtedly continue to rise in importance in the future.

Often, the companies that dominate supply chains are Fortune 500 companies that have been responsible for many of the new concepts and technology in the supply chain. Unfortunately, small- and medium-sized businesses (SMBs) have been much slower to adopt new supply chain concepts and technologies, mainly because they’re unable to apply them in the same manner as larger organizations.

As Charles Darwin said, “It’s not the strongest of the species that survive, not the most intelligent, but the one most responsive to change.” This may be a decided advantage for SMBs that can often respond to change more quickly than their larger competitors.

Large vs. SMBs—Challenges and Opportunities
Resources, stage of evolution and awareness—Many large companies have a centralized supply chain function with personnel who have a deep knowledge of supply chain strategy and operations. Most SMBs focus on individual plants or distribution centers within the company and, consequently, are more decentralized with an emphasis on local profitability and efficiency. Smaller plant staff typically don’t have the supply chain background to even be aware of opportunities beyond their local operations. This may result in the SMB missing out on higher overall efficiencies and cost reductions through collaboration among multiple locations and the entire supply chain.

Most SMBs have some type of an enterprise resource planning (ERP) system but still operate in functional silos. Usually, little thought is given to how technology could provide tools for supply chain management. Unfortunately, the cost and complexity of supply chain technology is typically far too sophisticated to be a benefit decision for a midsized company. However, this market is beginning to change. Top ERP and supply chain vendors realize the tremendous potential of the midsized segment and have developed less complex versions (turning off many of the bells and whistles not needed by midsized companies). The SMB can minimize the risk of implementing new technology by selecting long-established software suppliers with stable, proven technologies rather than the “latest and greatest” technology solutions recently released to the market.

Supplier Collaboration
Strategic vs. tactical—Many SMBs view the role of procurement within their organization as ensuring the production line doesn’t experience material shortages and negotiating the lowest prices on the items. If merchandise can be sourced for a smaller fee, switching vendors is common, regardless of their performance with delivery, quality and value-added services. Most procurement decisions are made on a tactical basis and very little feedback on future requirements, expectations and performance are given to the supplier. Many SMBs don’t realize supplier relationship management and sourcing can have a greater impact on profitability than any other area. Moving to strategic sourcing and supplier collaboration, which is more common in larger companies, can often reduce the cost of materials and services by 10 to 20 percent.

Customer Collaboration
Strategic vs. tactical—There has been much more interest and focus on customer relationship management in SMBs than on the supplier relationship side. But concentration still seems to be predominantly tactical rather than strategic. Even though numerous SMBs significantly invest in customer relationship management (CRM) software, they aren’t using the technology to forge strategic alliances with their customers. Rather, CRM software is used to track leads and consolidate information on the customer rather than further collaboration and partnering activities. Very little formal product forecasting, sales and operation planning and customer collaboration is actually being implemented in many SMBs.

SMBs have fewer resources to focus on supply chain management, but the potential advantages may be greater than those of larger companies. Since the increasing global markets are going to make the competition between supply chains more important than competition between companies, it’s critical that SMBs must address this change. This should start with top management—redirecting their emphasis from the traditional operations measures to a supply chain focus.

Bottom line: If SMBs don’t change their focus to include their supply chain, they may find future growth, profitability, and possibly even their very existence may be at risk. iBi