As a small business owner you are probably looking for ways to improve your profitability. One of the first places you should look at when wanting to increase the amount your business makes is by improving your supply chain. To help with that we have 6 ways that you can improve supply chain management in your business.
Before we get into the specific ways you can improve your supply chain, it is important to note that expanding your knowledge about supply chain management, evaluating your suppliers and staying up to date with trends in the industry will help you a great deal in increasing efficiency in your supply chain.
1. Use your placement in the market to create effective procurement strategies
To create an effective procurement strategy you are going to need to understand your business's place in the market. You should look into your products and potential market opportunities to create a strategy that works for your business.
You will need to evaluate what type of business you have and how that will affect the suppliers you choose. For example, if you are a low-cost provider the most important aspect when choosing suppliers is going to be cost. Evaluating the cost of suppliers will be an ongoing process.
Another example would be if your company is focused on building strong customer relationships, then you will need to select a strategy that puts customer service and not cost as the primary criteria when selecting a supplier. The goal will be to find suppliers that are service-oriented and able to meet the unique demands of your customers.
Your business may have a few other considerations when looking at your place in the market, such as if you are rushing a new product to market or if you are a business that provides speciality products. Understanding your place in the market will help you know how to find the right suppliers. Then, once you have found the right suppliers, it will be important to build those relationships to further improve your businesses supply chain management.
2. Nurture relationships with strong suppliers
The strength of your key suppliers is the foundation of an effective supply chain management strategy. A simple way to make sure that you have a good relationship with your suppliers is to make sure that they share your business values.
When you are trying to source potential suppliers work with industry specific directories, trade associations and professional publications. This will expose you to business-oriented suppliers who are more likely to share your values and meet your business needs.
No matter how small your business is, you should be able to build a good relationship with your suppliers. Typically, suppliers segment their customers by size, market and sales potential allowing them to maintain a good relationship with the businesses they work with. You will also find that a lot of the time suppliers are small businesses themselves. That presents an opportunity to grow with them.
Once you have started working with your suppliers, a key part of maintaining the relationship will be to continually assess how effective the partnership is. You should use specific data metrics to assess your suppliers performance.
3. Use quantitative and qualitative metrics to manage supplier performance
When you are assessing your suppliers performance you should identify key performance indicators (KPIs) such as on-time delivery and quality. Establishing the KPIs and tracking the performance will help you assess the supply chain efficiency and how it can be improved.
After you have established the KPIs you should set up a spreadsheet where you can track and analyze trends. You can continue to grow and optimise the supply chain from there. Showing this data to your suppliers can help strengthen your business relationship, giving you leverage in negotiations and helping your suppliers improve their operations. These conversations and analysis can help improve overall performance and reduce costs.
When you are setting up different performance measures, key metrics to track will be risk factors. You should set up a solid risk management strategy to be prepared for potential risks.
4. Manage risk in the extended supply chain with a risk management strategy
Risk is a part of running a business and small businesses may be more vulnerable due to their lower financial position and lack of leverage. Creating an in-depth risk management strategy will go a long way in minimising risk in the supply chain. In your strategy you should specifically look at critical items and potential workarounds for any supply disruptions.
To help you make sure that you can ensure continuity of supply you should identify suppliers that are critical to your supply chain. You should also ask your suppliers how they mitigate risk and include that in your strategy.
When you are discussing potential risks with your suppliers, you should also look at more opportunities. A great way to look into opportunities and risks is to use demand planning.
5. Use demand planning to improve efficiency
In your discussions with your suppliers using demand planning will help you improve your supply chain efficiency. Demand planning is when a business uses historical demand data to forecast potential demand in the future. For example, if you know that sunglasses sell better around September then you can use demand planning to work with your supply chain partners to ensure that you have enough sunglasses to meet the demand in September.
Once you have completed your supply chain management strategy including demand planning, key suppliers, potential risks and key metrics the next step will be to integrate your supply chain strategy with your overall business strategy.
6. Create and integrate your supply chain strategy with your business strategy
Integrating your supply chain and overall business strategies will help improve both the business and supply chain efficiency. When you are creating this strategy you will need to look into potential suppliers, plan for performance tracking and include risk management strategies. A good supply chain strategy should be aligned with your business strategy and goals.
This will help you achieve your commercial goals more easily. Ensuring you take your time to plan the strategy out will be invaluable.
Continue improving your supply chain management
Using the six steps mentioned above will help you improve your supply chain management as a small business. However, it is important to not become complacent, continue finding ways to improve. Look for courses to expand your knowledge, stay up to date with trends and see if there are more ways to improve your supply chain.
Optimization of your supply chain will go a long way in helping your business grow. Make sure to find more opportunities to optimize your supply chain at every point. Hopefully, this list will serve as a good starting point for your small business to increase its efficiency and profitability.