Robust supply chain management is vital to success, whether trading domestically or internationally. We sought advice for SMEs from a leading academic.
Always remember that it is supply chains that compete, not individual companies,” says Professor Richard Wilding OBE, Full Professor & Chair of Supply Chain Strategy, Cranfield School of Management. “You are only going to be as good as your worst supplier.” This understanding is fundamental to the management of supply chain risk. To build a truly competitive strategy, a business must know what creates value for its customers. If it has clarity here, it can design a supply chain to deliver that value. For Professor Wilding, the following design advice can help.
It is vital to know where your customers and your suppliers are located and where you fit into that overall supply chain network. If something changes in that network, you should be able to maintain your position.
Even if it means putting pins into a map, as soon as you are able, visualise and understand the geography of your network, which will enable you to manage risk more appropriately. In understanding where goods may be travelling from and to, when you hear of an event or issue in a country that is likely to disturb that flow, your awareness will already have facilitated proper contingency planning.
This should include scenario planning for potential events and natural disruptions (such as storms or earthquakes). This will provide you with a view on how your operations could be affected and how you could mitigate the risks.
Avoid paralysis through analysis though – take firm decisions. The plan does not need to be too in-depth to work; just ensure you do not start planning during an emergency!
You can keep connected to your supply chain by using the information services of banks, insurers, travel advisory firms, the Government’s Home and Foreign offices and organisations such as DIT and the Met Office.
Essential information may simply be knowing key supply chain contacts. Be proactive to maintain relationships. For an SME, this might be as simple as a regular phone call. Should something go awry you immediately have a point of contact to help manage that issue.
Transparency is increasingly important in efficient supply chains. Companies that can digitally connect into the supply chain and manage the flow of goods can better manage risks.
However, technology changes quickly and IT management can be resource intensive. Many vendors offer cloudbased systems, which are owned and maintained by the vendor, making them cheaper than installed technologies.
Regardless of system used, it is essential that all companies have appropriate data back-up strategies to ensure supply chain continuity. Back-up must be kept in a different location from the main data source. For the SME, cloud-based systems potentially offer greater security and disaster recovery than installed technologies.
When communicating with customers or suppliers, you need clarity in terms of what you are doing and how your processes work for you. The danger with the smaller business is that everybody knows how these processes are supposed to work.
Ask yourself if that knowledge can be communicated quickly and easily. If you lose a key member of staff, would you be able to maintain that process or need to reinvent it?
You should map the processes in your supply chain. This does not need to be highly detailed, just easily understandable. I recommend the time-based mapping approach. Time is the most critical dimension in supply chains: each participant has its own processes but if each understands how long its processes take to complete and monitors those measures for potential improvements, this will be of advantage to all players in the supply chain. Communication of This understanding also serves as a means of highlighting and remedying the weakest supply chain links.
It is in the interests of all companies to recognise that competition is between supply chains, not individual companies. Organising and managing relationships across the network is vital because all feed off each other. As such, the supply chain as a competitive unit dictates that each component must look after the others.
One large buyer putting a small supplier out of business through harmful terms is doing itself a disservice. For small firms, if you are struggling, it is always worth communicating this. Large buyers can restructure payment terms to protect smaller suppliers, offsetting increased DPO by extending terms for suppliers better equipped to handle later payment. This ensures the whole supply chain remains healthy throughout.