Today’s customers know what they want – and when they want it. As a business owner, your job is to meet your customers’ needs reliably, efficiently, and cost-effectively. For goods-based businesses, the key to doing this can be managing your supply chain.
The right supply chain strategy ensures that you can maximize the return on your products, including all the raw materials, components, and other factors that go into making them, while keeping your customers happy. These three supply chain management strategies – demand-driven, resilient, and lean – can help position your small or midsize enterprise (SME) for long-term success.
What Is a Supply Chain Management Strategy?
A successful supply chain strategy should outline how your organization manages the entire journey of your product, from pre-production to the moment it lands in your customer’s hands. It should cover activities such as production, supplier management, inventory management, and transportation.
Why Is Strategic Supply Chain Management Important?
An effective supply chain management strategy can streamline your product’s journey and cut costs. For example, finding a way to consolidate shipments and lower transportation expenses could make your product cheaper to build. Supply chain optimization can also contribute to quality, as you establish close working relationships with suppliers. Risk management also tops the list of supply chain management benefits, especially amid inflation, labor shortages, extreme weather, and other sources of possible disruption.
What to Consider When Creating a Supply Chain Strategy
For a small-to-medium size business owner developing a supply chain strategy, there are some key elements to consider:
Supplier Relationships
Your supply chain strategy should set out how you find the suppliers that will bring value to your organization, and how you will confirm that they are cost-efficient, reliable, and capable of providing high-quality products or services. Building strong relationships with those suppliers then can become essential to maintaining quality and reliability in your supply chain.
Risk Management
One of the most important elements of any supply chain strategy is risk management. What happens if a supplier’s factory must close, or bad weather prevents a shipment from reaching its destination on time? Try to make sure that both you and your suppliers have contingency plans to tackle any supply chain issues. Also try to ensure that supplier's contingencies are written into their contracts. Diversifying suppliers and integrating them into your digital supply chain management platforms can also help reduce risk.
3 Supply Chain Strategies for Small Businesses
The three leading approaches to supply chain management are demand-driven, resilient, and lean strategies. Today’s businesses increasingly combine tactics from all three in formulating their own supply chain management strategies.
1. Demand-Driven Supply Chain Strategy
As the name suggests, a demand-driven supply chain primarily focuses on meeting customer demand. This entails looking at data about what customers need, where, and when – then sharing this information with everyone in the supply chain so that products can be made and distributed more efficiently.
Historical data on customers’ buying patterns can help an SME decide what to do next. But times are changing. Today’s demand-driven strategies should incorporate the agility to react more quickly to changing trends and other drivers of customer demand. Digital supply chain technologies are increasingly applied to modeling supply and demand. For instance, real-time customer data can be collected and mined for useful insights using predictive analytics.
2. Resilient Supply Chain Strategy
A resilient supply chain strategy focuses more on minimizing disruption and recovering quickly in the event of supply shortages, transportation bottlenecks, and other issues. In some cases, these strategies call for “just-in-case” inventories. In others, supply chain managers diversify by using multiple suppliers to lower their risk. Resilient supply chain management also employs tools and procedures for forecasting and anticipating disruptions, including digital supply chain technologies and regular communications with suppliers, for example.
3. Lean Supply Chain Strategy
“Lean” had long been the watchword in supply chain management prior to the pandemic. That’s when decades of trying to control costs by keeping inventories at a minimum, with “just-in-time” replenishment, ended up catching supply chain managers flat-footed.
While some observers then proceeded to declare the end of lean supply chain strategies, controlling costs never goes out of vogue. Even as many companies are increasing their just-in-case inventory, they also continue to use just-in-time practices in supply chain links where they can cut costs without undue risk. Even at that, lean operations require carefully managed supplier relationships, contingency plans, and other steps to avoid disruptions.
How Technology Can Improve Your SME’s Supply Chain Strategy
The adoption of innovative supply chain management technology is increasing among SMEs. Cloud-based software and services can help deliver greater visibility into supply chain operations, especially when paired with sensing devices and other Internet of Things technologies. Automating key processes in the supply chain can drive efficiency and accuracy, delivering significant cost savings.
Today, supply chain management software can take over jobs like managing shipping schedules, tracking inventory, making sure deliveries are shipping on time, and monitoring supplier performance and reliability. The extent of a company's investment in supply chain management technology is often influenced by its size. Yet these days, even smaller companies are finding advanced technologies within their budget and worth their investment.
The Bottom Line
Supply chains have attracted a lot of attention during and after the pandemic, as successive waves of economic and political upheavals have continued to cause unprecedented disruption. Now more than ever, small and midsize enterprises looking to help minimize business risks require strong supply chain management to deliver what their customers want, when they want it. Many SMEs are cherry-picking tactics from the three major supply chain strategies – demand-driven, resilient, and lean – to tailor their own approach to running reliable, efficient, cost-effective supply chains.
Photo: Getty Images
