“Supply chain” …how often do you think about your business’ supply chain?
Unfortunately, most small business owners don’t even consider the dynamics of their business’ supply chain because they think that it’s a waste of time.
The truth is, though, that the small business supply chain does matter and has a tremendous impact on how your business functions.
The good news is that, if you manage your supply chain correctly, it can give you an incredible competitive advantage over your competition.
Let’s dig in.
Quick Side Note: If you’re still looking to start a business, this article should still be valuable to you. Having a solid grip on this information will help you grow your business faster once you’ve launched it.
What is a supply chain?
Before we get into supply chain strategies, let’s answer the obvious question; what is a supply chain?
In short, a supply chain is everything required to get your product or service to your customer.
Below is a great video I found from ASU that describes what a supply chain is. It’s a bit cheesy at times but, if you have a few minutes, it’s definitely worth watching.
As you can see, there’s a lot that goes into providing your customer with an end product. Just because you are the only one who sells a product doesn’t mean you are the only one involved in the production of that product.
Every product or service has a supply chain; they just differ in their complexity.
Essentially, three things typically flow through a supply chain:
- Materials
- Information
- Money (Cash)
The idea is to make those things flow through your supply chain smoothly and improve how your business functions.
Supply chain strategy for small business
When it comes to determining the best supply chain strategy for your small business it’s important to remember that no two businesses are exactly the same.
That means you’ll have to do some leg work here to figure out the specifics of your supply chain strategy.
The best way for me to help you layout a meaningful supply chain strategy is to walk you through the steps:
- Consider your overall business strategy – Before you can create a supply chain strategy you first need to have an overall business strategy for your organization. Your business strategy should describe the overall direction in which you want to go, whereas your supply chain strategy describes the business operations and extended supply chain needed to meet those company objectives. Your supply chain strategy and business strategy should make sense together.
- Map out and assess your supply chain – Once you’ve identified your business strategy, you need to take a close look at your internal capabilities and the capabilities of your extended supply chain to make sure that you have the capabilities to achieve your strategy. Use a tool like Gliffy to map out your internal processes and then the processes of your extended supply chain. Next, find the benchmarks for your industry and compare them to your own. Do the same thing for your extended supply chain. I like to think about the supply chain in stages. For example, first consider where you source your material comes from. Then consider how you make your product or service. And lastly, consider how you deliver that product or service to your customer.
- Develop an implementation plan – Once you’ve identified the strengths and weaknesses of your supply chain, you then need to create a supply chain strategy that will allow you to accomplish your company objectives. It’s important here to have specific performance metrics and roles to know exactly how you will meet those company objectives. If you were able to find benchmarks for your industry, most likely you can use those metrics as key performance indicators.
Why is supply chain management important?
Once you have your supply chain strategy up and running, you then need to focus on supply chain management and meeting your goals.
Of course, before you narrow in on supply chain management it’s fair question to ask, why is supply chain management important?
I like to relate this to health and nutrition; if your business is a person, the supply chain is the environment that provides your business its nutrition (money).
If the idea is to feed your business the healthiest food possible (lots of money), it’s in your best interest to make sure that your supply chain stays healthy.
Here are a few additional reasons why managing your supply chain is important:
- Reduced supply chain costs – If you have never even considered how your supply chain looks, it’s likely that your supply chain costs are too high. By effectively managing your supply chain you can gradually bring down your supply chain costs as well as reduce the risk of costly breakdowns in your supply chain.
- More resources to spend elsewhere – If you reduce your supply chain costs, you have more money to spend elsewhere. I’ll let you dream about where you’d like to spend that extra money 🙂
- Improved operations management – A healthy supply chain is a stable supply chain. A stable supply chain means that operations management should become more efficient and effective.
- Improved overall business functions – If you eat healthy, don’t you perform better? Sure you do. The same is true for your business; as your supply chain strengthens, so do your business functions. A healthy supply chain doesn’t just make operations management more efficient, it has an impact on all of the business functions throughout your organization.
- Happier customers – This should be all the motivation you need; a better supply chain makes it possible to deliver quality products to your customers in a shorter period of time. This should literally be visible through measuring the metrics you use within your customer service process.
Common supply chain issues
In my experience, most supply chain issues don’t come from lack of executive planning, they come from lack of execution. In other words, people love to talk about “how to make it happen” but actually fail to make those things happen.
In today’s world, it’s about making things happen. Sure, strategic planning is important but, if you can’t make your plans work, then all you’ve done is just waste your time.
More specifically, though, below are a few supply chain issues that you will likely face:
- Strategy alignment – as we discussed earlier, you need to make sure that your business strategy aligns perfectly with your supply chain strategy. This is one of those supply chain issues that you can’t afford to avoid. If you don’t get this right, nothing else works.
- Poor supply chain strategy – to take this one step further, it’s important that you actually have a good supply chain strategy. This comes down to thinking about your customer. Make sure that your supply chain strategy works towards something that your customer actually values; not something that YOU value.
- Delegating responsibility – you can’t simply have a supply chain strategy and expect your team to adopt it. You need to find ways to delegate responsibility and motivate your team to actually accomplish those company objectives.
- Poor communication with strategic alliances – your strategic alliances are an incredibly important aspect of your supply chain. That means that information, material, and cash need to flow between you smoothly. To make that happen you need to have incredible communication with those strategic alliances.
Conclusion
I know for some small business owners, thinking about your supply chain is something you’d rather not do.
However, that’s exactly why you should do it. Because most small businesses ignore this particular part of their business, it leaves an incredible opportunity for those who optimize their supply chains.
For those of you who have experience dealing with supply chains, what are your thoughts?
How can small businesses take advantage of this opportunity?