Three Supply Chain Mistakes Small Businesses Make
Date: Wednesday, June 10, 2020
Good product business leaders understand all aspects of where crucial supplies come from.
Building a business is a demanding endeavor. For small to midsize business (SMB) leaders, the list of responsibilities feels endless. The demands of building a high-performing brand, hiring the best talent, and rapidly expanding into new markets, often overshadows critical functions like supply chain.
But as recent global events like Covid-19 have highlighted, the supply chain is the foundation of any product business and must be a priority, rather than an afterthought. Without a clear picture of how suppliers operate, companies are vulnerable to unnecessary expenses, delays and disruptions.
Here are the top three supply chain mistakes we see high-velocity brands make, and a few easy steps to help avoid them.
1. Not knowing your suppliers
Too many SMB leaders hand over control of their supply chain to a third party. They rely on brokers or contract manufacturers to manage sourcing, manufacturing and delivery--which may seem like an easier solution in the short term but can quickly lead to cost, quality and supply problems.
When you don't know who makes each of the sub-components that go into your product, you lose visibility into factors that affect the final product, like raw material availability, scheduling and production delays. As a business leader, you must ask questions. Who are all of your suppliers? Where are they all located? What is their capacity? How often do they deliver on time, on cost and on quality?
If you can't answer these questions, it's time to take back ownership of your supply chain management. Start by:
Doing your research. Be sure you fully understand your market and the top players. If you don't have the right suppliers, try tapping into your team's network to get recommendations on alternate suppliers; research who other brands in your category use, and understand every tier of supplier down to the raw materials.
Using technology. Sourcing and procurement software platforms like ours at Anvyl, can be helpful in identifying new suppliers, gathering price estimates, and submitting RFQs to compare the capabilities of different factories. Search for suppliers that can improve your end-to-end supply chain, deliver cost savings and improve overall efficiency.
2. Not understanding your entire supply chain
Once you know who your suppliers are and where they're located, you need more details about their key processes and timelines. Companies that didn't have this knowledge at the beginning of the Covid-19 pandemic were blindsided when factories shut down across China, then Europe and beyond.
Put together a short and easy list of questions to ask your suppliers, such as:
How many days a week do you work?
How many shifts do you have?
How many units do you produce per day?
How many production lines do you have?
What times of year do you shut down production?
This information will help you plan ahead and anticipate potential supply chain problems. If you know a factory shuts down for three weeks during the New Year, for instance, you will be able to account for that production pause in advance.
3. Not digitizing your supply chain early enough
A majority of SMBs are not using digital tools for supply chain management, according to a 2019 report from Deloitte:
23% of these businesses are at the most basic level of digital engagement, and only 10% of them use software to connect sales with supply chain operations
41% are at an intermediate stage of their digital journey, and 20% of them use software for supply chain
In a digital world, tracking suppliers manually is far less efficient than a digital approach. Instead of pen and paper, set up a digital document or use software that tracks and connects planning, production and logistics for your business. This can be as simple as a spreadsheet that you update weekly or could be a turn-key software that aggregates real-time data, and collects historical information to enable you to plan for the future. If you're managing one part and one supplier, you can probably make do with a spreadsheet. But if you have SKU complexity (a lot of parts) or supplier complexity (a lot of suppliers), you'll need a more robust digital platform.
The good news is that many of the most common supply chain mistakes SMB leaders make are also the easiest to fix. With just a few simple actions, you can become more engaged with your supply chain management and save your business time and money.