By Denis L’Heureux
Small businesses are often squeezed by both suppliers and customers that have stronger bargaining power, missing out on opportunities to save time and money. But Export Development Canada (EDC) research shows that even smaller businesses can learn to create and manage a supply chain to gain a competitive edge.To do so, you may need to invest in more modern business processes and new relationships, but those efforts and costs are usually recovered through efficiency gains. Fergus Groundwater, who heads EDC’s global trade management program, suggests three ways you can create the best supply chain for your business.
1. Consolidate your spending with fewer suppliers
Many companies see purchasing simply as a support function for manufacturing. A lot of them – especially small businesses – get caught in what Fergus calls “area code” supply chains – i.e., they go with the nearest supplier.
While this approach may at first seem easier and reduce transportation costs, over time a company may end up with a large number of suppliers, leading to higher logistics and shipping expenses than it realizes. By consolidating spending and better managing relationships with a smaller number of suppliers – even if they are farther away – the increased volume leads to economies of scale and lower administrative costs.
2. Make supply chain management part of your business planning
Supply-chain experts have spent their careers developing relationships and expertise that can benefit the financial health of an organization. But for their expertise to be useful, they need to be included in business planning early in the game.
For example, a manufacturing firm that includes a procurement specialist in the product-design process may end up using a different type of component than originally planned – at a lower total cost – taking into account quality, warranty, after-sales service and even the supplier’s financial stability. In addition, involving a financial manager can help you better control payments to vendors and inventory levels to improve cash flow.
3. Invest in technology
While technologies like enterprise resource planning (ERP) systems have been widely embraced by large corporations, smaller companies are often concerned about the cost. But not every company needs an expensive application. Small business can look at software as a service (SaaS), where a service provider licenses an online application to customers through a subscription, “pay-as-you-go” model or, increasingly, at no charge. The latter includes free portals offered by large buyers and many shipping companies. One example where such technology can reduce costs is in electronic invoicing and automated payments. They can mean better cash flow and lower administrative costs.
As you can see, you don’t have to be chained to old-style methods to manage your supply chain. Consolidation, planning and inexpensive technology can save you time and money – better spent on growing your business.