Supply Chain Management in Small and Medium-Sized Enterprises

Every organizational system, big or small, aims to control operations and execute projects in the most effective and efficient manner. Supply chain management is the apt system to integrate and connect a product’s workflow, right from acquiring raw materials to production and then distributing the products to customers in a highly systematic and streamlined manner. By implementing this system, businesses can earn good profits as well as lower losses and business failure risks. A supply chain management system is an integration of three main phases:

  • Supply – process of procuring raw materials
  • Manufacturing – involves the production process during which raw material is converted into a product.
  • Distribution – process involved in shipping goods to warehouses, customers and other places of distribution.

Small and medium-sized enterprises play an important role in the economic growth and development of a country. Innovation, versatility and perseverance that comes with these type of enterprises makes them highly important for both, developed as well as developing nations. However, the growth and survival of small and medium-sized enterprises can be quite challenging. One of the main reasons for the high failure rate of SMEs is lack of financial resources, management proficiency and the right technology. For businesses to function properly and make profits, a good supply chain management system is highly essential. This system helps improve productivity, quality, customer base and profits.

In the business world, where customers want good quality products at the cheapest rates, it is quite challenging to produce low-cost goods without compromising on quality. Therefore, an effective supply chain management system is essential to control the expenditure involved in the product’s life cycle. Several businesses, especially small and medium-sized, are new to or unaware of supply chain management. Some benefits of supply chain management are given below.

Low costs  

One of the main reasons why Supply Chain Management system is getting popular especially among small and medium-sized enterprises is that it helps to produce high quality products at reasonable rates. Supply chain expenses can be kept low by controlling the expenditure at every phase of the supply process. Be it procuring raw materials, production or shipping products to clients, this system helps to run various processes of a company in a highly streamlined fashion, thus reducing unnecessary expenditure.

High profits

As the supply costs reduce, business profits increase. Following a properly implemented supply chain management system helps reduce waste in various processes like storage of raw materials and production. This system also helps to reduce transportation costs. By implementing the apt activities via this system, entrepreneurs can earn great profits and lead their companies towards success.

Higher efficiency  

Supply chain management helps reduce wastage thereby increasing efficiency. This system aids businesses to streamline their supply chain so that there is no wastage of time and resources. The company implements only the necessary processes and therefore ensures that the organization functions smoothly and efficiently without any wastage of money, time and resources.

Customer satisfaction and loyalty

Companies that operate on a supply chain management system have been proved to develop strong and positive relationships with their customers. This system enables companies to produce high quality products at reasonable prices and ship these on time thereby satisfying customers, who then place more orders in the future. This system also attracts new customers thus increasing sales and profits for the company. A strong customer base            helps small and medium-sized businesses to grow and expand.

Although a supply chain management system is highly beneficial for businesses of all sizes, a poor supply chain management system can cause more harm than good. If the system is not aptly implemented, there are high chances that the business will suffer loss via wastage of funds, services and resources. Deadlines will not be met, and the company will lose clients. Also, integrating the system into your business can be quite complex and demand for extensive team training. Initial setting up of this system can be costly too.    

Despite the challenges, a successfully implemented supply chain management system can prove to be a perfect option to grow your business successfully. Several companies like The Coca-Cola Company, manufacturer and retailer of non-alcoholic beverages and syrups, Zara, international accessories and clothing retailers, and Amazon, multinational technology company, have prospered due to the correctly developed supply chain management system.        

– Amareta Rodrigues


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