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calendar    Apr 04, 2022

Supply Chain Management for Small Business

Supply chain management is on everyone’s mind

A few years ago, the only people talking about supply chains and supply chain management were those directly dealing with it. Now, as consumers begin to see some empty shelves, wait longer for delivery of large purchases, and watch prices increase, everyone’s talking about supply chains!

But if you’ve been in business for any amount of time—particularly if you’re a small business that relies on a fully serviced supply chain—it’s never been far from your mind or your plans. And, for those experiencing growth, ready to launch a new line or product, or increasing their ecommerce presence, supply chain management is a crucial part of a functioning business.

Small businesses are stocking up

Whenever possible, small business owners are doing what they can to increase inventory, so small supply chain challenges don’t become big business challenges. This is a good strategy for obvious reasons. When you have more stock, you’re not as impacted if a shipment is late.

But increasing inventory is not without cost. You need to be able to order and pay for more inventory. You may need more warehouse space and staff to move and manage the inventory. One option may be to use partial truckload shipping, so you’re not waiting on getting a full container of products (this is also called LTL or Less Than Load).

And, you may also be on the other side of the equation, with customers wanting to increase their orders from your business, so they have the inventory they need to meet demand. That comes with the obvious working capital problems, especially if you need to offer net terms to your customers.

Global network connection of logistics and cargo distribution

Supply chain survival 101

Besides the general ‘stock up’ advice, there are some things any business can do to mute the impact of supply chain disruptions.

One is to buy as much as possible whenever a top-selling item (or a crucial component or part) becomes available. The same goes for anything that goes on sale or is heavily discounted. If you can add it to your inventory, it may be a good idea to do so now. This is where those supplier relationships (more on that in a bit) can come in very handy. When one of your suppliers knows that you need something and gives you a heads up that it’s suddenly going to be available or the price is dropping, you can use that inside knowledge to benefit your business.

It may even be the right time to get financing so you can increase the amount of inventory you’re holding. Whether this is from a traditional bank or lender in the form of a business credit card, line of credit or loan, or something else, having the funds to purchase extra inventory may help you meet your customer’s needs.

If storage, packaging, and/or shipping capacity are maxed out, look for options for outsourcing. An impact of the pandemic is that there are more options for outsourcing everything from warehouse space to repackaging and shipping services. And it’s looking to be more than a short-term solution.

Cash flow is king for supply chain challenges

If you can pay for your own orders upfront and give your customers 30, 60, or 90 days to pay for their orders, you’re nearly set. But that’s just not a reality for most businesses.

A solution involves digital net terms. Companies like Resolve are using fintech solutions to support customers who need cash flow solutions while offering net terms to their customers. Resolve uses safe, quiet credit checks on your customers to determine what credit limits you should offer them, and the appropriate net terms.

Then, Resolve pays you up to 90% of each invoice into your bank account within one day. Customers still have the full length of their net terms to make payment and do so via an online payment portal that’s branded for your business. They can pay by credit card, ACH, bank transfer, or check, and immediately access all their account information online.

This type of set up is allowing businesses to create strong relationships with their customers, meet their needs, and keep their own accounts payables up to date thanks to the advance payments from Resolve.

What’s behind supply chain problems?

One of the more recent contributors to supply chain issues remains the pandemic. Some countries had entire factories shut down for weeks (if not months), and these were producing some of the most widely used components for many industries.

But even before that, businesses of all sizes had started buying inventory from global suppliers. It does come with its challenges—especially due to shipping and transportation problems and backlogs and a whole variety of supply chain woes from a shortage of shipping containers to port backlogs in places like Los Angeles.

Prioritizing supplier and customer relationships

If you’re facing supply chain management issues, chances are good that your suppliers and your customers are as well, regardless of whether they’re small companies or large enterprises. While it always makes good businesses sense to develop strong relationships, times like these when compounding factors make operations even more challenging benefit from solid relationships and high customer satisfaction.

Keep your customers informed of issues that are likely to impact them. If there’s a chance that something they need may be delayed down the line, let them know, and offer to work with them to mitigate any challenges. If one of you has the warehouse space to hold more inventory, look for a mutually beneficial solution to increasing inventory.

Give them as much time as possible to make changes and adjustments to their own product lines and services when supply chain disruptions and supplier delays make it impossible to meet an order or expectation.

When you hear of another supplier that might help out your customers, consider connecting them. And ideally, your suppliers will let you know if they anticipate challenges. With enough advance warning, many businesses are able to adjust their product lines and promotions to accommodate at least some supply chain problems.

If you have a supplier that goes out of their way for you, consider leaving them a good review online. Do what you can to keep those connections healthy.

Businessman at warehouse!

Consider small business supply chain management software

If inventory and customer fulfillment are a big part of your business, this is the best time to look into supply chain management software (if you haven’t already). It can make a big difference for both larger companies and startups when addressing supply chain disruptions, forecasting, tracking inventory and raw materials, charting lead times, and handling all the real-time metrics that are part of inventory management processes.

Supply chain management software (CMS) can also track customer demand, shortages, and over time predict ebbs and flows of demand. Having effective control over your inventory will help to protect from some of the impacts of supply chain issues.

Since the beginning of the coronavirus pandemic, this type of software has become much more popular. The right software helps to coordinate suppliers, manufacturers, transportation, warehousing, and customer orders, and guard against having too little (or too much) of anything you list as inventory.

As of this publishing, the most popular supply chain management software brands are SAP SCM, Perfect Commerce, Infor SCM, Logility, Oracle SCM, JDA SCM, and E2open. Most seem expensive at first glance, and it may seem difficult to add in another operating cost. But there are different products and services for different budgets and needs.

Ideally, the cost will be more than covered by the savings created by effectively managing inventory and demands, managing shipping costs, planning for changes, and dealing with unexpected supply chain disruptions. The software may also save labor costs once it’s fully implemented. All of this adds up to a competitive advantage and improves the sustainability of your business.

Keep current on the issues that may impact your business

Having information on what’s behind current and future supply chain issues isn’t exactly heart-warming. But knowledge is important so you can understand the ‘why’ (even on a basic level) and plan for how to keep your business going. The impact of the war in Ukraine is just one example of how quickly things can change for larger businesses and smaller businesses.

The last two years have taught us that we’re all much more connected globally than we realized, and we need our local communities much more than we realized. Give some attention to world events and the things that are likely to impact the global supply chain and your own bottom lines. Research where your products are made, where the components that make them come from, and how they get from there to you.

Explore alternative suppliers and potential new suppliers—if for nothing more than to give you an understanding of what you can get somewhere else and what may become unavailable. Read your industry newsletters and find out what others are doing.

There’s a lot you can’t change about supply chain issues. But doing what you can to increase inventory, manage cash flow, communicate with customers and suppliers, make management software your friend, and know what events may impact your products are the best defenses against supply chain problems.

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