Effective supply chain management leads to greater operational success, reduced costs and higher customer satisfaction. The following four pillars of small business supply chain management will put a company on a strong footing when actively engaging with suppliers.
Develop procurement strategies based on the company’s market position
Create short-term and long-term procurement strategies based on how the company competes in the marketplace. If the company is a low-cost product and service provider, select a strategy where the lowest cost is an important supplier criterion. Consider offshore suppliers and suppliers focused on cost management. If the company is rushing a new product to market, consider suppliers that are focused on rapid prototyping and fast deliveries. Cost is often a secondary consideration.
Identify reliable suppliers and nurture those relationships
An effective supply chain management depends largely on credible sources of supply that can help the company meet current operational obligations and scale as the company grows. Find suppliers from industry specific directories, trade associations and professional publications.
Develop key performance metrics to manage suppliers
Establish a handful of critical key performance indicators to track supplier performance. Review the data with each supplier regularly to strengthen the business relationship, provide leverage in negotiation and help suppliers improve their business operations.
Manage risks in the extended supply chain
Ensure continuity of supply by identifying critical path suppliers in the extended supply chain. Ask how suppliers are handling risk in their supply chains.
Among the risks business owners should manage are:
- Credit lines – Make sure to establish adequate credit lines when the business grows, and be sure to pay the bills. “Credit Hold” is a supply chain risk as well as “Cash on Delivery.”
- Confidentiality and IP protection – Ensure the confidentiality and the protection of intellectual property by requiring all key suppliers and critical sub suppliers to sign a non-disclosure agreement.
Keep lines of communication with suppliers open at all times and recognize that the supply chain is a major contributor to the success of the small business. Be the supplier’s best customer.