Resource  19 January 2022

Why is supply chain management so important for growing SMEs?

Supply chain management is an integral part of most businesses and plays an important role for growing SMEs. It can significantly impact the speed of growth and the ability to achieve company goals. So, what are the benefits of effective supply chain management?

The importance of effective supply chain management

57% of companies believe that supply chain management gives them a competitive edge enabling them to develop their business. (GEODIS, 2019)

Whether you’re selling simple products or services locally, manufacturing complex electronics or exporting worldwide, you will need a network of suppliers working in unison to ensure you deliver maximum customer satisfaction.

There are usually two main elements within the supply chain: materials management and physical distribution. Sounds simple enough! However, when you factor in sourcing materials, supplier agreements, timings, sequences and schedules, as well as transferring materials to manufacturing sites or end products/services to the customer, supply chain management can get extremely complicated.

5 key benefits of effective supply chain management

Effective supply chain management requires orchestration, collaboration, foresight, and preparation. With greater visibility and control of the flow of goods and services, you can make efficiency savings throughout your whole business.

1. Increase your profits

Supply chain costs often represent a considerable percentage of the sales price of a good or service. By reducing supply chain costs, you can increase profits without increasing sales!

If the net profit on sales is 5%, for example, a reduction in supply chain costs from 9% to 4% (or from 12% to 7%) will double net profits. (Logistics Bureau, 2016)

2. Reduced operating costs

Inventory management is a core component of the supply chain, and poor inventory management is one of the biggest contributors to high operating costs.

The costs associated with buying more inventory than you need, transporting those items, and storing them can take a huge bite out of your operating budget and eventually your profit. However, 46% of small businesses don’t track their inventory! (Wasp Barcode, 2018)

The supply chain must be timed in a way that supports demand levels to avoid overstocking and inventory costs. By monitoring your inventory and keeping track of each item you’re storing, you’ll significantly reduce operating costs.

3. Boost customer satisfaction

Your supply chain has a big part to play in customer satisfaction. It directly dictates price and delivery. Giving your customers what they want when they want and at the cheapest price is key to keeping them satisfied. You don’t want to get a reputation for sending the wrong items or for sending items out very slowly!

4. Faster decision making

Do you wish you could make decisions (and take action) faster across your business? You’re not alone!

62% of companies have limited visibility of their supply chain and 15% only have visibility on production. (GEODIS, 2017)

With effective supply chain management and greater visibility of underperforming areas and predicted demand, you can make informed business decisions, spot opportunities for innovation and identify improvements in productivity.

5. Increase output

Collaboration is an essential part of effective supply chain management. When your business collaborates effectively, both across internal departments and external suppliers, this results in streamlined production and distribution processes, which directly translates to the company’s bottom line and improves overall output.

How can you successfully manage your supply chain?

A supply chain market report says that 63% of organizations have no tech systems in place for monitoring supply chain performance and 46% still reply on excel spreadsheets for their operations. (BCI, 2017)

Unfortunately, spreadsheets alone aren’t enough to successfully manage your supply chain. Digitisation and having the right technology is key to effective supply chain management. From efficiency, performance and risk management to quality and customer experience, technology plays an important role in streamlining every aspect of the supply chain. 

The average supply chain has a digitisation level of just 43%. However, companies that aggressively digitise their supply chains can expect to boost revenue growth by 2.3%. (McKinsey, 2017)

Investing in digitisation and the right supply chain management technology for your business will ensure you have visibility and control throughout your supply chain. You can then make faster, more informed decisions, which leads to reduced costs, increased outputs, improved customer satisfaction and consequently result in business growth.

What supply chain management systems are best for growing SMEs?

There are lots of different systems on the market suitable for growing SMEs, from well-known brands like Sage, Epicor and SAP and many smaller providers.

Investing in supply chain management technology is a critical decision. You want to be secure in the knowledge that the system you choose is the right fit for your business now and will meet your future needs as you grow.

It’s important you really understand your business goals and carry out thorough product evaluations before making a final decision. Check out our interactive guide: Choosing the right ERP software for your distribution business to help you navigate assessing your options.

Aren’t you a Sage 200 business partner? Shouldn’t you be telling us Sage 200 is the best supply chain management system?!

Sage 200 is an advanced business management system that has a wealth of features and functionality to help you effectively manage your supply chain, including detailed reporting, POP and SOP, and inventory and warehouse management.

Of course, we think it’s great, but it isn’t the best fit for every business! Smaller businesses won’t need a solution as comprehensive as Sage 200 yet, and other businesses will be better suited to a system designed for large multinational companies.

What makes us different is that we want to get to know you and your business to fully understand whether Sage 200 is right for you. We care about solving your problems and finding a solution that fits the nuances of your business, not selling. If you’d like to have a chat with one of our expert team to find out more about Sage 200 please get in touch.

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