Why is supply chain management important for SMEs?

By Dr Sue Grinsted

2 of 5 Articles on Supply Chain Management for SMEs

You might think that supply chain management is just another fad and is only for large companies but some of the key concepts can be very valuable for SMEs.

In the article entitled “What is supply chain management?” it is stated that supply chain management (SCM) has 2 overall objectives: to reduce cost and to improve logistic customer service.

Cost reductions arise from:

  • Reduced levels of inventory at all stages leading to reduced storage costs and reduced levels of operating capital
  • Reduced purchase costs through better supply management
  • Reduced transport costs through better planning and scheduling and supplier/customer relationships

Clearly, reducing cost improves the bottom line but why improve logistic customer service?

Firstly, let’s consider what logistic customer service includes. Behind service with a smile, there is a whole range of concrete and measurable elements of customer service, many of which are key to business success. The most well-known elements are delivery on time, in full, with no damage, to the right address in the right packaging with a correct invoice – what we now call a “perfect order” i.e. nothing for the customer to complain about. The only way to find out what is really important to your customers is to ask them and that usually means a survey.

The results can be surprising. For example, many customers see delivery on time as most important. Delivery on time and in full enables them to plan their own production or activities with certainty. Others might see delivery lead time as critical, others volume flexibility. Further, different market segments or different channels may have different requirements or priorities. Logistic customer service is not usually successful with a one-size-fits-all policy.

The customer survey will enable you to identify 2 or 3 main groups of roughly common requirements and then to set targets for the main performance measures in each group. These will enable you to set priorities during planning and production.

Thus the main consequences of improved logistic customer service are customer confidence and repeat orders.

Article 3 > What can SMEs do to improve their supply chain management?