Why supply chain management is imperative for SMEs

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: A majority of the prevalent strategies in supply chain management continue to focus on large businesses. Fair enough. These companies, more often than not, have been the pioneers in embracing the concept of SCM. But what about the numerous small and medium enterprises? Has modern SCM been realistically successful in addressing the needs of SMEs? SMEs, due to their various constraints – finance, infrastructure, human resources among others — have found it tough to adapt modern SCM into their strategic ambience.

SMEs often are not large enough to justify centralised organisations for supply chain management involving large corporate staffs in the various business functions. The result is a focus on individual facilities and, therefore, on a decentralised supply chain organisation. SMEs often don’t have personnel who have knowledge of sophisticated supply chain strategy and operations. Most of them recruit people with strong operational distribution and logistics skills rather than those with a broader supply chain perspective and experience.

This results in a localised approach, with a focus on local efficiencies rather than on cross-enterprise opportunities. Consequently, SMEs can miss out on lower total corporate costs and higher overall efficiencies. And even as SMEs grow and expand their number of facilities, they often continue to focus on the individual plant/distribution centre instead of the entire corporation. To create a more centralised view, SMEs should construct an appropriate “to be” organisational chart with current positions, proposed positions and the timing, and criteria used to install the new roles.

Because they often cannot offer large volumes of business to suppliers, SMEs often have to pay higher costs per unit. Moreover, while big suppliers vie for the business of large enterprises, SMEs sometimes have to “sell” themselves to potential suppliers and be “better partners” just to get business. Their smaller volumes don’t help either, in terms of simply securing capacity or supply. For example, initial volumes for SMEs foraying into outside manufacturing often aren’t large enough to secure competitive pricing or, in some cases, even to get the attention of the large contract manufacturers. Therefore, SME companies have to pay more for initial smaller volumes.