By Akash Hegde
Technology for MSMEs: We all know that a robust supply chain system is imperative to the seamless growth of any business. The higher the efficiency of the supply chain mechanism, the better the overall development of the business. It also plays a crucial role in nurturing long-term business-client relationships. However, the global MSME supply chain is undergoing a paradigm shift. Factors like a global pandemic, large-scale digitization, dynamic customer preferences etc., are responsible for bringing out this revolution in the supply chain system. Let us look at the ongoing trend in the global supply chain systems for MSMEs!
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Current scenario: A digital bend in the supply chain
Even after putting in uncountable efforts, global leaders have failed to breathe life into the dying economy worldwide. The fragility of the business environment, altered customer behavior, rise and fall in customer demand, logistics performance etc., have direct implications on the supply chain system of MSMEs. In order to cope with these challenges, an increasing number of businesses are embracing digitisation. The ultimate motive behind this herculean move is to render seamless services to the customers. Digitisation allows manufacturers to produce tailor-made goods at a large scale and then get them shipped without any unnecessary delay. Apart from the digitisation of supply chain systems, here are a few strategies that businesses have started to implement to redefine their supply chain strategy:
- Creation of a dedicated supply chain team: Building a dedicated supply chain team is one of the most effective things every business must do to enhance its supply chain system. When you have a specialised supply chain team in place, overall management becomes easier and leaves room for no mistakes.
- Reliance on predictive analysis: In order to avoid instances of overstocking and stockouts, businesses should start by analysing consumer preferences. This enables them to forecast customer demand. As a result, inventory management gets quite convenient and straightforward.
- Laying down the key performance indicators: Understanding the KPIs or Key Performance Indicators (inventory turnaround time, costing, speed, rate of complaints, customer satisfaction etc.) can help businesses to improve their supply chain management system further. The significance of different KPIs will vary according to different businesses based on their requirements, budget and other factors.
- Setting up an integrated platform: Developing a unified system that covers different functions such as marketing, production, operation, etc., offers a comprehensive view of the business. Know that a comprehensive view is always better than a compartmentalized work pattern when it comes to supply chain management.
- Following the make-to-order policy: Following the ‘make-to-order’ policy over the ‘make-to-stock’ policy gives businesses an edge over those manufacturers who tend to practice the latter.
- Collateral-free working capital to streamline the supply chain: Small businesses often face setbacks because of a lack of capital in the initial stage of business. Seeking pools of collateral-free working capital can, therefore, streamline business operations.
- Evaluating GST risk of vendors: Since MSMEs operate with a very thin margin, their first priority should be to evaluate the GST risk of vendors. It is important to review the present vendor history in order to strike out the non-compliant vendors. Educating the vendors regarding the significance of GST compliance can also save a lot of hassles.
- Negotiating back-to-back payment terms to compress the working capital cycle: The procedure in which the total net working capital is converted into cash is called a working capital cycle. Businesses generally try to streamline the cash flow by selling out the stock as soon as possible. It is, therefore, necessary to negotiate back-to-back payment terms so as to compress the working capital cycle.
Conclusion
Businesses worldwide are striving hard to match up with the upheavals of the supply chain system. The sudden onset of the pandemic and subsequent changes in customer behavior has compelled businesses to gear up and strategise their supply chain management. If implemented correctly, the above tactics will bring noticeable results and offer long-term stability to supply chain systems.
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Akash Hegde is the co-founder of ShakeDeal. Views Expressed are the author’s own.