When it comes to logistics, more isn\’t always better.
You can be excused if, as a startup business owner, you feel
helpless to solve supply chain concerns given that you lack the financial
muscle and extensive supplier networks enjoyed by companies like Walmart and
Procter & Gamble.
But in practice, when it comes to managing your supply
chain, bigger isn\’t necessarily better. One very significant advantage of
smaller businesses is their capacity for agility and flexibility with
suppliers. Contrarily, large corporations are frequently entangled in alliances
and certain regions that can be challenging to dissolve.
Smaller enterprises can take advantage of this advantage by
incorporating supply chain resilience into their DNA and adopting some of the cleverest
strategies used by larger companies to enhance the management and effectiveness
of their supply chains. Here are five strategies for doing that.
1. Recognize and mitigate hazards.
Small businesses should thoroughly examine their supply
chains to identify any weaknesses and determine what steps may be taken to
mitigate those risks. The danger and opportunity that are present in the far
larger pool of suppliers of those suppliers—and the suppliers of those
suppliers—are often missed by businesses that make the error of stopping at
their key suppliers (also known as tier one, two, and three suppliers).
The impact of the Ukraine crisis on world supplies has
brought this truth into focus. For instance, while there are fewer than 15,000
tier-one connections with Russian firms, there are 7.6 million tier-two
connections that have an impact on at least 374,000 businesses worldwide.
After determining your downstream exposure, you can start
looking for new partners and regions to add diversity and resilience to your
supply chain. Make careful to incorporate flexibility into agreements with the
fewest possible contractual requirements so you can change suppliers at a
moment\’s notice if necessary.
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2. Clarify product categories.
Diversity of supply is a strength, but if it is exploited to
support an extremely wide range of products, it can become a vulnerability. The
likelihood that a lack of components due to supplier or logistical issues would
interrupt your business increases as the number of product types you have
increases.
Although product culling can involve difficult choices, it
is a crucial tactic for enhancing operational performance and enhancing supply
chain resilience. In response to issues with global transportation, a number of
significant corporations have been making efforts to streamline their product
offering. For instance, Coca-Cola discontinued its Odwalla juice line in 2020
as part of a strategy to concentrate on its core offerings.
3. Put operating capital first.
Moving away from the just-in-time inventory strategy has
been one of the major lessons learned from the current supply shortage.
However, it has brought about its own risk, diminishing working capital as more
money is committed to protecting inventory and increasing the likelihood of a
cash shortage.
This necessitates a greater emphasis on controlling cash
flow, making sure you are paid as quickly as possible without making payments
prematurely. Smaller businesses sometimes behave inconsistently in this regard,
paying suppliers frequently well in advance of their contractual obligations
and allowing clients to avoid paying invoices for extended periods of time.
4. Improve your staff.
Knowing exactly what each employee performs and how they
contribute to supply chain operations is another significant advantage that
small businesses have over larger ones. To avoid falling victim to Parkinson\’s Law
(which frequently impacts large firms), small business owners should be aware
of the importance of each employee: Work grows to occupy the time allowed for
it. They can then take the appropriate action to make sure that each employee
is bringing their most value to the table by redeploying personnel, automating
procedures, and digitizing systems.
5. Manage logistics expenditures.
The ability of businesses to control the cost of
transferring their products has become increasingly important due to the rising
cost of logistics, which includes everything from shipping containers to fuel pricing.
Companies should take every step possible to streamline and improve their
logistics operations. It is much more economical to send out a few complete
truckloads to consumers in the area rather than using half truckloads to
deliver goods to clients on the other side of the country.
Small firms frequently make the mistake of accepting any new
business they can, even when the price doesn\’t cover the costs of producing the
good. They must be aware of every cost-driver in the company and reflect that in
their pricing, with sufficient escalation clauses to prevent further cost
increases.
Keep your confidence high
Over the past two years, the largest, most resource-rich
businesses in the world have battled, and frequently failed, to deal with the
effects of supply chain disruptions around the world. However, don\’t assume
that just because you\’re a little person, you won\’t encounter difficulties. For
startups to succeed in a challenging business environment, it is best to build
on their strengths – creative, adaptable leadership and operations.