Supply chain disruption can have major consequences for SMEs, particularly after the challenging events of the last two years. Zak Rafiq, Industry Principal, Oracle NetSuite, offers his insight into how businesses can become more resilient in the face of continued supply chain disruption and shortages.
While the UK is emerging from the restrictions of the pandemic, the prospect of reduced stock and increasing prices continues, driven in part by inflation, supply chain disruption and consumer demand. These are unwanted challenges for SMEs – particularly the many who faced closure or restricted trading for large parts of the last two years.
According to YouGov, UK consumers experienced supply problems far more than their European counterparts, including lack of products in stores (56%), fuel shortages (33%) and shipping delays for purchases (28%).
Yet the latest Barclays SME Barometer reports that almost half (48%) of UK SME leaders are optimistic and SME sales are up 42.3% for the last three months of 2021, compared to the same period in 2020.
Getting to grips with financials, balancing inventory to anticipate demand and being adaptable to change, is of paramount importance. Now, more than ever, SMEs need to address how to control and optimise their operational approach. Here’s how:
- Abandon the ‘Just-in-Time’ approach
There is merit to the Just-in-Time (JIT) approach in minimising overheads on unnecessary storage and transportation, as well as waste. But JIT was not intended for a volatile supply environment and can be incredibly difficult to manage when there are unpredictable shortages or shipping delays.
Moving towards a ‘Just-in-Case’ approach allows SMEs to centre on securing sufficient supplies proactively, ahead of time, to prevent stock outs and protect profitability in a volatile supply chain ecosystem.
To achieve this, clear visibility of the entire breadth of the supply chain is required, which means a business management approach based on real-time insights on supplier deliveries, incoming orders and available stock data. This brings me to my second point:
- Secure all the data you can get your hands on
Accurate, real-time data will enable you to pre-empt strain and demand on your supply chain – and this means bringing together data from right across the business, including financials, resource planning and omnichannel sales.
Data analysis then brings actionable insights so vulnerabilities and risks can be identified, and the supply chain optimised. For example, by reviewing stock levels, procurement cycles and lead times, demand spikes and patterns that signal impending shortages can be better anticipated and accommodated.
Finance teams can also correlate supply chain insights with the balance sheet to deliver more precise financial models and better monitor budgets and cash flow.
- Hold suppliers to account
Work with heads of finance and procurement leaders to re-examine supplier contracts. If there are elements of the supply chain that are consistently failing to meet expectations or demand, contracts should be revised and renegotiated.
Pay special attention to where goods are sourced from, whether that’s a local or international supplier. Each will have their own political and logistical challenges and could be a weak link.
To drive further efficiency, ask your suppliers to integrate their supply data with yours. A recent report from Deloitte suggested that only half of businesses actually have visibility over their tier one suppliers. In the pandemic era, this is no longer acceptable.
This review approach will make any supplier vulnerabilities clear, providing a fair platform to negotiate plans and establish new service level agreements (SLAs) – with a clear plan of action should they fail to be met.
- Put the right business management systems in place
With so much flux in today’s supply chains, it’s become essential to have a single platform that provides visibility into every aspect of your business operations. Data from every part of the business needs to be brought together in a single view, with real-time insights to drive rapid decision making.
When prioritising supply chain resilience, there are some key characteristics to look for in a solution that will maximise your ability to navigate challenges and drive rapid growth:
- Data analytics to collate, manage and process data from multiple points across your supply chain
- Built-in management systems for inventory, supply chain and financial reporting, along with Application Programming Interfaces (APIs) for integration with external supplier systems
- Secure, high-availability systems to ensure mission-critical systems are always online, available and visible.
Clarity, centralisation and control
Clarity, centralisation and control are crucial when combatting supply chain challenges to underpin the highly-adaptable, flexible approach that is required in 2022.
This discipline means faster responses to market demands than competitors, pre-empting supply issues before they happen, driving efficiencies in time and cost savings and, perhaps most importantly, driving customer satisfaction and advocacy.
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