Seven tips on managing your supply chain
When it comes to running their supply chain, SMEs must nurture relationships, understand their competition and make prompt payments.
1. Don’t rely on intuition to manage your supply chain
“The supply chain is all about relationship management – with customers and suppliers. Manage those relationships right and small businesses can increase value for their final consumer, and reduce cost for all parties in the chain.
“You also need to measure those relationships. Try to get an understanding of what’s going well and what’s not. This may seem like something you do intuitively, but good practice requires a formal, defined process. This could include short surveys and questions to customers and suppliers in the chain (“how are we doing?”). Also think about creating regular diarised contact times, by email, telephone or in person.”
2. Think about how you fit in
“Map your supply chain. Competition is not between individual companies, but between supply chains, so draw a map of how you fit in. Understand the physical location of key customers and suppliers, and what products or services they supply or buy (and in what currency). If possible, map your suppliers’ suppliers and customers’ customers.
“This is important for managing supply chain risk, because if you hear of an event such as a flood, earthquake or forest fire, you know immediately who could potentially be impacted, and if your deliveries could be disrupted. With Brexit around the corner, your map can also help you understand the potential World Trade Organisation most-favoured nation (MFN) Tariffs your company may be subjected to if a so-called hard Brexit occurs. This can vary between 0pc and 10pc depending on the type of materials or products you move. Planning ahead is crucial for good supply chain performance.”
Tips by Richard Wilding, professor of supply and demand chain management, Cranfield University
3. Ensure communication is consistent and clear
“The nature of supply chains means that there can be a lot of players working on one project, and sub-contractors can often be left out of the loop when it comes to communication. Whether you’re the client or a contractor within a pipeline of work, it’s your responsibility to ensure clear communication comes through you.
“When businesses feel like they’re being kept in the loop, relationships are improved dramatically, which can prove useful if things go wrong. This means passing on information at all stages of the process – not just when you think a contractor should know, which could be too late.
“In construction, for example, late payment is a highly contentious issue. This can be caused by anything, but if it’s simply a delay in the pipeline, communicating the issue to suppliers long before the payment is due can keep a friendly working relationship going while the project is running (and can potentially minimise the need for legal action).”
4. Ensure all participants are reaching their potential
“Having worked with and in supply chains throughout my career, something I find particularly frustrating is when clients don’t realise the full potential of their suppliers. It’s also frustrating when suppliers fail to disclose exactly what they could do or offer outside the work to which they’re contracted.
“Contractors are often employed to fulfill a certain aspect of a project, but they may have the skill set and resources to present a solution to a problem in another area of the project.
“If clients were more aware of the entire skill set of their suppliers – and they encouraged innovation – problems could be solved in a more timely manner, without the need for a new tender process. Ultimately, delays could be avoided.”
Tips by Richard Selby, director, Pro Steel Engineering.
5. Ensure you’re gathering and using data effectively
“A clear understanding of customer delivery data throughout the supply chain is essential. Getting a handle on this ensures that each layer of the supply chain is looking at and analysing data in real-time (not after the fact), so that customer demand is accurate and unnecessary stock replenishment is prevented. Smart data usage enables your business to be more sustainable and as a result, healthier.”
Tip by David Poole, managing director of UK sales, FedEx Express
6. Pay suppliers on time
“Suppliers love customers that pay their bills on time. Rather than keeping suppliers hanging on for payment – and in doing so, damaging the relationship – always ensure supplier invoices are settled in the agreed payment terms.
“In some circumstances, you may even be able to negotiate an early settlement discount (if cash flow allows) for settling invoices in a timely fashion. In the long run you will often find that suppliers tend to favour the customers that pay them on time, so they may be more willing to help you out with a faster delivery lead-time or a one-off discount for a large order, if needed.”
Tip by Matt Deighton, managing director, Timeless Chesterfields
7. Get a handle on exchange rates
“We work at maintaining strong relationships with our overseas suppliers, to help with the constant ebb and flow of exchange rates. That includes meeting our US suppliers in person, for example. Those efforts have paid off, particularly since Brexit. Some of our suppliers in the US and Europe have been willing to offer small discounts, which has helped us control price increases. Their understanding has been refreshing.
“UK distributors that import EU/US goods are having to hike up their costs and pass them onto us. Small fluctuations don’t require any action, but recent increases are dramatic at 8pc.
“We deal with this by applying, where appropriate, the necessary price increases to our products. An increase on products with higher price points isn’t noticeable. For fountain pens that retail at £20, two extra pounds isn’t huge. But for a greetings card that retails at £4.50, bumping up the price closer to £5 is dangerous as sales slow down. So we try to negotiate discounts of 5-10pc with our suppliers, giving them a larger order in return. The last resort is dropping the lines and sourcing from UK suppliers.”