Supply chain management (SCM) is something many of us associate with larger manufacturers or pharmaceutical companies. Yet numerous small businesses in Wales are part of one or more supply chains. If you have customers who have customers of their own, your business is part of a downstream chain. And if you have suppliers of goods or services who also have suppliers of their own, you are part of an upstream chain. You can be part of both, and wherever you sit in the chain its likely you’ll benefit from a more streamlined approach.
This guide outlines how you can maximise online technology to reduce the added costs of multiple players within a supply chain whilst increasing the value of your service. Using Superfast Broadband you can benefit from quicker data capture and information sharing and therefore better visibility across the supply chain. Through collaboration, the supply chain as a whole is able to assess information flow and streamline processes to achieve better customer satisfaction, quicker services and reduced costs.
2. What benefits might I expect?
More flexibility: Most cloud based software can communicate with other systems so business decisions can be actioned quickly and affordably.
Accurate forecasting: SCM solutions allow you to plan your supply or production processes and share forecast demand with suppliers.
Better planning: SCM tools enable effective resource planning so the right products and services are always in the right place, at the right time.
Streamlined processes: Manage the flow of physical products from suppliers to customers and back (product returns, servicing, recycling and disposal).
Increased efficiencies: Work with other suppliers to refine the information flow and address areas where outdated processes hinder the supply chain.
Confident decisions: Improved information flows such as demand forecasts, order scheduling and delivery status reporting inform decisions.
Business Intelligence: When systems collaborate across businesses or supply chains there is a chance to analyse and act on strong market data.
Easier compliance: New IT systems are agile enough to become compliant with the quality standards required by industry norms or trading partners.
Improved cash flow: Save money on physical storage by working to a just-in-time system and release cash for other activities.
Better information: Store and access credit card information, credit terms, payment schedules and consignment arrangements for better financial management.
Minimised disruption: Apply good quality demand information to production planning processes and optimise timings and batch sizes.
Effective workforce: Effectively match labour schedules and machine use to deliver on customer needs at optimum cost.
Cost and quality management: Reducing short runs or emergency batches through demand smoothing, allows you to control costs and reduce waste.
- Automation: Track goods through the chain so all parties are aware of which products have been provided and automate invoicing and payments.
3. Real life example
The owner of a popular gift shop in the heart of the south Wales Valleys has transformed her business, after taking the decision to invest in an electronic stock-management system (EPoS). Alison Chapman, who runs Treorchy-based Wonder Stuff, has seen her takings leap by more than a third since installing the system, which has also allowed her to devote more time to other initiatives that have helped to grow the business.
“For the first 12 years of running the shop, we just used a manual till system, writing down all sales by hand and managing the stock manually,” explained Ms Chapman. “I used to place orders for new stock based on intuition, which worked out okay most of the time, but didn’t really allow me to analyse trends or track the lines that were proving popular, and I regularly ended up with leftover products that we couldn’t sell.”
The impact of the new system has been transformational, allowing the business to make a 20% reduction in stock management time and reduce the overall amount of stock held on site by around quarter. By analysing trends in the sales of different products, Wonder Stuff has also varied the products it sells – increasing lines of jewellery and personalised greeting cards, while carrying less of the items that were proving harder to sell.
“The system has also allowed us to make use of other technology solutions, like Amazon’s mobile seller app. We trialled the app as a way to move on unsold stock, scanning in a selection of items and fulfilling orders ourselves. More recently, the app has become an integrated part of our sales strategy and we place additional orders for products that sell particularly well online and use Amazon to fulfil them. The app now accounts for around 3% of all sales and it is growing.”
4. What is supply chain management?
Supply Chain Management (SCM) is the process of streamlining business supply activities to improve efficiency, save money, maximise customer value and gain a competitive edge in the marketplace. It involves the management of resource and materials and includes raw materials, work-in-process, and of finished goods from point of origin through to the point of use. Elements within SCM might include stock control, purchasing, supply logistics and sales forecasting systems.
Superfast Broadband technology supports the efficient application of SCM by ensuring the management information is available where and when it is needed.
5. Getting started
There are a number of key steps to determine how and if you can benefit from a SCM system in your business.
Evaluate the operational benefits and cost savings
The first step is to look at your own business, its products or service, customers and suppliers and determine the operational benefits and cost savings that your business may be able to achieve.
Establish links with these key customers and suppliers
The second step will be to explore a wide range of functions within your own and partners’ businesses and seek to identify efficiency gains or cost savings.
Analyse and document the business process flows between your business and your customers and suppliers
For some requirements, such as sustainability of certain natural or food products, you may need to have full understanding and traceability of the process back to the raw materials supplier.
Collaborative Business Process Mapping can identify duplication of processes or procedures which are not being adequately performed. Addressing these will allow the process flow to be improved, saving time and cost, and eradicating error.
Identify the value added and cost added at each stage
If the value added is low or cost added is high, it becomes a management decision to either look for alternatives or assess if the change is justifiable.
Look for duplication which can be addressed
This may occur in the processing of orders or in stockholding (e.g. entering information in multiple locations).
Optimise stockholding requirements where possible
Use forecast demand, appropriate replenishment quantities, lead time, optimum batch size and lead times to manufacture to optimise the stockholding.
Agree information flows and frequencies between the parties
Agreement of the type and frequency of reporting will ensure that the necessary information is available where and when needed
Consider sharing information across multiple suppliers and customers
Choose standard approaches where possible to have a consistent information sharing, processes and procedures.
Areas might include:
Customer enquiry and order processes
Product development and commercialisation
Manufacturing flow management/support
Run initial pilots for downstream and/or upstream partners
Monitor, review and modify the systems as experience grows. Choose a scale for the pilot that reflects capability and is manageable. Finally, select incremental change and don’t take on too much in one go.
6. Recommended action points and tips
Planning and preparation is crucial: Where several companies are involved in the process, it is essential to agree and document approaches and expectations from the outset.
Collaborative working requires trust and perseverance: Build strong relationships by sharing values and outcomes. Understand your partners’ objectives from the process and help them to achieve them.
Training: Ensure your staff understand WHY they are employing these SCM processes and systems not just HOW they should do it.
Change management: If you move to the cloud your staff may need to learn a new way of working. Identify processes and systems that need to change prior to implementation and plan and agree responsibilities and timescales with staff.
Investigate barcoding: Automatic data capture saves time and increases accuracy. This is especially true if you have a large number of products and therefore large datasets to manage.
Manage expectations: Filtering and alerting is critical to ensure you see the important and relevant data in a timely way. Users can access and drill down into the data to investigate exceptions to normal processing. And regular reports can highlight whether process are operating to expectations.
Hold regular meetings internally and with partners: Use these meetings to review progress and to confirm or change action plans. The flow of information between the key people involved is as important as the automated data flow to build and maintain trust.
Set up a benefits model and monitor it regularly: The scale of activity involved in supply chain management has the potential to deliver powerful benefits. Ensure it is monitored, with variances investigated and actions taken to ensure that optimum benefits are achieved.
7. Additional information
Use the Superfast Business Wales Software Directory to explore the software that could help you run your business.