Supply chain mistakes SMEs should avoid

Zak Sivalingum, FNB regional head, Gauteng East

Zak Sivalingum, FNB regional head, Gauteng East says, similar to cash flow management, good supply chain management can arguably be considered as the lifeblood of small businesses in the logistics sector. It plays a key role in managing the flow of goods and services between various stakeholders including, manufacturers, suppliers, distributors, shippers, retailers, wholesalers and customers.

Sivalingum highlights key supply chain mistakes that SMEs should aim to avoid:

Reluctance to adopt technology

Technology now plays a significant role, with more SMEs digitising processes and operating within integrated supply chains. For instance, businesses can now improve efficiency, streamline services, shorten business cycles and limit manual processes through e-commerce.

Furthermore, technology helps in simplifying the communications process by enabling stakeholders and customers to have real-time access to information about goods and services. For example, some panel beaters now allow customers to log into their portals/websites to get live updates on vehicle repairs, from when the parts are being ordered, assembled and when the product is ready. Similar technological investments are being made by SMEs to track the movement of goods from shipping to road transportation.

Working with credible and reliable suppliers is a critical component of good supply chain management. Failure to conduct proper due diligence when selecting suppliers can lead the business to lose its competitive edge, reputation, waste time, money and develop inconsistencies in service levels – which would ultimately impact on its ‘ability to fulfil contractual obligations.

Moreover, investing in developing good relationships with suppliers can also result in improved efficiency, business referrals and a reduction of costs as the businesses form a strong mutual relationship.

Failure to control costs

The containment of costs is essential to ensure that the business remains profitable. Depending on the nature of the business, the first step should be to eliminate wastage by proactively managing the business’ processes and procedures. It is also essential to have an active monitoring strategy in place, to deal with key areas that contribute to high supply chain costs, such as transport, inventory management and warehousing.

“Lastly, inadequate cash flow and working capital can severely impact a business’s ability to manage operations and its supply chain. SMEs end up in a desperate situation - making incorrect financial decisions, which lead to even greater cash flow challenges.

Therefore, having a good relationship with a bank or financial institution that understands the business and can provide tailor made/specialist finance solutions to help with short-term and broader funding requirements, cannot be over emphasised,” concludes Sivalingum.