Supply chains worldwide have taken a battering over the last couple of years, and with disruptions set to continue, it’s no surprise that SMEs are prioritising supply chain resilience as they plan ahead.
With lead times multiplying, shipping costs ballooning, and some raw materials simply unavailable, what are the best supply chain strategies for SMES?
We asked five experienced SME supply chain professionals for their top techniques for weathering supply chain disruption. Read on to discover their supply chain resilience insights – or watch the full video below.
Meet the SME supply chain experts:
- Daniel Bull-Clearie is Head of Supply Chain at Mara Seaweed, an innovative UK-based seaweed brand.
- Sam Gilks is a Supply Chain Consultant at Young Foodies, which offers services and opportunities for collaboration to FMCG challenger brands.
- Philip Oakley is Managing Director of Outserve, an Unleashed partner that provides software integration services.
- David Press is Head of Operations at Three Spirit, which produces a range of plant-based alternatives to alcohol.
- Ben Vear is General Manager (EMEA) for Minor Figures, which manufactures oat milk and coffee-based products.
1. Be ready to ‘pad the line’
As an SME, you may feel you’re often at the end of the queue when it comes to getting line time with your manufacturer – but you have the advantage of agility, Sam Gilks says.
“Try to be as agile as you can – because that’s your one advantage as a small brand or SME,” says Sam, “You should look for contingency solutions with other manufacturers: What does it take to get you on the line between big runs? How can you accelerate that and make their efficiency better?”
2. Inventory equals flexibility
Maintaining inventory levels is critical to remaining flexible when supply chain problems occur. You might, for instance, jump the queue when other businesses experience delays and run out of ingredients.
David puts it succinctly: “Inventory is key. If you don’t have ingredients, you don’t have the ability to slot into gaps that suddenly appear on production lines. The manufacturers you’re working with will have other SMEs saying, “I’m sorry, I can’t get my glass, my ingredient, for my production run that’s scheduled in X weeks’ time.””
Another bonus: your manufacturer will be grateful that you’ve filled up the empty slot, and this will also promote a good working relationship with them.
3. Leverage your brand
As Daniel puts it: “The advantage of being a SME is that you can build those relationships and people are interested in your brand, in your company and your ambition and what you’re trying to do in a way that does foster interest – and there are good intentions that can be built on this.”
As a smaller business with a unique and novel offering, your brand’s values and products are more likely to resonate in a way that those of larger companies do not – and you can leverage this to build a closer relationship with your supply partners.
4. Perfect relationships with third parties
One thing our experts all agree on: in the current climate of supply chain challenges, relationships are key.
As David puts it: “Lead times are being thrown out of the water, and trying to get security and stability is about perfecting relationships with your suppliers, gaining as much flexibility as you possibly can.”
Fostering those relationships – even through small gestures – is crucial. As Sam says: “Beers and chocolates and handshakes and dinners – they go a long way. When you need a favour on a line, and the factory manager remembers you because you dropped them some beers, it does help. It really does.”
5. Collaborate to find the win-win
For Ben, that relationship with third parties has extended to seeing their manufacturer as a partner as Minor Figures has grown: “It’s no longer about them doing us a favour, but more about us being their partner. So I think building, running and keeping that relationship tight has been key for us.”
That sense of cooperation with third-party businesses is echoed by Sam: “You shouldn’t be trying to steal your manufacturer’s margins – their 10%. You should be looking at their 90% cost base and saying, “How can we trim your costs? Because you win, I win when that happens.”
6. Dual sourcing
Finding an alternative supplier so your materials are dual sourced is a critical way to counteract ballooning lead times.
For Mara Seaweed this method has been important since the business relies on a steady supply of seaweed. “If your single source has any disruption, then that’s a risk to the whole business model. So dual sourcing is probably the key thing we’re doing,” Daniel says.
Dual sourcing can mean either finding an alternative supplier, or sourcing some of your raw materials yourself. This can be doubly effective if you’re able to localise by finding a supplier nearby so shipping delays and costs are minimised.
7. Deepen reserves
Upping your inventory holdings is one common way to mitigate against supply chain risks – a technique several of our experts are using in their own businesses.
For Mara Seaweed, it’s been a matter not just of increasing inventory, but holding it as far back in work in process as possible so the business can remain flexible with its products. The aim, Daniel says, is “to be as flexible as possible whilst keeping that deep reserve in terms of the work in progress material.”
But holding reserves of inventory comes with its own risk of tying up too much working capital. “There’s a cost of doing that,” says Daniel, “So what’s the balance to strike between staying lean and keeping costs down, and accepting slightly higher costs for that security?”
8. Upskill staff
Investing in your staff and building supply chain expertise in the business is another key way to boost supply chain resilience.
Ben Vear identifies this as the top technique at Minor Figures for boosting supply chain resilience: “Upskilling and growing the team has been key for us. That’s been about going from a supply team of one to a fully built-out supply team with process and procedure, and a tight focus on forecasting and S&OP process. That’s been number one.”
9. Invest in good systems
As obvious as it sounds, investing in good systems and processes is crucial as you approach supply chain hurdles.
When asked for his top two techniques for supply chain resilience, Philip chose this as his number one: “Have good systems. We see a lot of people who don’t know what they’ve got in stock, don’t know what their requirement for production planning is.”
In other words, make sure you know the basics: what you have, what you need, and when.
10. Good data in, good data out
Visibility is everything when your supply chain is disrupted. You don’t want to spend hours extracting data from your records; instead, you want precise and real-time data on crucial information like lead times and raw materials inventory at your fingertips. In other words: good data in, good data out.
As Ben says, “Those foundations of visibility – that’s really key. Making sure good data’s going in so you can get good data back out the other end and have clear visibility of what your position is in performance and stock holding.”
The best way to achieve this? Cloud based software that gives you immediate access to up-to-date data on your inventory, sales, products and customers.
11. Keep your SKU count tight
Rationalising your stock by assessing each product’s performance according to select criteria will keep your range limited to successful products – yet another way to keep your supply chain tight.
Ben notes that Minor Figures does this regularly: “We intentionally have kept our SKU count and range tight. We want to keep the good credit we have with buyers by focusing on a tight range of top-selling products – so constantly reviewing that we don’t carry a tail in our range of poor-performing lines is key.”
12. Plan ahead – but stay true to your brand
Can your supply chain cope if your business doubles or triples in size over the next few years? That’s a question you need to ask yourself – especially if your products are made from niche raw materials.
David from Three Spirit recognises the need to ask yourself this question: “If we were to triple the size of our business again in the next 2–3 years, we’re going to need to have a far easier supply chain to ensure that we can deliver that growth.”
At the same time, David says, it’s about staying true to your brand – so it’s a matter of balancing the practical aspects of your supply chain with your brand values.
13. Reformulate your recipes
If you use niche ingredients that are no longer available or hard to obtain, reformulating your product recipes is another option to ensure your supply remains steady – and even if you need to spend some time on this, it can pay off hugely.
David notes, for instance, that Three Spirit has been importing yerba mate from Russia – which is now presenting supply challenges. He’s very clear that going back to the drawing board and changing your recipes is a good option in this sort of situation: “If you feel that you do need to reformulate, don’t be afraid to.”
14. Regular S&OP sessions
One method Mara Seaweed is successfully using is monthly Sales and Operations Planning (S&OP) meetings, which gives their supply chain planning more structure.
Daniel says this gives the sales and supply chain staff the opportunity to discuss key questions to plan ahead: “I found that really valuable – to have the commercial and the supply chain on different sides of the room talking to each other to understand: ‘Is the sales trajectory going as anticipated? What’s the supply chain position?’”
15. Know where you stand
It sounds obvious, but a key step in making improvements to your supply chain is auditing it to uncover any potential weaknesses – and to work out where you can make the most gains.
An audit can be a time-consuming process, but when done thoroughly it’s invaluable for working out where you stand and where you could improve resilience. In other words, where in your supply chain you can use the techniques we’ve outlined above.
Sam Gilks puts it in a nutshell: “You really need to get a baseline understanding of what you can and can’t do, what your requirements are, and where you stand at any one time.”
16. Make supply chain management an investment
Rather than seeing supply chain management as just a cost, it’s important to view it as an investment that you’ll see a return on.
Many SMEs produce innovative products and know their market inside out, but are less experienced in the operational side of things. As Sam notes, “People are often blind to their supply chain needs, and have to walk through the fire and get burnt before they decide their supply chains are important.”
It may take time and some capital outlay, but in the long run future-proofing your supply will pay off. Again, Sam explains why clearly: “If you can’t put your product on a shelf – which is what a supply chain does – do you even have a product?”
This is part one of the Supply Chain Roundtable. Watch Part 2, Scaling in a Compromised Supply Chain here.