Supply Chain Management – Considerations For Small and Medium Manufacturers

March 12, 2018

Money Supply

Supply Chain Management – Considerations For Small and Medium Manufacturers

Supply Chain Management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Hartland, 1996). Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management activities. The question in today’s volatile market is whether Small and Medium Manufacturers (SMM) benefit from participating in the supply chain.

To answer this depends on a number of different factors which include but are no means limited to, size of the supplier, network capabilities of supplier, and who the customer at the top of the chain is and there policies and procedures.

For major blue chip companies like IBM where the supply chain oversees almost $ 40 billion of annual spending, which involves all sourcing, procurement to logistics and customer support worldwide then it is very clear that IBM has everything to gain by managing their supply chain.

However for smaller supplier UK companies there are a few factors worth considering.

Long term contracts – Every small supplier focuses on winning that long term contract that relieves pressure and helps with scheduling their production and planning. However the knock on effects is that these long term contracts usually impose contractual agreements and can include heavy fines and also substantial cost reduction to the customer annually. Therefore the small supplier has to look at ways of reducing their costs internally- Lean techniques.

Cost Involved to represent large Customers- Large OEM’s usually require the small suppliers to have certain regulations and processes in place such as ISO 9000/ 9001. This takes time and funding and in today’s uncertain market conditions is a catch 22 situation. Also another regular demand placed on small suppliers is that large customers tend to have a vast amount of paper work, detailed documentation etc and these cost are incurred by the supplier as they have to have relevant staff and systems in place to cope.

Profit – Seems logical but it is a vital question of any supply chain relationship – “CAN THE CUSTOMER BE SERVED PROFITABLY?” The pace of demand and expectations has heightened, and with customers driving prices lower and lower down through the supply chain, it is important for small suppliers to work out their margins and acknowledge when enough is enough in terms of bottom line figures. It is imperative that any hidden costs which large customers add on are accounted for.

In order to keep UK manufacturing from crashing any further Larger Customers need to acknowledge that working with small suppliers is a two way relationship and partnership. Only when the customer shares burdens and benefits is it a partnership.

“We need to hand together in the supply chain or we will Hang separately” Michael Collins.

Related Money Supply Articles[/random]

, , , , , ,

Comments are closed.