Despite living through a historic and tumultuous period, filled with uncertainty and risk, the environment for small to medium-sized businesses is improving. Greater emphasis on local trade to reduce exposure to third-country risk is fuelling a mini-revolution in the sector. It’s clear that growth is there for the taking, but it’s no longer enough just to be a participant and sail on the trade winds created by others in the market. Growth will present itself to those prudent enough to make smart business decisions and may, unfortunately, come at the expense of those ill-equipped and underprepared.
If 2021 is the year of anything, it’s the year of the supply chain. Never in history has the humble supply chain – long the undervalued workhorse of the modern economy – been spoken of so frequently in the media and industry. And with good reason; recent events have demonstrated just how critical supply chains are to the very fabric of society. Enterprise businesses, which had historically viewed supply chains as little more than a cost to be controlled, have now pivoted to appreciate their supply chain as a source of competitive advantage. Supply Chain Heads are finally now being giving a seat at the C-Suite table and resources are being ploughed into supply chain integration. For these enterprise businesses, there’s a lot of work to be done to address decades of apathy.
The good news is that for small to medium-sized businesses, there is a free lesson to be learnt by watching how these enterprise businesses are behaving. In particular, focusing on supply chain integration as a key enabler of business growth.
What is Supply Chain Integration?
For many small to medium-sized businesses, the term supply chain integration can sound intimidating and difficult to achieve, so let’s break down what we mean when we talk about supply chain integration so you can understand exactly what’s involved.
At the highest level, supply chain integration is about bringing all the parts of your supply chain closer together. While that does include improving connectedness with your suppliers and customers, you don’t have to achieve a highly sophisticated, fully-vertically integrated manufacturing supply chain to consider yourself integrated – or to reap the benefit.
The basic building blocks of a supply chain consist of procurement/purchasing, supplier management, inventory management and control, demand and lead time management, materials management, manufacturing*, storage and transportation, order fulfilment and customer analysis. As businesses grow and mature, they tend to move from spreadsheets to specialist applications that support one or more of these building blocks.
The problem that many small to medium-sized businesses still encounter though, is that these specialist applications don’t talk to each other. At best this requires the development and implementation of APIs or the periodic ingestion of flat files. At worst this requires manual workflows to understand what’s going on in one system and then another. For example, doing purchasing in a separate application to your production planning and your order fulfilment means that you can’t use customer demand to easily plan production or purchase raw or unfinished goods.
Integrating your supply chain internally means that all your processes from planning, sourcing, production, distribution and returns can all be orchestrated and working together. That’s a pretty big prize, right?
Why is Supply Chain Integration important?
Having systems and processes working in silo’s has a huge negative impact on business value, and so having them integrated has a huge positive impact. The easiest benefit to measure is productivity benefit. Less time spent jumping between applications, less lag in one system waiting to respond to the inputs of another, faster time to execute your end-to-end supply chain. But’s that also the lowest value benefit.
Next is the value of insights you get out of an integrated supply chain with a unified system of record. Unnecessary costs and inefficiencies in your supply chain can become almost instantly visible. Holding excess inventory, having slow-moving and obsolete stock or even paying suppliers inside their payment terms can become visible almost straight away. Next, the automation and optimisation opportunities from having an integrated and orchestrated supply chain are many. This can take manual decision making and offline analysis out of the business and provide data-driven insights, ready to execute. This translates into direct costs out of your business.
The final and most valuable outcome is that of a more resilient supply chain and a happier customer. Having the flexibility to manage uncertainty, drives lower stock-outs, better service levels and greater reliability. These all improve customer retention and reduce the costs of sales. Effort can be redirected from managing disparate parts of your supply chain into capturing and converting new customers.
Increased sales and increased customer retention, combined with lower cost-to-serve results in? You guessed it: growth! And once unlocked, this growth can continue year on year, as scaling and bringing on more customers with bigger order volumes becomes easier and easier.
How do I integrate my supply chain?
There are several ways to achieve supply chain integration. The first is to retain your existing suite of business applications and create software integrations between them. This means defining the individual systems of record, determining the type and frequency of calls and testing and maintaining them as each individual application is updated over time. This approach can be costly and inefficient, especially where legacy applications or unusual databases result in snowballing development costs.
The other way is to implement an end-to-end supply chain software product such as SAP Business One or SAP Business ByDesign. This provides you with a single platform, within which all parts of your supply chain are already integrated, there’s a common system of record and insights can be generated supply-chain wide and at the click of a mouse. This approach very quickly unlocks extensive value for your business and at a fraction of the cost and effort required to integrate separate applications. For small to medium businesses, this is the fastest and most effective way to integrate a supply chain, make it a source of competitive advantage and drive real, tangible growth in your business.
Find out more about how we can help you integrate your Supply Chain including the features and benefits of an ERP here: https://www.ozoneit.co.nz/procurement-inventory-supplychain-management-software/