Supply chain mistakes SMEs should make sure they avoid

CONSIDERING the tough economic environment, it has never been more important for small businesses in the logistics sector to keep their supply chains healthy and eliminate costly mistakes. 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. 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. Technology helps in simplifying the communications process by enabling stakeholders and customers to have realtime access to information about goods and services.

■ Not performing due diligence – 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. Moreover, investing in developing good relationships with suppliers can also result in improved efficiency, business referrals and a reduction of costs.

■ 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. Lastly, inadequate cash flow and working capital can severely impact a business’s ability to manage operations and its supply chain. Therefore, having a good relationship with a bank or financial institution that thoroughly understands the business and can provide tailor-made/specialist finance solutions to help with short-term and broader funding requirements cannot be over-emphasised.

Zak Sivalingum is FNB regional head, Gauteng East.