Supply Chain Management - Making Small And Medium Enterprises (SME) Adoptive And Responsive 

One fine morning you get up to find out that your daily bread's price has gone up by 15% and the Kinnaur apples that you savour costs 20% more, you may be wondering what has gone wrong even while the price of ingredients used in bread remain steady. Is it the bread manufacturer or the apple grower who are playing spoilsport? Here the role of supply chain management comes. Something must have gone wrong down the supply chain line. Manufacturing or production, labour, traders, packaging, transportation, competition are some the factors which have driven up the costs.

Despite extensive initiatives taken in the area of Supply Chain Management (SCM) throughout the world, SCM practices have not yet been very well-adopted especially in developing countries like India.

In order to set their house in order and to improvise their working, SMEs in India are often found to struggle with constraints like finance, infrastructure, human resources etc. The problem looms large especially when they deal with large organizations' staff trained and responsible to keep their SCM in place. The mismatch becomes apparent as a result of localized, narrow and unprofessional approach on the part of the stakeholders woven in supply chain.

Constraints

There is no denying the fact that most SMEs lack skilled personnel who have knowledge of sophisticated supply chain. With their approach of focusing on local efficiencies rather than on cross-enterprise opportunities SMEs tend to have higher total corporate costs, lower overall efficiencies resulting in higher costs per unit because of low volumes.

The problem becomes more acute when SMEs decide to work with outsourced supply partners. Inconsistent product data and IT & communications systems make it difficult to match all the manufacturing and distribution activities. Another area of concern is the lack of detailed process documentation. Also, large public companies dwarf SMEs for corporate finance options. This limits their ability to fund large investments.

SMEs are fast in adopting strategic changes in comparison to large organizations and this edge of flexibility can be used to their advantage. SMEs can reduce cost and increase operating efficiency by fully leveraging supply chain concepts.

There are organizations which are dedicated to improving SCM in India. Here the role of dedicated organization adept in helping the SMEs recognize and adopt simple SCM practices can be a boon to small enterprises.

To read the rest of the article on SME World, click here. And please leave any comments you have below - I would love to hear your ideas on this hot topic!

-  by Alagu Balaraman, Managing Director and Partner