How Much Do Small Operations Need Supply Chain Management?

Supply chain management (SCM) is all the rage in corporate America these days. Moreover, it is more than just a philosophy. Entire companies specializing in SCM have been birthed from the idea that the supply chain can be more effectively managed using a scientific, data-driven approach.

The question for small operations is how much they really need SCM. The answer lies in how they define the terms. Technically speaking, every business needs to manage its supply chain regardless of its size or the industry at hand. But small operations rarely need to go to the extremes corporations are known for.

1. The Supply Chain Is Fundamental

The supply chain is fundamental to business. At the retail level, for example, it takes many players to get products from the manufacturing stage into the consumer’s hands. A typical retailer supply chain includes at least wholesalers and manufacturers. In some environments, there are distributors as well.

Olympic Eyewear is one example of a wholesaler. The Utah company sells men’s and women’s wholesale sunglasses to retailers. They source their products from various distributors and manufacturers. They also design and sell some of their own brands of sunglasses.

It is easy to understand the supply chain in retail. But what about manufacturing? The manufacturers responsible for making the sunglasses Olympic sells at wholesale have their own supply chains. Manufacturers have to source raw materials, like acetate, along with the hardware that goes into assembling a pair of sunglasses.

A manufacturer has its own supply chain providing the materials it needs to make its products. In turn, it becomes part of the supply chain that feeds distributors, wholesalers, and retailers. Call it the ‘business circle of life,’ if you will.

2. Service Sector Supply Chains

All business is divided into two categories: products and services. The product supply chain is fairly easy to understand because it is tangible. The services supply chain, not so much. Yet service providers still have their own SCM issues to deal with. They still have suppliers they rely on to keep them going.

Consider a computer consultant hired by a small company to upgrade its network. The consultant relies on suppliers to provide the necessary software upgrades. If the company is switching from in-house servers to off-site collocation at a data center, the consultant now relies on said data center and its supply chain as well.

Whatever products and services the consultant needs to do their job is part of their supply chain. They have to work with a variety of different players just like the retailer purchasing bulk sunglasses from Olympic Eyewear.

3. Managing to Stay Ahead of the Game

It is impossible to conduct business without accessing the supply chain at some level. So regardless of the size or scope of a particular company, some amount of SCM is required. It is all about managing supply in order to stay ahead of the game.

This is most easily observed in retail. Retailers have to plan their inventory well in advance of actually selling it. Most retailers work a season ahead. For example, retailers are already looking at fall and winter sunglasses even though consumers are still thinking summer vacation. They need to have new inventory ready to go when the season changes.

SCM is a necessary tool to ensure that a company always has access to the products and services it needs to serve its own customers. Therefore, every company needs to practice SCM at some level. The size and scope of a given company largely determines how much time, effort, and resources are devoted to the supply chain.