Resilience in supply chain: a small business guide

A supply chain management process considers all the links involved in building a product or service and delivering it to customers. But with many opportunities for your supply chain to get disrupted, how do you stay resilient? Read our guide to learn the basics.

What is supply chain management?

Supply chain management analyses the flow of goods and services along a chain of suppliers, with the aim of minimising waste and maximising value to the customer.

Some businesses may have dedicated supply chain managers looking at the process, while smaller businesses may combine the function among other roles.

Today’s supply chains are often driven by just-in-time (or lean) processes, in which goods and services are made (and shipped) only when there’s customer demand. 

This mindset places the customer’s needs first, but it’s important that all elements in the supply chain are managed efficiently.

Here’s a definition of supply chain management…

Supply chain management is how the flow of goods and services is managed within a business and among its suppliers, from buying raw materials to delivering products to customers. Its aim is to cut costs, increase revenue, and improve the service to customers.

It’s different to the supply chain itself, which links individuals, businesses, technologies, and everything else involved in making (and delivering) a product or service.

The supply chain management process

Supply chain management isn’t just about the logistics of getting products and services into the hands of customers. A proper supply chain management process considers the steps from an overall strategy to how customers can return products.

There are five key elements to the process:

1. Working out a plan or strategy (including how to align supply chain management with your business’s principles and philosophy)
2. How products or services are built (for example, where raw materials are sourced)
3. Manufacturing (involving maximising efficiency and value to the customer)
4. Delivery and logistics (for example, transportation)
5. How customers can return items (if they’re faulty or not what they wanted)

The supply chain management process also involves opportunities for quality control, minimising shipping delays, and avoiding oversupply.

Small business supply chain disruption

If you’re running a small business with limited resources, you could be vulnerable to supply chain disruptions. Here are a couple of potential disruptions to be aware of:

• natural disasters, such as extreme weather conditions, which disrupt transportation routes could cause disruptions in your business – having a crisis management plan in place could help you prepare
• major worldwide events such as Covid-19
• if you rely on a particular supplier, you could also be in trouble if their own supply chain is disrupted
• regulatory changes, such as as the import changes that came into effect with Brexit, can also affect small businesses – so it’s important to stay on top of the things that could affect your business or industry

But disruptions can also come from within your own business. Poor inventory management can cause missed sale opportunities or lessen your customer relations, so it’s always important to have an accurate inventory level.

Staff sickness and holiday, if poorly managed, can also cause disruptions in your supply chain. Make sure you’re properly managing staff absences in order to avoid any issues.

Ultimately, you can help to manage these disruptions by building strong relationships with a diverse range of suppliers and setting up contingency plans before disasters arise.

Supply Chains Resilience Framework

The Department for Business and Trade, which is part of the UK government, believes there are five areas to focus on to strengthen supply chain resilience. While not specifically designed for small businesses, these can help give you a framework to work from.

The five areas of focus are:

1. Diversification: multiple supply sources can give your business more flexibility when disruptions appear
2. International partnerships: while this area may not be applicable to all small businesses, if you do import or export internationally, nurturing these relationships could help
3. Stockpiling and surge capacity: spend time identifying where it might be beneficial to keep strategic reserves of certain stock for certain times
4. Onshoring: if you’re looking to expand, figure out if increasing your domestic capacity might be more helpful than expanding internationally
5. Demand management: consider if you’ll need to manage the demand for a certain product – which could involve considering substitute or alternative products instead

Why is supply chain management important?

Supply chain management helps businesses gain a competitive advantage and give a better experience to customers.

By actively studying the supply chain, businesses can identify where to cut costs. It also helps them practise a culture of continuous improvement (in which problems are raised, discussed and solved as they arise in regular meetings and retrospectives).

Finally, the world is waking up to unethical practices within supply chains. As these practices become more transparent, an effective supply chain management process means you can avoid working with suppliers who go against your principles.

Our guide to business strategy can help you think more critically about these areas.

Would you like to know any more about supply chain management? Let us know in the comments below.

More helpful small business guides

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• HR toolkit: what HR tools do growing businesses need?
• What is outsourcing? A simple guide
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