Significance Of SCM For SMEs

Supply chain management (SCM) is a critical element in today’s highly complex and competitive business environment. It has direct influence on key issues like cost to market, time to market, responsiveness to changing customer demands and market dynamics and – in fact – on the overall business.

The SCM market in India, however, is still to mature and get organised. The process seems to have started but it has a long way to go.

To a great extent, due to the huge resources at their disposal, large enterprises have learnt to leverage SCM to their advantage.

Not surprisingly, most of the solutions and services available in the market tend to focus on the big players – leaving out SMEs who anyways start with a disadvantage due to their inherent resource constraints. Consequently, SMEs have been rather slow (and at times reluctant) to adopt and adapt SCM to their businesses.

However, various factors related to globalisation have now rendered implementation of SCM an imperative even for the SMEs. Mr Rajesh, MD, Rajathi Group highlights the relevance. He says, “The need for SCM is more than ever before because of the challenges unleashed on the competitiveness of the Indian industry by deregulation and globalisation.”

True, competition has now acquired a cross-border dimension and cost will play a key role with regards to competitiveness. “Effective and efficient SCM can help Indian SMEs to reduce their cost and compete aggressively in the international markets,” states Dr K Rangarajan, Head, Indian Institute of Foreign Trade (Kolkata).

The mammoth challenge for SMEs is to maintain the balance between demand and supply and, while doing so, provide the best possible products or services at the lowest possible cost. SMEs, obviously, do not have enough resources to employ at various stages of the chain. Hence, they often concentrate on individual components for optimising their internal operations.

But this is just a starting point and is never enough in the long run. The need is to optimise the supply chain in its totality and derive the highest possible value from it. “The objective of every supply chain is to maximise the overall value generated by an enterprise. It consists of all stages involved, directly or indirectly, in fulfilling a customer request,” remarks Mr Nikhil Shah, Executive Director, Elbee Express Pvt Ltd.

SCM is an ongoing process that involves precision in demand forecasting, inventory optimisation, reduction in warehouse costs and efficient as well as cost-effective handling of both incoming and outgoing stocks.

“Effective SCM brings down operating costs by a reduction in cost leakages like inventory pile-ups and reverse logistics, thereby ensuring a better planned environment wherein the production and supply sides are better synchronised and optimised,” says Mr Nikhil Sen, Director, Rosebys.

Thus, SCM is really about enhancing the efficiencies of the supply chain right from the planning stage to the execution stage while coordinating with diverse partners located at different locations. “As Indian SMEs go global it becomes even more imperative that their supply chains are linked with their global suppliers as well as vendors,” adds Mr Shah.

Efficient SCM needs an integrated approach; Indian SMEs need to start identifying and addressing various factors of their businesses so that they can enhance their supply chains accordingly. “An essential first step in the process is to assess the current supply chain capability and then linking that strategy to deliver bottom line results through SCM, competitiveness, order fulfilment, inventory management, etc,” says Mr Rajesh.

A good system will integrate not only information and processes but also people and technology. This is crucial if SMEs want to advance their market position. “An integrated SCM system can act as a powerful differentiator to significantly improve the competitiveness of the Indian SMEs,” says Mr Chittilappily, MD, V-Guard Industries.

As SMEs are gradually realising the significance of having an effective control over their supply chains, the SCM market in the country too is evolving in response. While the IT sector is gearing up to tap the growth, third party players, both at the level of consultation as well as implementation, are emerging on the landscape.

“SMEs are now increasingly relying on 3PL (Third Party Logistics) specialists to manage their entire supply chains, from procurement of raw materials to distribution of goods, in the domestic market as well as exports, so that they can focus on their core competencies,” explains Mr K Prabhakar, President and CEO, XPS.

It does make more sense to rely on specialists and to outsource it ‘to professional supply chain service providers that are well versed in the latest technologies and processes and have the cost benefit of economies of scale which they can pass on to the SMEs’ as Mr Shah says.

Although certain factors related to SCM are common to all industries, each industry vertical has its unique set of issues. Naturally, SCM requirement and implementation would differ from vertical to vertical. Mr Sivaram, Executive Director, Royal Classic Group, brings in the perspective from the apparel sector.

He says, “Being a fashion oriented business, our merchandise always has a limited shelf space and hence SCM has to be very effective. The co-ordination from design forecasting, conceptualising, samples production, bulk production, warehouse management & maintenance, effective distribution network are key activities involved in the process...” Similarly, other industries like auto-components, pharma, gems & jewellery, retail, etc. would have their distinctive SCM needs.

Moreover, each of these sectors is going through a different phase and hence its needs would change accordingly. The point is – SMEs from each industry would have to go for SCM solutions that are well-suited for their industry as well as their individual requirements and not blindly follow any trend.

Being small (or mid-sized) isn’t always bad; it has its advantages. As Mr Shah says, “SMEs have an advantage over their larger competitors as their smaller size gives them less bureaucracy to change and greater agility to respond.” Due to their leaner operations they are well-positioned to implement strategic changes quicker. This agility must be used to exploit business opportunities.

“However they have to do their homework on issues like getting the right team, dealing with lower volumes in the initial stages, keeping firm process documentation in position etc,” says Mr Ramkumar, Executive Director, Gemini Communication Ltd.

Globalisation has not just thrown up new challenges but has also opened up new opportunities. Likewise, just as SMEs have certain inherent limitations, they also have definite intrinsic strengths. SCM is all about aligning your strengths to take advantage of the opportunities while overcoming weaknesses and challenges. SMEs can definitely do it.

Source by indiatimes