Supply Chain Mailbag - Small Business Owners Edition
Small business owners supply chain questions answered
I’ve decided to publish some of the questions that I receive in a semi-regular Supply Chain Mailbag because the supply chain questions from my readers tend to include recurring themes.
For this edition of the Supply Chain Mailbag, I’m focusing on a couple questions asked of me by small business owners. Their supply chain concerns cross-industries. A small business owner in Los Angeles running a skin care products company has the same sourcing, cost of goods, and inventory control issues that small business owners in the food service, baby products, and other industries across the country and world have.
So read on to see what supply chain questions other small business owners have – and learn from their willingness to be case studies in the public service we provide here at the supply chain blog.
From Wallace, Los Angeles, California:
I have run [my own skin care products business] for over five years and have never needed anyone to help me with supply chain. I’ve grown my company from working out of my dining room to having my products in [well-known distribution channels]. I do all this myself. Why do I need supply chain help?
First off, Wallace, here’s to you. Everyone knows the odds of a small business making it more than twelve months, much less over sixty of them. And here’s what I tell all the small business owners who have succeeded and who want to know, for the love of W. Edwards Deming, why they should get supply chain help. You want to get supply chain help for the same reason you want to stop wearing orange shirts to Home Depot – at some point, you’re going to get tired of answering questions someone else should be answering.
You’re probably getting a bookkeeper to do your books. Someone else probably built and manages your website. And while you may have baked those cupcakes for the most recent staff meeting yourself, your time might have been better spent running your business.
Having a supply chain pro at your side allows you to focus on marketing, product development, business development, raising investment and other crucial activities.
While you may have initially identified your suppliers, a supply chain pro can manage those relationships – and also negotiate cost of goods and supply agreements with them. You don’t necessarily need to manage the intricacies of your inventory accuracy or your on-time delivery metrics – after you set the strategic goals for your company (ahem, start with 100%).
From LBJ, Seattle, Washington:
Over the past several weeks, I have had to ship almost half the shipments that I’ve promised customers late. The problem seems to be that I tell my customers I can ship their orders on time because I think I can ship them their order and then I go to my warehouse and what they want isn’t there. This seems to be a supply chain problem. Your blog is written by a supply chain expert. Fix this.
At first glance, yes, this appears to be – at least partially – a supply chain issue. And, LBJ, a 50% on-time delivery success rate is absolutely horrible. I don’t know what your particular product line is or how long you’ve been in business, but chances are you haven’t reached the half-decade mark like our friend Wallace. If what you say is accurate – i.e. you think you can ship an order and then you go to your warehouse and it’s not there – your specific supply chain problem relates to inventory control (inasmuch as you have none).
Your on-time delivery should be closing in on 100%, not half that. And you can’t deliver to your customers on-time if you don’t know what you have on hand. That means taking a weekend (or a week or a lunchtime) to count everything you have in stock. You should do that right now. This process is called conducting a 100% physical inventory.
Okay, now that you’ve done that, you need to initiate a cycle count program. That means that – on a regular basis – you count a certain percentage of the parts you have in inventory.
Since the 100% physical inventory you just conducted was your first (or your first in a long time), you should conduct another 100% physical inventory after 30-90 days. This is will ensure your counts are accurate. The cycle count program will also help you maintain your inventory accuracy.
100% physical inventories should also be conducted annually.
Small business owners – a focus on supply chain optimization and inventory accuracy are two solid ways to help you deliver what your customers want, when they want it, and spend as little money as possible getting that done.