Now is SMEs' time to compete

On-demand supply chain solutions are affordable for the small distributor

By Ed Lewis -- Industrial Distribution, 9/1/2005

Supply chain inefficiency is one of the most prevalent issues facing the small- to mid-size enterprise (SME) market today. The SME market continues to struggle to find ways to improve its supply chain while competing with larger enterprises that have the capital to invest in sophisticated systems. The supply chain management market has a gap today in terms of companies that will serve the SME market. Companies are finding fewer choices that fit their needs.

The problem facing the market rears its head in various ways:

• Bloated inventories and risk of obsolescence;
• The growing manual effort required to manage the process;
• Customer service levels that are unpredictable at best;
• And, in the worst case scenario, a gap in supply to meet customers' demand.

SMEs also feel pressure from their customers. Many of them want increased visibility, but the Internet has changed the way trading partners share information. As a result, customers have realized the benefits of visibility and now require it.

Customers have built their processes around the availability of accurate and timely information. Delays are not an option. Cost-cutting initiatives mandate continuous improvement or risk the loss of business. On-time delivery is mandatory, of course. In addition, SMEs face pressures from competitors, many of whom have already implemented global supply chain management (SCM) solutions.

So, how does an SME improve SCM processes without millions to spend? What if you are reluctant to add further IT costs and aren't convinced that the investment is going to render the projected return? These market conditions are fueling the desire for an on-demand solution.

Historically, companies were required to buy, build, and maintain their own IT infrastructures despite exponential costs. An on-demand model for the SCM market provides economy of a shared infrastructure across multiple companies and the convenience of a service provided completely over the Internet. Companies can now plug in and subscribe to services built on world-class infrastructure via the Internet.

Improving supply-chain performance provides a competitive advantage for small and medium-sized businesses and enables them to compete with large enterprises that have the capital to invest in sophisticated systems. On-demand SCM is currently an untapped market, and its potential is just starting to be noticed. For example, the success of Salesforce.com in the customer relationship market (based on a model similar to that used within the SCM market) has helped educate companies on the power of using an on-demand model.

On-demand solutions help SMEs to create a true "end-to-end" supply chain at a cost below any available in the traditional IT environment. Because an enterprise's demand on computing resources can vary drastically from one time to another, maintaining sufficient resources to meet peak requirements can be costly.

Conversely, if the enterprise cuts costs by only maintaining minimal computing resources, there will not be sufficient resources to meet peak requirements.

Now companies can leverage these modern supply chain techniques without breaking the bank. On-demand supply chain management can help SMEs connect offices, warehouses, suppliers and clients while helping to strengthen trading partner relationships, increase total sales opportunities, enhance operational efficiency and dramatically slash costs.