Many Small to Medium-Size Companies are Turning to Innovative Supply Chain Management Solutions

Dustin Caudell
Mon, Jan 23, 2017
Many small to medium-size business owners are turning to supply chain management solutions to solve their biggest problems.
Many small to medium-size business owners are turning to supply chain management solutions to solve their biggest problems.

Small to medium-size businesses typically understand the challenges they face against their larger counterparts such as economies of scale, more efficient operating practices and resources. That's why, to compete, they must ensure all components of their supply chain management processes run smoothly. They have little room for error. 

For those companies that are still on the edge about whether to integrate supply chain management solutions either fully or partly into their operations, it's helpful to look at where the market currently stands. 

Daniel Harris, market researcher for supply chain management software consulting firm Software Advice, pointed to a recent survey his company conducted of manufactures, 3PL firms and other specialty distributors when explaining just how popular SCM software has become with smaller businesses.

"Adoption of SCM software is growing among small businesses," said Harris, according to RFgen. "In fact, 74 percent of our sample consists of businesses with fewer than 500 employees, but 46 percent of our sample is using SCM software indicating the adoption by small businesses. Additionally, 40 percent of our sample states that they're in the market for a new system in order to modernize business processes. This suggests that small businesses are attempting to leverage software to pivot towards data-driven supply chain management tactics."

If Harris' comments haven't quite swayed you, let's breakdown why smaller businesses are turning to these solutions.

1. What are Companies' Pain Points With Their Current Data Collection Processes?
There are many reasons small to medium-size companies turn to data automation tools. Typically they do so to resolve a number of pain points, such as handling increasing challenges with digital workflows, adjusting to rapid business growth, and transitioning from supply chain management processes or platforms that don't match their unique needs. 

Increasing Challenges: A supply chain management report by Beyond the Horizon and commissioned by Michigan State University examined common supply chain management challenges that keep managers up at night.

"I worry about supply risks in general, whether it's from natural disasters or things like … a troubled supplier or a variety of issues with the whole supply chain risk piece," one participant in the report said. 

Some companies likely feel their current systems or processes don't allow them to meet problems head on. Modern solutions - such as mobile data collection tools that take advantage of cloud software - can equip businesses to better mitigate and prevent data damage, and navigate supply chain disruptions.

By using a tool that allows them to exchange information in real time with their enterprise system, they often have more control over their supply chain management.

Rapid Growth: A Software Advice study found that many companies struggle when they're expanding too quickly. Nearly 20 percent of businesses that experience rapid growth through acquisitions and mergers feel they need to overhaul their current data collection practices because the solutions fail to support the company.

However, automated data collection solutions typically aren't the problem - unless they're too simple or feature-rich, which is something we'll discuss shortly. These solutions can actually help growing companies better manage data intake, extraction and transfer, and other supply chain operations and scale with the company.

Businesses that are expanding their vehicle fleets or adding additional facilities, such as offices or warehouses, may find that upgrading to a comprehensive SCM will reduce stress placed on their supply chains. Respondents in Beyond the Horizon's survey agree: Thirty-five percent of employees said they want to improve their warehouse management system to both support multiple facility locations and new features. 

The Wrong Type of Solution: Some companies find their current supply chain management software is too simple because it doesn't provide them with the extensive options they need - beyond basic finance and warehouse management features, for example - to help them operate efficiently.

On the flip side, third-party salespeople may have sold other companies on the prospect of using a complex SCM that contains an assortment of bells and whistles. While initially exciting, these businesses soon found out they don't need half of what they purchased. 

Some companies that want or need to cut back their budget may feel stuck. They're not sure how to transition to a system that better suits their business needs. In this case, it's critical they work with a solution provider that can help find them a SCM that works for them.

2. What Data Solutions are Businesses Currently Using and Why?
More and more companies are using commercial SCM software over other supply chain management methods. Software Advice found that 46 percent of respondents use commercial SCM solutions, which was nearly 20 percent more than those who use manual methods. QuickBooks (19 percent), spreadsheets (18 percent), proprietary systems (17 percent) and legacy systems (6 percent) rounded out the top four. 

So the question that remains is, why do companies use SCM? Software Advice researchers believe it has everything to do with growth and flexibility. 

Take for example companies that may have hired a developer to build them custom software years ago, but no longer have access to the same developer. As a result, the company can't upgrade or update the SCM consistently. This can not only hold the company back from an operations standpoint, it can open it up to IT security vulnerabilities. These companies are stuck using what's called abandonware, or a system they wish they could move on from.

3. What Can the Correct SCM Do For a Company?
The correct SCM software can help small to medium-size companies better automate their supply chain management processes. And for ones that aren't quite ready to switch over entirely to these procedures (or don't plan to) the right data automation solution can help fill in gaps between manual and automated processes. 

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