Logistics Failure

Why a logistics failure can mean the end for an SME and how you can protect your business.

Whether you call them supply chain issues or logistics failures, an SME’s ability to prevent, predict and/or recover from such problems may be vital to success. The reason that logistics problems are so challenging is that they tend to be the result of success, rather than failure.

The risks of growth for an SME

It’s important to understand why these issues present such challenges. It’s because while all companies can stumble in this area, large organisations tend to have more of a cushion to protect them from the risks. A supply chain problem has three big knock on effects: customer service damage, higher costs and in-house tensions, each of which can lead to substantial problems down the line. While multinationals can throw money at their problems, absorb unexpected costs more easily or draft in expertise to help overcome difficulties, there’s little scope for an SME to take the same actions.

Expansion and logistics

It’s incredibly easy to think of logistics as simply the getting of your product to market but acquiring raw materials, hiring staff and obtaining new infrastructure all have logistical elements to consider. And of course, nobody wants to grow their business more slowly than they could – expansion is exciting and it’s a simple business fact that if we don’t supply, somebody else will.

How to handle growth

First of all – inform. Letting your key suppliers know what is happening gives them a chance to scale up as you do. Talking to major customers about your growth reassures them that you’re not going to forget their needs (it also reminds you not to forget those who supported you at the beginning, as ‘old reliables’ tend to find that it’s their orders that get pushed back or skimped when new customers show up!) Tell your bank too, so that they are prepared for you to need help with cashflow as your business grows. And don’t forget to check out your commercial insurance and keep your insurer abreast of changes – being underinsured or uninsured in new areas of business is an absolutely avoidable risk.

‘No’ is realistic

Some business leaders seem to feel that it’s not okay to say no, but if you can’t fulfil demand without compromising on quality – whether quality of product or quality of delivery – you are actually becoming a different, less-well established, organisation than you set out to be. Offering a clear statement of what you can do, even if it’s less than your potential client would like you to do, has more integrity than trying, and often failing, to meet a demand you doubted you could fulfil.

The devil in the detail of logistics

Study after study has shown that the most common logistical difficulties relate to

  1. planning,
  2. inventory management,
  3. customer service.

Sadly, most SMEs only discover the weaknesses in 1 and 2 when 3 hits their business.

Use 3PL to avoid disaster

Accidents happen, as to Acts of God, and monitoring the ebb and flow of demand will help an SME become skilled at handling logistics issues in advance of getting hit by problems. Using 3PL systems can, for example, give your business a chance to relocate inventory out of a problem location (think flooding, terrorism scare etc.) rather than trying to manage logistics in the middle of a crisis. Not only can you fulfil your own orders but it’s a chance to capitalise on any weaknesses in your rivals who might not move as fast, or as cleverly, as you do to get out of trouble.

Remember that 90% of success is delivery

Business gurus the world over say that if businesses would only put the same effort into a delivery service that they do into capture, most SMEs would be more robust. What this means is that instead of focusing on getting the order, many SMEs could benefit from splitting their focus equally between capturing orders and fulfilling them. Supply chain innovation is one of the easiest ways for a new business to differentiate itself, and whether than means adding a packet of Haribo to every order (Angling Direct) or giving the biography of the person who packed your order (Lush) it’s a way of creating a customer relationship that feels intensely personal and is – most importantly – memorable.

Calculate your risk

Global supply chains create escalating levels of risk, not just in the obvious failure of delivery, but in failure of transparency. Risk emerges when anybody from primary producers to 3PL SKU pickers are built into the delivery system, and being able to trace the entire logistics trail from beginning to end is vital if a business is to stay on top of the entire supply chain. This is important when there are difficulties but equally vital to progress success. If it’s discoverable – for example – that raw ingredients from one supplier achieve higher feedback than from another, it makes perfect sense to see if the more popular supplier can take on more work, reducing reliance on the less well valued one.

Consider your advantages

Many SMEs fail to consider their competitive assets because they become too involved in competing with similar sized organisations without considering what they have in their favour. Distinctive products, the ability to cater to local tastes, having the chance to produce niche products cost-effectively, access to low cost raw materials locally, the ability to serve an otherwise hard to reach market segment…all these can lead to a robust business model that allows an organisation to grow even if it’s not in direct competition with similar organisations or even with multinationals.

We provide warehouse space throughout the UK with professional warehouse services, including; pick and pack, pallet storage, temperature controlled warehousing, 3PL and much more. Ecommerce businesses must consider time management, and how to fulfil customer requirements, with product quality, cost and delivery in mind. We can help ensure your supply chain runs efficiently.

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