In today’s rapidly evolving business world, consumers have come to expect immediate responsiveness, complete transparency and total accuracy in every business transaction they undertake.
This dynamic has forced creativity within the manufacturing sector. Successful manufacturers have shifted to more flexible product configurations and just-in-time delivery models supported by modern technology systems that improve communication and visibility across the supply chain.
At first glance, it would seem that larger companies with greater economies of scale are better positioned to adapt to the constant downward pressure on prices and increase in expectations that transparency and global competition brings. In reality, though, thousands of smaller, more nimble manufacturers have successfully carved out a niche by building their own network of strategic partnerships. These companies are filling the missing elements in their own supply chains or creating new revenue opportunities by collaborating with large brands and individual entities selling directly through extended networks.
For manufacturers that are part of these networks, technology is the key to effectively competing in today’s tough market environment. Many small manufacturers have laid a foundation for success with modern business management and cloud enterprise resource planning (ERP) software. Consider these tips to overcome the complicated logistical processes and challenges presented by these extended networks and better meet customer demands.
Subcontracting Networks
In many industry sectors, small manufacturers have thrived as subcontractors as major brands have looked to delegate significant elements of their manufacturing and assembly processes to partners. These subcontractors typically focus on few product lines, have the flexibility to re-configure products quickly and can adapt overnight to changes in delivery specifications such as the sequence and timing of product deliveries.
Updated IT systems are a key contributor to subcontractor success. Older systems that support communication protocols such as EDI (Electronic Data Interchange) historically proved reliable in communicating orders, invoices and cash payments bi-directionally between parties. However, they were typically expensive to buy, implement, reconfigure and support.
Modern cloud ERP systems — which include application programming interfaces (APIs) as well as EDI — allow more disparate systems to be easily integrated and supported, which is critical given the varying technologies used throughout a network. Smaller, growing businesses can now select a system built for the exact business processes needed and can manage costs effectively while providing the service levels demanded by up-stream partners.
Improved cloud ERP systems also offer a vital improvement in the supply chain — control over inventory. Customers on tight assembly deadlines often need the direct visibility into vendor inventory levels that modern customer portals offer. Automated notification capabilities keep everyone in the vertical supply chain apprised of new and changing requirements. And the more open APIs of these systems make it far simpler for disparate systems to be linked to provide visibility and a single point of data entry across the supply chain.
An improved inventory system not only shows the quantity of inventory available but also likely incorporates back-order and drop-ship management capabilities. And any items with finite shelf lives can be identified and moved expeditiously through the sales cycle.
Direct Distribution Networks
Today’s technology allows businesses across sectors to market their products globally, making support for extended supply chains an imperative. Smaller manufacturers often turn to distribution partners to provide local sales and marketing, in-field services support and product repair or return capabilities. The distributor’s ability to offer greater scale — managing the products of multiple companies simultaneously — and awareness of local customs and business practices provides a platform for business expansion that may otherwise be cost prohibitive for the smaller manufacturer.
As with subcontracting networks, technology plays a key role in making the distributor network reliable and successful. A good cloud ERP system can automatically route any order received directly from a customer to the appropriate party for fulfillment with notifications and alerts to ensure prompt action. Cloud ERP can also enable a local distributor to have around-the-clock access to a vendor’s system via an online portal to enter, update or check the status of any order.
Because inventory is typically one of the biggest costs for small businesses, inventory management and accounting should be part of the same system. A system that updates inventory as orders are taken and fulfilled, with correct sales and cost-of-sales values posted instantaneously to accounting, is critically important in the distribution network. Not only is profitability immediately clear, but supply chain partners have an accurate real-time view into inventory availability.
Another important consideration, particularly when distributors are in a different time-zone, is the need to be able to accurately identify the location of inventory and help predict delivery lead times. Modern logistics systems can track inventory sold or consigned to a distributor and provide updated pricing for local markets. All parties in the value chain can be kept apprised on the status of any order at any time, building confidence and helping grow the relationship.
In today’s economy, strategic partnerships offer disproportionate benefits for the small manufacturer, for which they have become a business necessity. Today’s technology allows companies of any size to reach customers anywhere in the world, and strong partnerships are key to making these partnerships work. Choosing the right technology can give small and growing manufacturers the edge they need to make the most of strong strategic partnerships and thrive on the world stage.
Sunil Pande is CEO at VersAccounts.
