Basic Principles of Supply Chain Management for Small Businesses


Managing your supply chain as a small business can be a complex task and can feel overwhelming sometimes. Breaking it into 5 key areas can help streamline your supply chain management. Here are the basic principles of supply chain management for small businesses:

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Basic Principles of Supply Chain Management

There are 5 principles to consider in your supply chain:

  • People
  • Purchasing
  • Production
  • Processes
  • Profitability

When analysing customer business needs, ensure every process is covered and that people remain at the heart of SCM. Employing the right people to manage and then define that process will significantly reduce the risks to the business. Let's consider each of the 5 key areas in turn:


Defining roles, training and development and skill matching is key when building an effective and successful business supply chain. Without the right people building the product, creating the workflow and processes which join the chain together and managing the entire operation the business would not exist.


Finding the right suppliers, negotiating the most cost effective rates and terms, routings, BOM’s, categories, recipes, weights and measures, warehousing, bin locations, catalogues, master files and ensuring timely inventory delivery.


Labour groups, operations, planning, tools, work centres, van routes and delivery schedules.


Workflows and business mapping to define the simplest most effective supply chain, track and trace as an integral customer component. Defining the following:- Sales order processing, Purchase order processing, despatch notes, remittance advice notes, statements, invoicing, credit notes, returns processing, receipts, payments, bank payments, journals, payroll, chart of accounts and nominal ledger codes


Efficient business processes, maximising existing and new software, knowing limitations, constantly revisiting cost to serve ratios, production and delivery costs.

Recommended reading: Five Tips For Effective Logistics Management

Supply Chain Management and Customer Relationship Management

Supply Chain can also exclude areas such as CRM (Customer Relationship Management).

To date organisations have approached CRM with the single goal of improving customer knowledge to drive sales strategies. Understanding the customer has meant, in essence, easy access to consistent information about sales history. As a result, too many companies have been sold CRM as an extension to the 'contact management' concept, and have therefore focused on delivering customer information to sales people.

However, this exclusive focus on sales not only constrains the scope of CRM, it also significantly undermines the potential benefits and overall value that can be gained from it.

By pulling information from finance, sales, marketing, and even support into a central, customer focused database, an organisation can attain significant insight into business performance and attain attendant benefits including enhanced financial control, improved forecasting and in-depth business understanding.

It is clear that visibility across finance, sales, service and marketing provides an organisation with the joined up business understanding required to achieve return on investment, whether from credit control or stock reduction and drive operational strategy, whilst supporting the CRM objective of enabling improved customer value.

Recommended reading: 6 Strategies for Better Customer Relationship Management

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