Technology Challenges and Opportunities for SMBs

An overview of supply chain software solutions to enable small
to medium-sized companies and small and medium enterprise spaces.

Christopher D. Norek and Al Zorner

In the world of supply chain management, one group of companies that seems to get short-changed in terms of coverage is the SMBs: small to medium-sized companies and small and medium enterprise spaces. It is these companies in the $50 to $500 million per year revenue range that are so key to our economies and that drive significant business. In the United States alone, it is estimated that there are more than 20,000 companies of this size. However, the large enterprises (typically over $1 billion) get the vast majority of press coverage, which includes supply chain issues.

We hope to improve upon the coverage for SMBs and to offer them ways in which they can use supply chain management to become more efficient and profitable. In the spirit of the Technology Toolbox, we believe technology is an area where SMBs can benefit significantly, allowing smaller workforces to increase productivity.

Common Challenges for SMB IT Investments

Lack of documented processes
Documented processes allow for faster and more effective technology implementation. As is the case in the larger companies, full documentation of operational processes typically does not exist in the smaller company. This documentation is a key enabler in implementing any technology solutions.

Less sophisticated IT departments
Traditionally, SMBs haven’t been able to pay their people on par with Fortune 500–type companies, which has resulted in perhaps less experienced people—including those in IT.

Standard software pricing models require a significant up-front license fee, in addition to almost as much in implementation fees and a yearly maintenance cost of 18 to 20 percent of the license fee. This has often made it impossible for SMBs to participate in the efficiencies the software provides.

Software as a Service (SaaS)
SaaS refers to paying for software on a usage basis rather than under the typical purchase license that gives relatively unlimited use of the software. The billing is usually on a monthly basis for the number of transactions/uses in that month. There are no up-front licensing costs and no need for up-front equipment and development resources. The subscription fee covers software maintenance and operational costs as well as any upgrades. This type of software pricing brings affordability to the SMB—no longer do you have to pay the significant license fee that larger firms pay.

Types of Software Available

in the SaaS Model
Most types of supply chain software are now available in the pay-by-use model, including procurement, warehouse management systems (WMS), transportation management systems (TMS) and business intelligence applications that enable decision making across various supply chain activities. The SaaS model allows an SMB to shop for “best of breed” offerings.

Steps to Determining If a Software Solution Makes Sense for Your SMB

  1. Determine the availability of information necessary to effectively and efficiently perform the work within your SMB.
    • Investigate the relevant systems from which data will have to be extracted to determine accuracy and completeness of data.
    • Determine which data elements are needed to power potential software solutions and in what systems they reside.
  2. Identify your desired functionality and value-add prior to speaking with vendors (a common recommendation in past Technology Toolbox articles). An outside consultant can help determine need if your team has difficulty thinking beyond current capabilities.
  3. Evaluate each vendor’s pricing model and relate it to the usage you will have if you “pay as you go.”
  4. Have vendor(s) help you create an ROI based on the issues you are trying to address and the benefits from improvement.

Things to Consider in the Purchasing Process

  • Can the supply chain solution be integrated with existing installed data?
  • Will the data be secure?
  • Forget competitive advantage or differentiation based on the solution itself.

Benefits of Various Types of Supply Chain Software

Lower total cost of ownership
With the pay-as-you-go option, SMBs can now really make the case for supply chain software implementation. They can pay on an incremental schedule based on usage, allowing them to avoid large one-time license fees. In addition, the pay-as-you-go approach can include all hosting, maintenance and upgrade costs.

Faster implementation and reduced startup costs
Many of the IT requirements are managed outside your company by the vendor, thereby reducing the resource needs of the SMB’s IT department.

Seamless updates
With the “hosted” solution, there is no need to upgrade the software you are using, since the vendor does that automatically.

Easier access to current technology
Now SMBs have access to benefits of current technology that only large companies could afford in the past.
Greater focus on custom supply chain and other process improvements

Having transactional processes automated can free up your people to provide additional value-add in other areas that require more customized intervention and attention.

Credit card purchase
Yes, it is that easy! You can now enter your credit card number and begin using a SaaS supply chain application that same day. Obviously, something you can use this quickly will be a more basic application, but the time frames needed to start benefiting are much smaller than in the past.

Remember that supply chain software solutions enable SMB processes, and the SMB processes are what you control!