SMEs form the lifeblood of communities all around the world, whether they are in developed or emerging countries.
For brewing and beverage business SABMiller, which was acquired by AB InBev for £68 billion it is reliant on thousands of these businesses throughout the world. It is not currently known how the takeover has affected its supply chain.
The London-based company says its supply chain is made up of the likes of local farmers, larger logistics businesses and independent retailers.
To help with these small and medium-sized companies, SABMiller, which is the brewer behind drinks such as Miller Genuine Draft and Pilsner Urquell, is implanting a number of different support methods.
In Mozambique, where the cassava root is used in its brewing process, the crop was being grown on a large scale but wasn’t adequately commercialised. A truck funded by SABMiller now ventures into rural areas and processes the surplus cassava bringing extra revenue to farmers.
Millions of families around the globe are reliant on incomes from small businesses, but the challenges faced often hold them back from prospering further.
SABMiller’s cassava actives have helped bring new sources of capital to 500 farming families and have also contributed to an improvement in practices.
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Other initiatives currently being employed by SABMiller around the world include support in the African nation of Ghana and finance aid in Latin America.
From farms to factory suppliers, small businesses bring numerous advantages to the community in which they operate.
The guidance and advice being provided to SMEs in Latin America is aimed at improving sales, profits and customer service knowledge so that the SABMiller supply chain is strengthened across the spectrum of businesses.
Optimising your supply chain
By: Phil Davies, a Senior Manager at Ernst & Young
Efficiency and flexibility are essential elements for the success of a fast-growth business. Apply them to your supply chain and watch your profits increase and your market position improve.
All growing businesses face expanding and increasingly complex supply chains. For businesses with an international reach, the issues become amplified as they enter new markets and use new sources of supply. As supply chains grow longer they inevitably become harder to control.
Managing extended supply chains is not just a cost issue – the risks also multiply as the chain lengthens. Businesses can find that their ‘supplier’ is in fact just a middleman. They don’t know who is really manufacturing their products and their brand promise of ethically sourced goods can be left meaningless. A fire at mobile phone manufacturer Ericsson’s chip supplier left Ericsson unable to supply its market; its rival Nokia, which wasn’t dependent on a single supplier, was able to build a competitive lead, which persists to this day.
Protection of intellectual property is another problem with an extended supply chain – businesses can struggle to distinguish their own goods from counterfeits – which can often be produced to their own designs and even by their own suppliers.
Entrepreneurs tend to drive their businesses from the front, pushing for sales and leaving the back end to catch up and deliver on their promises. Leading companies realise that this not only exposes them to unacceptable risk from incidents in their supply chain, but also loses them opportunities to gain competitive advantage.
Fashion chain Zara, for instance, is known as the king of the fashion supply chain. Zara’s efficient supply chain and tracking systems allow the retailer to monitor buying trends from all of its 724 stores and tailor its supply accordingly. Each day, shop managers update commercial directors at the northern Spain headquarters on customer buying patterns. Information on whether customers are buying a particular fabric or jacket style is reflected in subsequent orders. Orders are made every few days, and it is the shop manager, not a distant director, who controls the order. New designs can reach the store in three weeks.
If something is not selling well, Zara stops producing it almost immediately. The results: higher margins with lower levels of markdowns and write-offs.
In many cases there is scope to structure global supply chains to reduce costs by minimising the international tax burden. All organisations are required to set transfer prices which reflect the true economic cost of products and services as they move from country to country across the supply chain. This gives the business the chance to reduce tax by relocating the most value adding activities – such as brand, design, strategic management and even supply chain management itself – to the lowest tax regimes. Asda, for example, recently moved ownership of its George brand to Switzerland, where it joins many other well-known retail names.
Taking control of supply chain issues will often mean building in-house capability from scratch, so it’s important to prioritise activities:
- Create the top layer of global capability first: even if you operate in a single country your supply chain will usually be multinational.
- Rationalise suppliers to a reasonable number without creating over-dependency, and build strong relationships with those that are left. Work with those suppliers and set systems to establish transparency and visibility in the supply chain.
- Use this visibility to build your ability to change and switch supply in the face of market conditions. Delay configuration – of products or even labelling – as late as possible and take a regional approach to supply to allow products to be switched between national markets.
- Where possible, end reliance on third parties and establish your own teams in supply markets to set up supply contracts and monitor quality.
- Integrate information across the business so that supply can react early enough to sales and marketing initiatives and ensure the product ends up on the shelves.
By investing in building a truly global supply chain early enough, companies can not only avoid costly supply chain mishaps, but avoid the need to make much larger investments later on, transforming their supply chain into a major weapon in their competitive arsenal.