Small and medium sized enterprises face multiple challenges on their entry to market, and easing their entry into the supply chain can help third party logistics providers nurture potentially long-lasting relationships. Alex Whiteman reports.
Several recent studies of small and medium sized businesses have highlighted the varying challenges that these companies face. One such study, commissioned by FedEx and conducted by the Atlantic Council, of SMEs in Europe and the US cited three core challenges facing SMEs, with the idea that in laying out these challenges the study would provide a boost to fostering cooperation between companies on both sides of the Atlantic, and seek to expand the Transatlantic Trade and Investment Partnership (TTIP) to include smaller businesses.
The challenges noted by the study were: a lack of clarity in how to get started; problems finding the right clients; and a “confusing mix of regulatory differences and contradictory registration requirements”.
“As two highly-regulated, highly-competitive, and highly-integrated markets, it only makes sense the United States and Europe endeavour to remove some of the unnecessary barriers that still exist between them,” said Garrett Workman, author of the study.
Focusing on that study’s first and second points, UK-based SMEs, targeting the transport and engineering sector, were given a boost earlier this year when it was announced that Derby City Council had teamed up with The University of Derby, Aston University, and Cranfield University, to launch a new organisation called Enscite to help SMEs grow or break into the UK’s supply chain, via the transport engineering sector.
Enscite, which officially launched in April, is dedicated to improving UK-based SMEs’ performance and business opportunities, and aims to forge close working relationships across the aerospace, automotive, and rail supply chains.
Managing director Colin McKinnon said that Enscite’s main aim is to help manufacturing businesses to grow and thrive.
“It offers a range of support services to SMEs, including access to a £1m Technology Fund to help firms invest in new cutting edge equipment, and is committed to becoming the UK’s leading national centre for supply chain innovation in the transport engineering sector.”
Niklas Hedin, chief executive of 3PL Centiro, says that there is a core difference between small/medium sized businesses and larger firms. Namely that it is less about mass and more about service.
“Cloud technology is now enabling these smaller companies to deliver a full-circle brand experience to customers that many larger retailers would be envious of,” he says. “Logistics providers like Shutl can also now allow any SME to complete deliveries within an hour of an online order, and this is mainly due to the technology behind it rather than an extensive logistics network.”
The ascent of technology in the supply chain, according to Hedin, has allowed SMEs to grow. “Technology has now allowed SMEs to collaborate and pool resources to grow their logistics network or look to crowdsourcing for the necessary investment,” he adds.
Failure to capitalise
Another study, carried out by retail analysts Conlumino, stated that SMEs are failing to fully capitalise on the festive season. The study went on to add that, among other things, it expects UK-based SMEs to record seasonal losses in the region of £200m because of their overwhelming lack of click and collect services.
Conlumino found that the service, offered by just 18 per cent of SMEs, is expected to account for £700m of the anticipated £8.5bn Christmas spend. Almost a third of consumers are expected to take advantage of click and collect services offered by retailers.
Research conducted by Verdict noted that click and collect accounted for 70 million deliveries in 2013, with the group forecasting that will rise to 82 million in 2014. This prevalence of click and collect must come as no surprise to SMEs.
In August, the Royal Mail announced that it was expanding its click and collect service, with 20,000 SME customers said to be taking up contracts for the service.
Up until this expansion, users of Royal Mail’s click and collect service – which allows shoppers to collect goods from one of 10,500 UK post offices – had been open solely to larger retailers.
Nick Landon, managing director of Royal Mail Parcels, said: “Royal Mail is a key partner for online retailers and we are well placed to benefit from the growth in e-retailing. By teaming up with the Post Office to offer the UK’s largest click and collect service, Royal Mail is enabling shoppers to have greater control over the delivery of their items.”
Royal Mail’s decision to expand its click and collect service to SMEs may have, in part, been prompted by a study of its own, which stated that one in six e-tail SMEs are planning to expand into physical stores as they face an ever-increasing struggle to compete in the online market. Offering consumers a click and collect service, while not providing a physical presence in the classical sense could offset the need for high-street branches through the convenience collecting offers up over deliveries – especially during peak seasons when delivery services face extreme pressure and often disruption.
At the time of the report, Landon said SME online retailers were concentrating on exploiting as many channels to market as possible, adding space in physical premises and online marketplace listings to complement their existing web channel.
The Conlumino study polled SMEs to get an idea of their expectations for the Christmas period. Thirty nine per cent of those polled stated that they expect to lose out to larger retailers this Christmas, indicating that shoppers are set to allocate just 13.2 per cent of their Christmas spend to small or medium sized enterprises. The negativity felt by Conlumino’s polled SMEs reflects a similar pessimism noted at the start of the year by the Royal Mail study, which showed that there was a ten per cent decline in the number of SMEs that thought sales would increase on the previous year.
54 per cent of SME online retailers surveyed believed competition for online shoppers is more intense than last year, with 59 per cent citing an increase in the number of competing web sites.
Neil Saunders, managing director of Conlumino, said: “The good news for smaller retailers is that while many claim to be planning to switch to larger retailers, almost half (49 per cent) of shoppers say they’d actually prefer to give them [SMEs] their custom rather than the big fish. However, they need the reassurance that they’ll be able to get what they want, when they want it.”
For customers to get what they want, when they want it involves a solid distribution and delivery network.
By their very nature, SMEs operate on a smaller scale, and with limited resource when compared to their larger competitors. This gulf in available resource provides SMEs with multiple uphill struggles, including those laid out in the above studies. As a result of this, they rely far more on leveraging the expertise of their partners, including their third party logistics providers.
Hedin says: “SMEs are often a lot more reliant on the experience of their logistics provider to ensure that their business objectives are met. For instance, an SME might not be as resilient to supply chain disruptions as a larger business would be.”