Logistics to make your business grow

Small and medium sized enterprises face multiple challenges on their entry to market, and easingtheir 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 varyingchallenges that these companies face. One such study, commissioned by FedEx and conducted bythe Atlantic Council, of SMEs in Europe and the US cited three core challenges facing SMEs, withthe idea that in laying out these challenges the study would provide a boost to fostering cooperationbetween companies on both sides of the Atlantic, and seek to expand the Transatlantic Trade andInvestment Partnership (TTIP) to include smaller businesses.

Originally published in Logistics Manager, January 2015.

The challenges noted by the study were: a lack of clarity in how to get started; problems finding theright clients; and a "confusing mix of regulatory differences and contradictory registrationrequirements".

"As two highly-regulated, highly-competitive, and highly-integrated markets, it only makes sense theUnited States and Europe endeavour to remove some of the unnecessary barriers that still existbetween them," said Garrett Workman, author of the study.

Focusing on that study's first and second points, UK-based SMEs, targeting the transport andengineering sector, were given a boost earlier this year when it was announced that Derby CityCouncil had teamed up with The University of Derby, Aston University, and Cranfield University, tolaunch a new organisation called Enscite to help SMEs grow or break into the UK's supply chain, viathe transport engineering sector.

Enscite, which officially launched in April, is dedicated to improving UK-based SMEs' performanceand 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 businessesto grow and thrive.

"It offers a range of support services to SMEs, including access to a £1m Technology Fund to helpfirms invest in new cutting edge equipment, and is committed to becoming the UK's leading nationalcentre for supply chain innovation in the transport engineering sector."

Niklas Hedin, chief executive of 3PL Centiro, says that there is a core difference betweensmall/medium sized businesses and larger firms. Namely that it is less about mass and more aboutservice.

"Cloud technology is now enabling these smaller companies to deliver a full-circle brand experienceto customers that many larger retailers would be envious of," he says. "Logistics providers like Shutlcan also now allow any SME to complete deliveries within an hour of an online order, and this ismainly 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 logisticsnetwork 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 fullycapitalise 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 ofclick 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 takeadvantage of click and collect services offered by retailers.

Research conducted by Verdict noted that click and collect accounted for 70 million deliveries in2013, with the group forecasting that will rise to 82 million in 2014. This prevalence of click andcollect must come as no surprise to SMEs.

In August, the Royal Mail announced that it was expanding its click and collect service, with 20,000SME 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 tocollect 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 onlineretailers and we are well placed to benefit from the growth in e-retailing. By teaming up with thePost Office to offer the UK's largest click and collect service, Royal Mail is enabling shoppers to havegreater control over the delivery of their items."

Royal Mail's decision to expand its click and collect service to SMEs may have, in part, beenprompted by a study of its own, which stated that one in six e-tail SMEs are planning to expand intophysical stores as they face an ever-increasing struggle to compete in the online market. Offeringconsumers a click and collect service, while not providing a physical presence in the classical sensecould offset the need for high-street branches through the convenience collecting offers up overdeliveries - especially during peak seasons when delivery services face extreme pressure and oftendisruption.

At the time of the report, Landon said SME online retailers were concentrating on exploiting asmany channels to market as possible, adding space in physical premises and online marketplacelistings 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 thisChristmas, indicating that shoppers are set to allocate just 13.2 per cent of their Christmas spend tosmall or medium sized enterprises. The negativity felt by Conlumino's polled SMEs reflects a similarpessimism noted at the start of the year by the Royal Mail study, which showed that there was a tenper 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 moreintense 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 thatwhile many claim to be planning to switch to larger retailers, almost half (49 per cent) of shopperssay they'd actually prefer to give them [SMEs] their custom rather than the big fish. However, theyneed 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 deliverynetwork.

Leveraging expertise

By their very nature, SMEs operate on a smaller scale, and with limited resource when compared totheir larger competitors. This gulf in available resource provides SMEs with multiple uphillstruggles, including those laid out in the above studies. As a result of this, they rely far more onleveraging 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 ensurethat their business objectives are met. For instance, an SME might not be as resilient to supply chaindisruptions as a larger business would be."

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