Small businesses and the supply chain.

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In a White House Blog post this month, the role of the President’s Council on Jobs and Competitiveness in promoting supply chain innovation and helping small businesses was highlighted. The blog described how small business growth can influence regional employment and the Council’s objective to provide constructive guidance to help make that a reality. While the blog did describe some of the methods the council is using to achieve their objectives, I was left wondering how the council can help level the playing field for small businesses when competing with large rivals.

Who hasn’t heard tales about the virtual disappearance of the local hardware stores when faced with competition like Home Depot and Lowes? Small businesses face many of the same supply chain dynamics and risks but without the level of resources in systems, expertise, and business leverage. The recent recession was particularly hard on small businesses which often have very limited capital and a much lower risk tolerance. I can count more than 10 small businesses within a 3 mile radius of my home that didn’t survive the recession. Still, small can often translate to nimble with a freedom of transformation that is difficult to achieve in large company bureaucracies. So how can the council help small companies address the disadvantages while leveraging their strengths?

Large companies have been investing heavily in developing sophisticated response management capabilities to address the volatile nature of demand and supply while minimizing their investments in inventory. Coupled with Lean Enterprise practices, these companies have achieved distinct cost advantages. I’m wondering if the council shouldn’t be actively promoting methods for small companies to learn and adopt lean practices. 

Going one step further, perhaps the government should be subsidizing system investments that would help small business be more responsive to the dynamics of the current business environment. The objectives of the Council are laudable and a business environment where small companies can compete and thrive will indeed serve to increase both product and supply chain innovation. Do you have other ideas on what the Council might do to help?


Darryl Gash
- May 24, 2011 at 2:07pm
I would advise small business to focus on flexibility and customer service levels. Large retailers in all indiustries struggle between cost pressures and having unique solutions to customer needs on a micro level. The one product serves all attitude to take advantage of economics of scale and scope leaves consumers who have unique needs out in the cold. The reatiler that can identify these needs and have the flexibillity to satisfy them will have a competitve advantage. My experience is that todays large retailers are following a Wal-Mart mindset. They seek to be the low cost leader while sacrificing customer service. Home Depot, as an example, is turning to a larger part-time work force to fill needed positions. This looks good from a cost of operations stand point but will degrade its mission of providing excellent customer service. If Home Depot does not change its mission to match its strategy it will realize a similar fate to that of Sears. This crtical strategic error will open the door for a host of small business that will have the ability to out perform Home Depot with flexibility, employee knowledge, expertise, and customer service level.
Kerry Zuber
- May 24, 2011 at 2:25pm

I think you are exactly on target with respect to where the biggest area of opportunity for small businesses lie. They won't win on price, but it areas with service is valued as highly as the goods purchased, they can shine. The challenge for them is promoting that value and the benefit to the community of their presence.
Air Charter
- May 25, 2011 at 12:22pm
Interesting article... I think those who care about small businesses should do all they can do shop locally. Coming from a small town I really care about local small businesses and always try to support them!

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