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Examining Logistics as the Lifeblood of SMEs and Supply Chain

September 15, 2023

The world is gradually but steadily going fully digital, and more human activities are now taking place online than ever before. In addition to physical meetings, there are now other ways to interact with members of society, including virtually.

The same applies to businesses,  physical outlets/stores, and corporate offices. According to a survey, 91% of enterprises are engaged in some form of digital initiative. In comparison, 89% of all companies have already adopted a digital-first business strategy or are planning to do so. This analysis further backs up Statista’s prediction of an increase in digital transformation spending to $1.8 trillion in 2022 and $2.8 trillion by 2025.

With the new reality for the business world deeply rooted in ICT, customers are also finding their way around the new norm. Mainly, people can skip a clothing store to shop for clothes or a car lot to buy a car. Consumers can quickly and conveniently order and pay for their goods online.

Logistics has found more relevance in modern society, as it plays a very relevant role in the sustainability of SMEs and supply chains. While people no longer go shopping unless required, logistics serves as a bridge between businesses and consumers. This article examines the role of logistics in the long-term viability of SMEs and supply chains in Africa and beyond. Without further ado, let's get right to the point.

Understanding the Role of Logistics in SMEs

Understanding the Role of Logistics in SMEs

SMEs are the biggest beneficiaries of modern society, as size does not always matter regarding online sales. However, large corporations still have a competitive advantage in finance, promotion, and infrastructure. Regardless, logistics provides a level playing field for both large and small-scale businesses to thrive in the ever-growing business world.

Only recently, SMEs have struggled to gain a share of the market in which they operate, owing to the need for critical elements such as visibility, brand voice, and trust among potential customers. In this case, lack of faith was a significant issue for small-scale businesses, as potential customers prefer to rely on an already-established brand rather than a new entrant with little or no visibility.

Similarly, due to a lack of trust and visibility, SMEs have had to deal with other issues like minimal patronage, operating on a slim budget, the incurrence of huge debts, or, in extreme situations, a total shutdown of operations. While this has been the reality of most SMEs over the decades, there has been a recent wave of change as logistics is tackling more business problems for SMEs than could have been envisioned a few years back.

In addition to leveling the playing field for large and small-medium scale businesses, logistics contributes to the sustainability of SMEs in the following areas:

  1. Reduce overhead expenses: The first benefit of logistics for SMEs is the reduction of overhead costs. Since most transactions take place online without needing a physical outlet, SMEs can channel their resources and spending into more relevant courses like online promotion, web development, and inventory management.
  1. Expansion: One of the critical drivers of business expansion is the ability to reach more customers, and this is precisely what logistics do for SMEs. With no worry about how consumers can access a good or service, SMEs can take advantage of logistic services to reach more customers and establish their presence beyond a single spot.
  1. Introduce advanced processes: Another impact of logistics for SMEs is the introduction of advanced techniques. When using logistic services, SMEs tend to implement specific procedures to ensure smooth operation and improve customers’ overall experience.

Notably, SMEs tend to integrate systematic inventory management, mainly if none existed before; this will help the business keep up-to-date records of available goods, track goods transportation, and plan for increased demand in seasonal periods or trending products.

  1. Competitive edge: Over the years, logistics has been very instrumental to the success of large-scale businesses, as it is an essential link in the supply chain. In contrast, SMEs face several entry barriers when it comes to the transportation of goods.

Remarkably, most SMEs could barely ship a truckload of goods, and if they could afford to do that, they had to wait a long period to fill a truckload of consignment and have it shipped.

However, as the need for less-than-truckload (LTL) delivery grows, many SMEs can now afford to ship fractional goods in a timely and efficient manner. This, coupled with other advantages like driver management, modern aggregation, and integration technology, has provided SMEs with a competitive advantage in the commercial sector.

Why is Logistics Important to the Supply Chain?

Why is Logistics Important to the Supply Chain?

The global supply chain market is expected to hit a CAGR of 11.2% from 2020 to 2027, suggesting a market value increase from $15.85 billion in 2019 to $ 37.41 billion in 2027. While this projection has continued to hold despite the pandemic, it further demonstrates the importance and growing demand for a global supply chain.

The flow of goods and services from the raw state to the end user is described as a supply chain. Interestingly, the better part of this process relies heavily on transportation, which also incorporates logistic operations. 

In other words, the supply chain is an overarching concept that combines multiple processes to achieve a competitive advantage. At the same time, logistics is an arm of the overall supply chain: Specifically, it refers to the methods of moving finished goods from the manufacturer to a distribution center and then to the end user.

Other functions of logistic management include order processing, material handling, inventory management, warehouse management, packaging and labeling, information and control, and transportation, all of which contribute to the overall success of the supply chain.

Generally, any business that sells products and services at any level is expected to establish its supply chain and, as a result, its logistic operation.

Final Thought

Logistics can create positive and invaluable business results if executed and coordinated correctly. Notably, SMEs can scale faster and thrive in a competitive commercial environment by exploiting point-to-point delivery, which ultimately translates to exceptional customer service.