SUPPLY CHAIN MANAGEMENT FOR SME
OVERVIEW
Definition of Terms
1. Supply chain management is the oversight of the flow of goods and services. It includes the movement and storage of raw materials and finished goods from point of
origin to point of consumption.
2. Small and Medium Enterprise (SME) are non-subsidiary independent firms which may employ few employees between from 10 – 200 people. Their capital and assets
are limited and their turnover is small compared to larger businesses.
3. Business Enterprise is an endeavour where the primary motive is profit and employment of one‘s self and others. It is any type of operation that is involved with
providing goods and services with the anticipated outcome of earning a profit.
Types of Enterprises
1. Sole Proprietorship
This is a business that is owned and managed by one person. The owner is personally responsible for its debts.
The owner may seek help from family members in running the business or employ an assistant.
Advantages
1. Easy decision making.
2. Capital required for starting and running business is minimal.
3. Sole proprietor enjoys profits alone.
4. Easy to start as it requires few legal formalities.
5. Is possible to keep business secrets to stay ahead of competition.
Disadvantages
1. There is no specialization in management e.g. finance or marketing, as all the work is done by owner of the business.
2. The sole proprietor has unlimited liability, which extend up to their own personal belongings.
3. Sole proprietor bears all the risks and losses alone.
4. Decisions made may be weaker done alone.
5. Lack of adequate capital for expansion.
6. Lack of continuity after death, due to lack of knowledge in formalities running the business.
2. Partnership
This is a business owned by a minimum of 2 people and maximum 20. The business partners share profits and liabilities depending on the various arrangements.
They usually are together with a motive of generating profit.
Advantages
1. There is more available capital as each partner contributes.
2. There is improved specialization in management as each partner could bring in a different set of skills.
3. There is improved decision making as compared to sole proprietorship.
4. Partnership has limited legal requirements as compared to sole proprietorship.
5. There is sharing of responsibilities hence no overworking.
6. There is sharing of losses and risks.
Disadvantages
1. Slow decision making as both partners shall be confronted and involved as they must reach a consensus.
2. Profits are shared hence less profits received or enjoyed.
3. Lack of effort by some partners who joy ride on others.
4. It has a limited lifespan. Death of one partner bring the business to an end.
5. Limited expansions as compared to companies that can float shares to the public.
6. Partners have unlimited liabilities.
Formation of Partnerships
1. When partners decide to form a business, they come up with a name.
2. They register the name with the registrar of business names.
3. Though not compulsory, they can prepare a partnership agreement which is used to settle misunderstandings between the partners.
