The Effect of Supply Chain Management on Performance of Small and Medium Size Enterprises
in Buea Municipality
Department: Transport and Logistics
No of Pages: 60
Project Code: T&L4
References: Yes
Cost: 5,000XAF Cameroonian
: $15 for International students
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE
STUDY
The
term supply chain management was first coined by Keith Oliver in 1982. Though
the concept was of great importance in management long before. The main
objectives of supply chain management are to improve overall organizational
performance and customers satisfaction by improving product or service delivery
to customers.
In
other to achieve this it focuses on the right quantity delivery, to the right
location, at the right time, all in order to maximize total system cost,
satisfy customers’ requirements, face global competition and improve
standardization. (Robert B. Handfield L. Nichols 1999)
Every
organization in one way or another, be it standardized or local, has a trace of
how its activities are carried out with is its supply chain. In most cases or
generally, supply chains have four stages and in two phases.
But
some advance and large companies may have 5 stages of supply chain which starts
from the supplier to the manufacturer, to distribution, to retail and finally
the consumer. The supplier in most cases is the supplier of raw materials used
in the production process.
At
the level of manufacturing, it could be within the company or it could be
outsourced depending on the company in question. The disruption stage is also
an activity which could be outsourced or handled by the company itself.
The
retail level is usually divided in two in most cases that is the whole seller
and the retailer himself. Then the final customer is usually the consumer of
the product. But the nature of each supply chain depends on the kind of
products produced.
These
stages of supply chain in incorporated either internally or externally. That is
it could either be in the internal or external phase of the supply chain.
Internal supply chain refers to all activities of the supply chain that occurs
within the circumference of the organization.
That
is, Internal supply chain refers to the chain of activities within a company
that concludes with providing a product to the customer. This process involves
multiple functions within companies such as sales, production, and
distribution.
It is obvious that a company's performance would be enhanced by integration of these functions. (Robert B. Handfield L. Nichols 1999).
Furthermore, the history of supply chain can be sketched back to 1984 and 1985 in the textile industry. “The supply chain - a term increasingly used by logistics professionals, encompasses every effort involved in producing and delivering a final product, from the supplier’s supplier to the customer’s customer.
All
in all supply a chain delivers a finished good or service from supplier to
customer. It includes a variety of stages; manufacturer, supplier,
transporters, warehouse, retailers and final customers. A supply chain begins
with the supplier of raw material, extending through a manufacturing process to
the distributor and retail and finally to the customer.
As
supply chains continue to evolve and become more complex with international
sourcing, the associated risk increases as well as the probability for supply
incremental. With the recent increasing trend of industry responsiveness and
agility and the decreasing level of an on-hand inventory, a higher potential
for incremental is occurring Goldberg (2009)
Furthermore,
the exposure in the global supply chain can result from unintentional and
intentional events. Examples of unintentional disruptions include natural
disasters such as hurricanes and floods.
These
types of events can negatively affect transportation infrastructure, supply and
manufacturing facilities, unintentional events can also be manmade such as
accidents which create transportation delays, production stoppages and could or
could affect production quality (Jonsson et al, 2011). Intentional disruptions
such as theft and employee/union strikes can create transportation and
manufacturing delays.
As
supply chains continue to become more complex there is an interesting need to
incorporate effective supply chain management and establish disruptions
mitigations strategies within a company. Identifying supply chain risks and
predicting disruptions can help a company within the supply.
Unfortunately,
not all distributions are predictable. How a company handles the disruptions
during and after its occurrence can greatly influence the outcome of the
disruption and its effects on the company and brand. No industry is immune to
the threat of supply chain management.
As
companies experience the pressure to remain competitive on both the global and
regional scale, an increasing amount of companies are outsourcing product
manufacturing, material procurement, from global resources to decrease
operations cost.
This
information explosion had enabled logistics in supply chain to become an
important weapon in the firm’s arsenal to add valve to the bottom line (Closs,
et al., 2005). Information sharing was a key to success of logistics
performance (Whipple, Lambert, Vermeersch, 2002).
In
their study, Wardaya and Baskara (2013) confirmed that information flow had
become an important element that reflected collaboration within the logistic
management and firm performance.
Sharing
of information on transfer; exchange of information indicating the level and
position of inventory, sale data and information on the measure had become
essential to all firms (Wardaya, et al,2013).
On
the other hand, talking of organizational performance, various metrics can be
used to evaluate the performance of an organization (small and medium size
enterprises in Buea Municipality).
It
is worth mentioning that the metric/metrics to be used in evaluating
organizational performance remain subjective to what those in charge of
governance consider as success of the organization in question.
Nonetheless,
from a general perspective when talking of organizational performance, the
financial aspect cannot be undermined. Kenton (2018) describes financial performance
as a firm’s subjective measure as to how well it uses its assets from its
primary mode of business to generate revenues.
Another
perspective to financial performance views it as a tool used as a general
measure of a firm's overall financial health over a given period of time, and
can be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation.
According
to Hatten (2008) the term SME (Small and Medium Enterprises) is used in the
European Union and other international organizations to designate companies
that have a limited, specified number of employees, while the United States
typically uses the term "SMB" (Small to Medium Business) instead.
Classification
as an SME is based on the number of employees, generally between 10 and 100,
depending on the country in which the business is set up (Norlaphoompipat,
2008).
In
Kenya, supply chain in micro-enterprise means no more than 10 employees; a
small enterprise with 11-50 employees; and a medium/large enterprise with more
than 50 employees, as indicated by National Micro and Small Enterprise Baseline
Survey (1999).
SMEs
play a crucial role in market especially during recession of market and when
domestic growth is limited (Lages and Montgomery, 2004). There is not a
widespread accepted definition for SMEs around the world, instead some
considered number of employees (Lages and Montgomery, 2004); the other group
considered deficiency of financial resources against large enterprises
(Goldberg and Jonsson, 2009).
SMEs
are not subsidiaries, they are independent firms, but the number of employees
will not follow a common and certain rule around the world. Since the 1960s to
date, small and medium sized enterprises (SMEs) have been given due
recognitions especially in the developing nations for playing very important
roles towards fostering accelerated economic growth, development and stability
within several economies.
With
the outbreak of COVID 19 in the world, which caused a major shutdown in the
world including Cameroon, the nation during this period lost billions of FCFA
as its economic activities were all on a stand still.
Sea
and airports which generate huge money to the companies’ economy drop down by
almost 38% during the February to July months. Apart from the government, other
organizations and businesses within the company also suffered great lost a
disruption in their supply chain due to the lockdown.
1.2 STATEMENT OF THE
PROBLEM
Longer
supply chains due to globalization have increased the pressure to make
financing the supply chain more efficient. Due to increasing volatility of
global markets and complexity of supply chains, companies face huge challenges.
These
challenges also include financial aspects and risks in their supply chain
Narasimhan et al, (2002). The financial crisis has revealed structural
weaknesses. To increase the supply chain stability and to reduce the overall
costs, buyers having good credit ratings are increasingly interested in
improving their financial supply chain.
Financial
Supply Chain Management (FSCM) includes a set of approaches (Supply Chain
Financing or Natural Hedging) that should help to optimize the financial supply
chain setup regarding liquidity and financial risks in order to gain
competitive advantages Narasimhan et al, (2002).
FSCM
is an emerging field in practice and research and its potential is undisputed.
However, there still is a lack of understanding of the various FSCM methods and
their impact on the overall benefit, especially regarding organizational performance.
Organizational
problems which maybe delay of delivery, breakdown during production, political
instability and more are some of the problems originations are struggling to
battle with as supply chain management is on the rise everyday while others are
getting more complex by the day.
Many
organizations have a consistent and effective supply chain but at some point of
their operations, disruptions do occur and the effects of such disruptions be
it intentional or un-intentional are usually very impactful to the
organizations.
To
this effect, this research seeks assess the gravity of effect a supply chain
can cause to an organizational performance and to also see how these effects
can be better handled if in any case they do occur.
1.3 RESEARCH QUESTIONS
The
discussed background and problem formulation leads us to the following research
questions. The main research question is thus, “what is the effect of supply
chain management on the performance of small and medium size enterprises in
Buea Municipality?
Other
specific research questions are outlined below:
- How does delivery affect performance of small and medium size enterprises?
- To what extent does information flow in the supply chain affect performance small and medium size enterprises?
- How does transportation in the supply chain affect performance of small and medium size enterprises?
1.4 OBJECTIVES OF THE
STUDY
The
main objective of this study is to assess the effect of supply chain management
on performance of small and medium size enterprises in Buea Municipality.
The
specific objectives are:
- To assess how delivery affect performance of small and medium size enterprises in Buea Municipality.
- To examine the extent to which information flows in the supply chain affect performance of small and medium size enterprises in Buea Municipality.
- To determine transportation affect performance of small and medium size enterprises in Buea Municipality
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