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Meqaps 44 (1)
 

Meqaps 44 (1)

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    Meqaps 44 (1) Meqaps 44 (1) Document Transcript

    • Supply Chain Organization and Management in French SMEs: An Exploratory Study CĂLIN GURĂU Marketing Department Group Sup de Co Montpellier Business School 2300 Avenue des Moulins, 34185 Montpellier FRANCE calin.gurau@wanadoo.fr Abstract: This study attempts to investigate the specific requirements and success factors for a successful implementation of a supply chain logic in SMEs that experience the transition from a start- up to a growth stage. The study adopts an exploratory approach, by comparing two distinct groups of French SMEs, characterized by their activity profile: manufacturing or distribution. The qualitative analysis of secondary and primary data indicates the importance of a reverse logic in the implementation of the supply chain approach, centered on the specific requirements of customers, and the need to integrate the various firm operations, functions and partners into a seamless value-added chain, coordinated at managerial level. Key-Words: Supply chain logic, Success factors, Organizational restructuring, French SMEs, Manufacturing and distribution firms 1 Introduction The integration of SMEs in supply chains represents an important research topic for both marketers and practitioners. However, most studies consider the SMEs in their role of suppliers, without investigating the way in which these firms develop, organize and manage their own supply chain [1]. This exploratory paper attempts to identify the success factors and the strategies applied by UK SMEs to develop, organize and manage effectively their supply chain. To increase the specificity of this study, the research is focused on firms which evolved recently from a purchasing approach to a supply chain logic, due to their successful development and growth in the domestic market. On the other hand, the paper outlines possible differences among various types of SMEs, making a comparative analysis of these strategies and success factor between manufacturing and distribution firms. 2 Literature review The theory of firm’s life cycle defines a number of evolutionary stages in the development of a business organization. According to Churchill and Lewis [2], the evolution of an entrepreneurial venture passes through the following phases: creation (start-up), growth, maturity, and decline; with diversification sometimes considered as an intermediary stage between maturity and decline. The small firm is characterized by limited resources and market power, being usually managed in an entrepreneurial style [3, 4]. Internally, SMEs are restricted by a lack of financial resources which limits their growth potential [5,6]. On the other hand, most SMEs do not have the benefit of an expert management team, relying on the general competence of the owner-manager. Externally, the SMEs’ size and competitive power significantly reduces their control and market impact, making them extremely vulnerable to adverse environmental change and competitive threats. In this situation, their efforts are usually concentrated at tactical level to quickly identify and answer the dynamic changes in the business environment [7]. However, this situation cannot be generalized to all SMEs. The weaknesses of small firms are relative in nature, and are especially characterizing the first stages of organizational life- cycle. The market success of a small firm will usually determine a transition to the growth/success stages, which implies a series of organizational and managerial changes, based on a long-term, strategic perspective [8, 9]. This study attempts to investigate this specific phase of firm transition from start-up to Recent Advances in Manufacturing Engineering ISBN: 978-1-61804-031-2 256
    • growth, focusing on the organizational restructuring of the purchasing function and its integration in a supply chain logic. In order to answer this problem, the study defines the following research objectives: a. to investigate the specific conditions defining the organizational transition from survival to growth; b. to identify the strategic requirements for the implementation of a supply chain approach; c. to compare the specificity of these requirements between two different types of business organizations: manufacturing and distribution firms. 3 Problem formulation The existing literature outlines the importance of implementing a supply management approach even in small organizations [10, 11, 12, 13, 14, 15, 16, 17]. The supply chain is defined as (13]: “The connected series of activities which is concerned with planning, coordinating and controlling material, parts and finished goods from suppliers to the customer” (p. 3). The adoption of a supply chain approach is often determined by the need to increase the efficiency and the effectiveness of the production or distribution process [15]. During periods or growth and/or increased competition, the firm must increase its competitive advantage and provide more value for customers. In this context, the reorganization of the purchasing function and a strict selection and management of suppliers represent the first steps for increasing the quality of the final offer [1]. However, firm management should also take into account the internal flow or raw materials and equipment, considering the specific requirement of production, logistics and distribution processes that contribute directly to the value of the final product [18]. Williams [12] posits that the complexity of this approach requires a three stages, gradual implementation process: • review supply base and identify areas of improvement; • launch supplier development program and pilot activities; • review supply chain management activities and identify future requirements. However, the limitation of this approach is an exclusive focus on suppliers selection and management, without taking into account its connection with the external and internal demand chains [19]. On the other hand, with the exception of several studies [20, 21], the implementation of a supply chain logic was disconnected from the temporal perspective of organizational life-cycle. Therefore, the focus of this study is on the specific supply chain restructuring processes that take place in SMEs during the transition from a start-up to a growth stage. 4 Research methodology To answer the formulated research objectives, both secondary and primary data have been collected and analyzed. In the first stage of the research process, a series of academic and professional articles and market reports have been accessed and analyzed in order to define the theoretical background and the research framework of this study. In the second stage of research, five manufacturing and five distribution firms located in the Languedoc- Roussillon region (south of France) have been identified to be involved in organizational transition from start-up to growth, with the specific need to restructure and integrate their purchasing function in a supply chain logic. The number of firm staff was used as a defining factor for SME selection, using the threshold of 250 employees defined by Morrissey and Pittaway [22]. The managers of these firms (their names cannot be disclosed because of confidentiality concerns) accepted to provide additional information about the implementation of a supply chain approach. Primary data was collected though observation and face-to-face interviews with the entrepreneur manager of these firms, as well as with the person in charge with the purchasing/supply chain management function. The interviews have been registered and then transcribed. Taking into account the exploratory nature of this study, the interviews have been analyzed using discourse analysis techniques, in order to identify the converging themes in the narratives of firm representatives regarding the topics of interest. The richness of this methodological approach consists in the examples and arguments provided by the interviewed managers, some of which are reproduced verbatim in the following sections. 5 Presentation and interpretation of findings 5.1 The organizational situation during the transition from survival to growth Recent Advances in Manufacturing Engineering ISBN: 978-1-61804-031-2 257
    • The transition from start-up to growth phase creates new requirements and priorities for firm management [23]. On one hand, the number of both customers and competitors is significantly increasing. The firm needs to grown not only in terms of market share, but also as an organizational system, increasing the number of its employees and introducing more formalized processes and procedures: “Market success determines a dramatic restructuring of all firm functions. You need more and better prepared people, and the management processes become more standardized and efficiency-oriented” (CEO manufacturing firm 1). In the start-up phase many functions are assumed and performed by the manager- entrepreneur, often using his/her informal business and personal network: “Until now there was no one in charge with the purchasing function. I personally knew all the suppliers – they were either friends or colleagues of mine, so when I needed to order some more materials, I was just calling them on their mobile” (Manager, manufacturing firm 4). In the growth stage, this multi-tasking becomes impossible, because of the volume and complexity of various functions: “As the firms grows, I have to learn how to delegate more and more of my initial activities to professional people, and develop several organizational departments (CEO, distribution firm 3). On the other hand, the definition and understanding of product quality and value are significantly modified during the growth stage: “Customers require clearly-defined quality standards and a reliable brand name, which cannot be obtained without reorganizing the internal flows of the firm” (Manager, manufacturing firm 4). The managers of the investigated firms agreed on the following strategic changes they experienced during the transition to the growth stage: • organizational restructuring is triggered by a change in the volume and quality requirements of the external demand chain; • the internal demand chain (production, merchandising and distribution) starts to experience an increase pressure to redefine quality standards and redesign internal processes and procedures to achieve increased efficiency; • the internal system transmits more precise specifications for raw materials, fuel and equipment; • the purchasing function selects reliable suppliers and formalizes the value-chain relationships; • the top management is forced to delegate many of his/her traditional functions, adopting a strategic perspective of organizational integration and coordination; • based on clear strategic objectives, the supply and the demand chain are closely integrated and managed for increased quality and efficiency. As expected, the speed of transition is not the same in all organizations, the length of this period ranging between six months and two years among the investigated firms. 5.2 The specific requirements and success factors for the implementation of a supply chain logic The two categories of investigated firms: distribution and manufacturing, presented different sets of requirements and success factors for the implementation of the supply chain logic. This specificity was determined by the requirements imposed by the external and internal demand chains on the supply function. For manufacturing firms these requirements were connected with the total value offer centered on the final product: product quality and reliability, value for money, offer customization, customer technical and relational services. On the other hand, the interviewed representatives of the distribution firms emphasized that these requirements were focused on: product quality, speed and cost of delivery, customization and specialized services. However, in some cases, three of the investigated distribution firms experienced more complex requests, such as counseling services regarding the selection and use of the best materials for a specific project. These demands indicated the existing potential of a Recent Advances in Manufacturing Engineering ISBN: 978-1-61804-031-2 258
    • profit center specialized in customer support and market development. The success factors indicated by the interviewed managers are also specific. For the manufacturing firms, the implementation of a supply chain logic is more difficult because of the need to harmonize and integrate the interface between various internal function and external partners: “The best approach is to take into account the needs of customers and to make the necessary changes in the flow of materials and operations to attain the required levels of cost, quality and reliability” (Manager, manufacturing firm 5). This integration is bi- dimensional, including, on one hand, the horizontal integration of various operations and partners in an efficient value-added chain, and, on the other hand, the vertical coordination of several internal departments, creating a synergy between operational, functional and managerial levels. The representative of distribution firms emphasized the need to collaborate closely with their clients, and develop a long-term, relational strategy. On the other hand, the capacity to identify the right suppliers and negotiate favorable contractual conditions can create a significant competitive advantage in comparison with other similar firms: “In distribution business it is always essential to get a better deal than your competitors. In reality, you are only an intermediary and your best advantage is to know the best supplier for a prospective clients, and to negotiate the best contractual terms, transmitting to the clients some of these advantages” (Manager, distribution firm 1). Finally, a common success factor for both types of firms seems to be the managerial skills and capacity to take a strategic perspective, and to coordinate effectively organizational change: “Initially I thought that the first two years of business will be the most difficult ones, but that period is simple in comparison with the dynamism and the complexity of change in this growth period. I need not only to restructure the firm, but also to redefine myself and my function, to know what functions to delegate and which to retain, and finally what competencies to develop or outsource for the next development stage” (CEO, manufacturing firm 4). An essential condition for implementing a supply chain logic is the recruitment of a knowledgeable supply chain manager. Sometimes (in four from the ten investigated firms in this study) the entrepreneur-manager attempts to adopt this function, by delegating the financial and budgeting aspects of firm management to a Finance or Business Development Executive Director. 6 Concluding remarks The findings of this exploratory study outline that the introduction of a supply chain logic is paramount for the successful progression and stabilization of the firm in the growth stage. In fact, only the supply chain perspective provides a complete overview of all the function and actors that need to be integrated flexibly into the value-added chain of the business organization. The interviewed managers emphasized the utility of a ‘reverse logic’, in which the specific requirements of this transition process are identified and defined by analyzing and understanding the needs of final clients and customers. The management should then initiate the restructuring of the internal demand chain, focusing on the organizational functions and departments that add significant value to customer offers and support services. This aspect confirms the importance of market orientation for successful firm growth, and the need for a marketing management approach. However, in the final stages of firm restructuring, the supply chain function may override the marketing approach, because it can offer a seamless integration of all the value- added activities starting with supplier selection and management and ending with customer relationship management. This study has a number of limitations determined by its exploratory approach. The number of investigated firms is relatively small, and the analysis of primary data is too superficial to provide generalizable results. Further research is necessary in order to understand the specific changes implemented in Recent Advances in Manufacturing Engineering ISBN: 978-1-61804-031-2 259
    • the operational, functional and managerial structure of the firm. On the other hand, the high specificity of firm transformation may require a case study approach, which has been successfully used in other similar studies [12, 14]. References: [1] M. Quayle, A study of supply chain management practice in UK industrial SMEs, Supply Chain Management: An International Journal, Vol.8, No. 1, 2003, pp. 79-86. [2] N. Churchill and V. Lewis. The Five Stages of Small Business Growth, Harvard Business Review, Vol.61, No.3, 1983, pp. 30-50. [3] J. Hill and L.T. Wright, Defining the scope of entrepreneurial marketing: a qualitative approach, Journal of Enterprising Culture, Vol.8, No.1, 2000, pp.23-46. [4] M. Levy and P. Powell, SME Flexibility and the Role of Information Systems, Small Business Economics, Vol.11, No.2, 1998, pp. 183-196. [5] D. Carson, S. Cromie, P. McGowan and J. Hill, Marketing and Entrepreneurship in SMEs: An Innovative Approach, Prentice Hall International, 1995. [6] G.C. Reid, Small Business Enterprise: An Economic Analysis, Routledge, 1993. [7] P. Jennings and G. Beaver, The performance and competitive advantage of small firms: A Management Perspective, International Small Business Journal, Vol.15, No.2, 1997, pp. 65- 75. [8] R. Quinn and K. Cameron, Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence, Management Science, Vol.29, No.1, 1983, pp. 33-51. [9] L. Thompson Jr., Mastering the Challenges of Change: Strategies for Each Stage in Your Organization's Life Cycle, AMACOM, 1994. [10] I. Barclay, Supply chain management in SMEs – benchmarking best practice core competencies, Journal of General Management, Vol.30, No.3, 2005, pp. 35-50. [11] J. Cambra-Fierro and Y. Polo-Redondo, A relational approach of the supply function: an extension to the new ventures phenomenon in the small and medium enterprise (SME) context, Journal of Strategic Marketing, Vol.17, No.5, 2009, pp. 411-431. [12] Sharon J. Williams, Managing and developing suppliers: can SCM be adopted by SMEs? International Journal of Production Research, Vol. 44, No.18/19, 2006, pp. 3831-3846. [13] G. Stevens, Integrating the supply chain, International Journal of Physical Distribution and Logistics Management, Vol.19, No.8, 1989, pp. 3–8. [14] E.N. Tan, G. Smith and M. Saad, Managing the global supply chain: a SME perspective. Production Planning & Control, Vol.17, No.3, 2006, pp. 238-246. [15] F. Talib, Z. Rahman and M.N. Qureshi, Integrating Total Quality Management and Supply Chain Management: Similarities and Benefits, IUP Journal of Supply Chain Management, Vol.7, No. 4, 2010, pp. 26-44 [16] J. Campbell and J. Sankaran, An inductive framework for enhancing supply chain integration, International Journal of Production Research, Vol.43, No. 16, 2005, pp. 3321-3351. [17] P. Wynarczyk and R. Watson, Firm Growth and Supply Chain Partnerships: an Empirical Analysis of UK SME, Small Business Economics, Vol.24, No.1, 2005, pp. 39-51. [18] I. Chen and A. Paulraj, Understanding supply chain management: Critical research and a theoretical framework. International Journal of Production Research, Vol.42, No.1, 2004, pp. 131–163. [19] W. Hoover, E. Eloranta, J. Holsmstrom and K. Huttunen, Managing the demand–supply chain: Value innovations for customers satisfaction, John Wiley & Sons, 2001. [20] R. Burgelman, M. Maidique and S. Wheelwrigth, Strategic Management of Technology and Innovation, McGraw-Hill, 2001. [21] A. Vohora, M. Wrigth and A. Lockett, Critical junctures in the development of university high-tech spinout companies, Research Policy, Vol.33, No.1, 2004, pp. 147–175. [22] J. Morrissey and L. Pittaway, Buyer–supplier relationships in small firms: The use of social factors to manage relationships. International Small Business Journal, Vol.24, No.3, 2006, pp. 272–298. [23] Andrew R.J. Dainty, Sarah J. Millett and Geoffrey H. Briscoe, New perspectives on construction supply chain integration, Supply Chain Management: An International Journal, Vol.6, No.4, 2001, pp. 163-173. Recent Advances in Manufacturing Engineering ISBN: 978-1-61804-031-2 260