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The Role of SMEs in Supply Chain Management Feb. 26, 2010

The Role of SMEs in Supply Chain Management Feb. 26, 2010



In this talk we present various issues that need to be considered when SMEs may take the roles of suppliers, producers, distributors, and customers in supply chain networks. We also discuss the ...

In this talk we present various issues that need to be considered when SMEs may take the roles of suppliers, producers, distributors, and customers in supply chain networks. We also discuss the benefits and the difficulties that SMEs as well as large firms can face as being part of the same supply chain network. Oya Tukel, Ph.D., Cleveland State University Nance College of Business Teaches innovation management, supply chain management and project management. She is actively involved in international programs and corporate training in the United States and Europe. She regularly publishes basic and applied research in the areas of project management and supply chain management.



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The Role of SMEs in Supply Chain Management Feb. 26, 2010 The Role of SMEs in Supply Chain Management Feb. 26, 2010 Presentation Transcript

  • Supply Chain Management Practices of SMEs Oya I. Tukel, Ph.D. Operations and Supply Chain Management Department [email_address]
  • Supply Chain Management (SCM)
    • Network of organizations that are involved-through upstream and downstream linkages-in the different processes and activities that produce value in the form of product and services in the hand of ultimate customers (Christopher 1998)
    • All parties involve in fulfilling a customer request: Includes manufacturers, suppliers, transporters, warehouses, retailers, customers
  • Conventional Network Customer Store Customer Store Materials DC Component Manufacturing Vendor DC Final Assembly Finished Goods DC Components DC Vendor DC Plant Warehouse Finished Goods DC Customer DC Customer DC Customer DC Customer Store Customer Store Customer Store Vendor DC
  • Why SCM?
    • The short term objective of SCM is to increase productivity and reduce inventory and cycle times;
    • The long term strategy is to improve process efficiency and effectives for all the members to eventually increase customer satisfaction, market share, and profits
  • Facts about SCM
    • Most research on SCM focused on larger organizations (Tan and Saad, 2006) Wal-Mart, P&G, HP, car manufacturers
    • Study area is mostly supplier management
    • Recent growth due to technological advances (RFID, EDI, e-commerce, etc.)
  • SMEs in the U.S.
    • Firms with 500 or less employees
    • 99.7% of US businesses are SMEs
    • Employ over 80% workforce
    • Over 90% in service industry
  • Characteristics of SMEs
    • Often independently owned and operated
    • Closely controlled by the principal investors
    • Lack of standardization
    • Strong cultural influence in decision making
    • Flat organizational structure
    • Flexible to changes
  • UPS ANNUAL SURVEY of SMEs --2009
  • SMEs in Global Arena
    • SMEs accounted for 97 percent of all U.S. exporters in 2007, and export revenue from SMEs rose from $102.8 billion in 1992 to $312 billion in 2007!
    • A large percentage of midsize companies, however, still rely on manual processes to manage their global trade operations, particularly their exports.
    • Difficult for SME to remain in compliance with customs regulations.
  • SMEs unique challenges..
    • Distribution and logistics managers rather than broader supply chain experience
    • Use local vendors for non-critical items (lack of strategic procurement practices)
    • Lack of economies of scale (securing freight capacity)
    • Lack of consistent business processes (documentation, IT investment, new hires and knowledge transfer issues)
    • Lack of significant capital for investment
  • SMEs unique global challenges..
    • As supply chains become more fragmented and dispersed, the risk for terrorism, theft, smuggling, counterfeiting and other issues also increases.
    • SMEs that trade globally also face an increased level of financial risk. Duties, taxes, transportation charges, and currency exchange rates are contributing factors.
    • The cost of increased inventory, longer cash-to-cash cycles due to customs clearance delays, expedited shipments, and additional overhead caused by inefficient processes.
  • Challenges facing SMEs to be part of SCMs:
    • Arend and Wisner Study (2004)
      • Investigation of whether firm size is relevant to supply chain optimality
      • A survey of 400+ managers in SMEs in the US
      • Self-selection correction
      • Results:
        • SMEs do not implement SCM as deeply as large firms
        • SMEs received fewer advantages from the partnership
        • SMEs do not emphasize strategic focus areas (product development, quality) to engage in SCM
        • Shortsighted partner selection rather than more comprehensive long term SCM relationship
  • Arend and Wisner Study (2004)
    • SCM-SMEs are positively correlated with
      • Partner’s use of EDI
      • SME is a key supplier to its partners
  • Strategic Comparison of Large firms and SMEs (Hong et al., 2006) Category SCM by large firms SCM by SMEs Competitive priority Sustain large market share Market niches Key strategies Exert influences in SCM, form alliances Build unique competencies External control structure Command and control toward small suppliers Accept command and control Internal control structure decentralized Focus on decision making Goal of SCM Multiple performance outcomes Focused performance outcome
  • SME Strategic Focus SC Relationship L H Low Cost Value Added Coordination Innovation Efficiency Collaboration
  • Conclusions
    • More studies are needed to investigate the role of SMEs in SCM
    • Conflict exist in the literature in terms of how SCM affects SMEs
    • Technology should be used to improve SME performance in SCMs.
    • Limited ERP applications (mostly internal efficiency)
    • Limited e-SCM (mostly internal efficiency)