Business Process Management for SMEs in Wine Industry

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Why aren't SMEs adopting BPM for better operational efficiency, increased profitability, lower operating costs & improved market competitiveness? What challenges do they face & how can they overcome it? This pioneering study reveals the SMEs' experience from AUS wine industry. Read here or visit us at http://www.verityconsult.com

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Business Process Management for SMEs in Wine Industry

  1. 1. Business Process Management for small businesses A study of the Australian wine industry By Sandy Chong Business Process Management large organisations, it is also (BPM) has been identified as very important within the the number one business context of small and medium- priority. However, building sized enterprises (SMEs). one’s business process capabilities will remain a In this article, we focus on major challenge for senior SMEs within the wine industry, executives in the coming mainly because of its years. BPM is a structured significance in Australia. Wine method of understanding, businesses in this region are documenting, modeling, just starting to apply BPM analyzing, simulating, principles in response to the executing and constant change global grape glut, which forced of business processes and them to increase operational resources that add value to the efficiency. A pioneering study business. Though BPM research was done to review BPM has always focused on practices in these SMEs. Consulting Creativity | Passion | Growth
  2. 2. Creativity | Passion | Growth BPM in SMEs 3 The Australian wine industry 3 Constraints on BPM implementation 4 “Collaborate to compete” 5 BPM: Australian wine industry 2
  3. 3. Creativity | Passion | Growth BPM in SMEs The Australian wine industry The benefits of successful BPM experienced by The recent trend of industry consolidation has large organizations are well endorsed and threatened the competitiveness of smaller wine documented; they include, better operational operators; these larger companies bypass efficiency, increased profitability, better traditional distribution channels, eroding the customer relations, shorter process-cycle margins of smaller players. Furthermore, the times, lower operating costs, increased worldwide grape glut (oversupply) has generally accountability, and improved market depressed the market value of wine-related competitiveness. However because the products. This points to the need for industry- spotlight has always been on large wide strategies that preserve the health of the organizations, there is a false impression that industry. process-driven optimization frameworks are not applicable and useful for SMEs. Many operators have started to incorporate wine tourism in their business models in a bid It seems to be that most SMEs are not aware of to diversify operations. It is important to note, BPM practices that can help their businesses. In however, that this is unlikely to offset the many cases, they remain attached to older influence of supply-side inefficiencies and (functional) ways of thinking and managing, changing market dynamics. Thus, the fate of much to the detriment of their long-term SMEs will largely be determined by their survival. This situation has raised concerns willingness and ability to optimize business amongst policy makers worldwide, as SMEs are processes. important drivers of the economy, accounting for 40 to 60 percent of businesses in most For this research article, interviews were developed nations. Regardless of industry, conducted with representatives from 10 SMEs in there is an increasing need for SMEs to keep in Western Australia's (WA) wine industry. The pace with developments in the field of business main objective was to examine factors that strategy, so as to compete in an increasingly impede or constrain the implementation of global environment. BPM. BPM: Australian wine industry 3
  4. 4. Creativity | Passion | Growth Constraints on BPM implementation The research consisted of semi-structured interviews with representatives from SMEs in WA that derive a significant proportion of their revenue from activities related to wine production or sales. Although BPM has been adopted by many of the firms in this SME-driven industry, implementation is still at a stage of infancy. I. Lack of financial resources and III. Lack of IT expertise time This finding is understandable on two grounds. Firstly, the wine sector is still an “emerging These appeared to be the two most important industry” to the extent that much of it is still factors that hampered BPM implementation in comprised of small family-owned operations, the wine industry. most of whom do not have the resources to SMEs are usually unable to accommodate a employ specialist CIOs or knowledge large outlay on IT-driven BPM tools. Their management supporting officers. Secondly, human capital base also too small to allocate firms are mostly unable to afford hiring BPM BPM-specific tasks without compromising on technology specialists or consultants. regular operations. As one interviewee posited, the wine industry is very “capital intensive”. IV. Poor knowledge & Hence the long run cost savings expected from misconceptions of BPM BPM practices must be carefully balanced against the need for adequate working capital This finding is not only consistent with general in the short run. The smaller the firm, the studies on BPM adoption in SMEs, it also applies more difficult it is to strike this balance, it to the wider corporate community. A sound seems. knowledge of process-oriented optimization frameworks is essential to the success of BPM, II. Lack of senior management regardless of size and industry. In our context support though, there is a false impression that since smaller wine companies are not operationally Four of the ten interviewees found that this diversified enough, investing in process factor inhibits BPM significantly. This is optimization is not worthwhile. consistent with other BPM studies, that support That is not true, however. All companies, from senior executives or leaders is key to BPM whether they realize it or not, are engaged in success. value-adding activities - which are in fact Unfortunately in the wine industry, there is “business processes”. It would be a mistake to much resistance because businesses are assume that the streamlining of these "business relatively “family-oriented” and "traditional" in processes" is irrelevant to them. their mindsets and organizational structure. On In our interviews with wine companies, BPM the other hand, firms that experience great activities were usually adopted in an ad hoc managerial support have more vertically and piecemeal fashion, without proper integrated business units, supply chain implementation plans or strategic frameworks. intermediaries, export markets, growth Addressing the knowledge gap with education potential, and ambitions for accreditation. and publicly sponsored initiatives would therefore be essential. BPM: Australian wine industry 4
  5. 5. Creativity | Passion | Growth “Collaborate to compete” SMEs in the wine industry seem to be caught in About Us the same dilemma: it is true that process Verity Consulting is a boutique international marketing & optimization frameworks like BPM should be communication consultancy specializing in corporate training, senior adopted enjoy long-run cost reductions, yet, executive coaching and business advisory services. firms still have to manage short term capital needs, causing BPM initiatives to be curtailed, For more information about Verity’s global services and innovative delayed, and even abandoned. Experts business solutions, contact us at: recommend that “competing” SMEs should +61 4 02211373 (Australia) +65 8337 7178 (Singapore) instead collaborate, especially in industries like info@verityconsult.com the wine sector, which is seeing more and larger competitors enter the market. About the Author If a “collaborate to compete” model is adopted Dr. Sandy Chong in the WA wine industry, various inter- Principal consultant, Verity Consulting Pty Ltd organizational networks can be exploited. And, dr.sandychong@verityconsult.com issues with a lack of resources may be linkedin.com/in/sandychong dissipated. Certainly, one of the biggest questions is whether the WA wine industry is Curtin Business School mature and ready enough to adopt the Curtin University of Technology “collaborate to compete” approach. Indeed, Western Australia, Australia our research reveals that stalwarts of the wine industry tend to be averse to such This article is an abridged version of a research paper published in arrangements. In light of new competitive 2007 in the Journal of Information Systems for Small Businesses, 1(1- pressures, it might therefore be worthwhile for 2), pp. 41-58 – Business Process Management for Small- and Medium- companies to rethink their otherwise sized Enterprise: An exploratory study of implementation factors for "traditional" business approaches. the Australian wine industry. BPM: Australian wine industry 5
  6. 6. Copyright © 2010 Verity Consulting Pty Ltd. All rights reserved. www.verityconsult.com

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