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Wednesday, June 25, 2014

Strengths and Weaknesses of Small & Medium Businesses on the Global Supply Chain



Moving products from one area of the globe to another in an efficient manner is difficult. Ensure that inventory is accurate and supplies arrive when needed is also difficult. Small and medium size enterprises (SMEs) often lack the competence and skill to manage their supply chains well.  A study Dr. by Mohd Rahman discusses some of the challenges in supply chain management (SCM) faced by small businesses in Malaysia. 

A few decades ago Malaysia was an agricultural center but grew to prominence in the business world.  In 2005, approximately 29.6% of all companies were geared toward manufacturing exports. SME’s are 92% of registered companies and constitute 90% of manufacturing companies that contribute to 65% of employment. SMEs within Malaysia provide a strong case study of the difficulties SMEs have with SCM.

SMEs are often a strong catalyst for growth when they can effectively obtain resources and convert those resources to export products. Despite their benefits, many SMEs have a hard time achieving growth due to limitations on resources and knowledge. Understanding their strengths and weaknesses helps in tackling limitations to create a stronger business environment. 

Advantages of SMEs:

-Flat structure and short decision making that allows companies to adjust quickly.
-Flexible culture adaptable to change.
-Chances of improved success with organic vs. bureaucratic culture.
-Higher levels of innovative activities.

Disadvantages of SMEs:

 -Lack of skills and knowledge.
-Lack of financial resources.
-Owner controlling everything.
-Improper systems and processes.

The study indicated that SMEs are limited by both internal and external environmental issues. Some of these issues include cooperation with other parties in the supply chain, management supports and data transformation.  Such businesses don’t often cooperate for mutual benefit, have enough management knowledge to run certain programs effectively and lack acute ability to understand and use data.  The study found that the top five SMC dysfunctions in SMEs are 39% inefficient inventory management, 30% ignoring uncertainties in the supply chain, 26% incorrect inventory assessments, 26% lack of communication, 23% inaccurate use of data.

Rahman, M. (2012). The effective implementation of global supply chain management in small to medium-sized companies in Malaysia: An empirical study. International Journal of Management, 29 (3).

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