Supply chain management: a profile of micro enterprises.

Pearson, Terry R. ; Parmenter, David A.

ABSTRACT

Micro enterprises (firms with less than nine employees) represent an increasingly important component of the economy. The United States literature typically defines small businesses as having less than 500 employees, incorporating micro firms into this broader definition. Although there has been a diversity of studies focusing on small and medium sized enterprise supply chain management, there has been insufficient research on micro entities. Thus, little is known about supply chain management in micro ventures. This study develops a profile of micro enterprise supply chain management practices, the factors that encourage or discourage the implementation of supply chain management activities, and the impact of these supply chain activities on firm performance. The findings of this study indicate that micro enterprises tend to implement supply chain management methods and supply chain management appears to increase micro firm performance.

INTRODUCTION

For the last decade many large enterprises (LEs), and to a lesser extent small to medium sized enterprises (SMEs), have placed increasing emphasis on the implementation of supply chain management (Chopra & Meindle, 2001; Mentzer, 2000). Supply chain management (SCM) is a philosophy and a set of business practices that allow firms to more closely coordinate their activities with suppliers, distributors, retailers and consumers (Laudon & Laudon, 2001; Simchi-Levi, Kaminsky & Simchi-Levi, 2003). The SCM literature is somewhat inconsistent in its definition of SMEs, but tends to utilize size as the focal point, with LEs characterized as 500 or more employees and SMEs as less than 500 employees, although in some cases no definition is offered at all (Barringer, 1997; Brush, 2001; Committee on Supply Chain Integration, 2000; Larson, 2005). In addition to the number of employees, small firms are also delineated by such factors as finances, sector and ownership, effectuating a universal definition problematic (Curran & Blackburn, 2001; Storey, 1994). Micro enterprises, the focus of this study, are a subset of SMEs, with micro entities defined as those having nine or fewer employees (European Commission, 1996; Fulantelli, Allegra & Vitrano, A.Z.P., 2002). SMEs by definition include micro firms, SMEs can also be referred to as micro, small and medium sized enterprises or MSMEs. Although the literature includes studies of supply chain management in SME's, it does not to date appear to address SCM implementation by micro organizations in particular.

The growth of small business and its impact on the economy and employment has been recognized by both the public and private sectors as well as by academics (Chapman, Ettkin & Helms, 2000; Committee on Supply Chain Integration, 2000; Curran & Blackburn, 2001; Park & Krishnan, 2001; Schwenk & Shrader, 1993; Watkins, 1993). Furthermore, SMEs have become increasingly more important to the United States economy in the 1990's as more employees at LEs have been downsized and the growing attention to core competencies among many companies has evolved to increased outsourcing by LEs to smaller suppliers (Park & Krishman, 2001). SMEs not only comprise the majority of the United States manufacturing facilities and employees, but account for much of the innovation (Committee on Supply Chain Integration, 2000).

SCM has taken on critical importance within the context of small business due to its impact on long-term performance, competitive advantage, strategic competence and competitiveness (Cavinato, 1992; Park & Krishnan, 2001). Small businesses are already involved in SCM, whether the owner-managers of those small businesses recognize it or not (Chapman et al. 2000). Successful implementation of SCM can reduce costs, increase revenues, enhance productivity and quality, advance technological innovation and in general allow an organization to be more competitive (Chase, Aquilano & Jacobs, 2000; Christopher, 2000; Fisher, 1997; Gryna, 2001; Hult, Thomas, Nichols & Giunipero 2000; Mainardi, Salva & Sanderson, 1999; Spekman, Kamauff, & Salmond, 1994). MSMEs cannot dismiss SCM and hope to remain competitive in the future (Committee on Supply Chain Integration, 2000; Lummus & Vakurka, 1999).

The goal of this research is to develop information that will assist in answering the inquiry, is SCM implementation related to firm size and performance (Kaufman, Wood & Theyel, 2000; Magretta, 1998; Notman, 1998; Quayle, 2002; Tulip, 2000). The previous literature has converged on LE supply chain management and somewhat less on SME's. The research agenda of this study will provide a first glimpse of the impact that small size (micro enterprises) might have on both the implementation of supply chain activities and the benefits that result from these activities. The study employs a self reporting survey that addresses the following five issues: the extent to which micro enterprises have implemented SCM, the determinants that encourage SCM implementation among micro firms, the factors that discourage SCM implementation, the impact of SCM on micro firm performance, and the methods of SCM that micro organizations would like to receive additional training.

LITERATURE REVIEW

Supply chain management has evolved from two main perspectives, the upstream-focused procurement orientation of the manufacturer and supplier and the downstream-focused transportation and logistics orientation of the distributor and retailer (Mentzer et al., 2001; Tan, 2001). SCM is a fairly recent concept and although numerous models have been proposed no standardized definition has emerged to date (Gibson, Mentzer & Cook, 2005; Quayle, 2002; Tan, 2001). The various supply chain paradigms can encompass elements that range from the comparatively narrow to the very broad. Gibson, Mentzer and Cook (2005) develop a confined definition of SCM that emphasizes the importance of collaboration as well as alignment with the organization's strategy. In contrast, the Supply Chain Operations Reference Model (SCOR) takes a more extensive approach which spans the entire supply chain from the supplier's supplier to the customer's customer, but does omit certain activities such as product design, quality, information technology and elements of service after the sale (Schultz, 2003; Supply Chain Council, 2005). The Council of Supply Chain Management Professionals defines SCM more expansively in its Supply Chain Management Process Standards (2004 abcdef), including all of the activities involved in planning for SCM, sourcing the required inputs, manufacturing the product, delivering the product and processing returns, as well as incorporating supply chain facilitators such as quality, information technology and security.

Although there are examples of supply chain failures, many LEs have achieved significant success through the implementation of SCM (Chapman et al., 2000). Kopezak and Johnson (2003) observed that supply chain management's ability to leverage the skills and resources of partner entities allows for increased differentiation that can develop customer loyalty. Furthermore, SCM is being encouraged by such issues as global competition, outsourcing, cost reduction requirements, e-commerce, and decreased product life cycles (Ericksen, Suri, El-Jawhari & Armstrong, 2005). These factors maturate to extended supply lines, new members in the supply chain and longer as well as more complex distribution channels that must be coordinated The knowledge of the abilities of each partner in the chain joined with an increased comprehension of the end users' needs allows businesses to add services and features which create value beyond the cost to the chain members (Brewer & Speh, 2000). The chain's sharing of both demand and supply related information enables more effective planning which results in better utilization of assets, lower inventory, reduced costs and improved customer service.

In theory, smaller firms may have some characteristics that prove advantageous when implementing supply chain management. MSMEs tend to be less bureaucratic, more agile and more entrepreneurially oriented. Despite these potential advantages MSME's have some limitations due to their small size that may inhibit their implementation of SCM, notably a lack of resources (Hvolby, Trienekens & Carrie, 2001). Moreover, controversy concerning how SCM affects SMEs exists, especially with respect to findings that suggest SCM is negatively related to SME performance. A study conducted by Arend and Wisner (2005) was particularly discouraging. Arend and Wisner (2205) demonstrated that successful SMEs were more likely to employ SCM methods than less successful organizations but that, surprisingly, supply chain utilization tended to harm these more successful firms. Several alternative explanations are proposed by the authors for this finding including the proposition that SMEs did not select partners based on strategic alignment but rather on ease of integration. For example, partners might be selected on the criteria of compatible computer systems.

SMEs implement SCM differently than LEs and may not be qualified to utilize SCM as effectively (Gammelguard & Larson, 2001). SMEs could have been bullied into SCM by a larger and more powerful supply chain partner (Maloni & Benton, 2000), with this tendency toward bullying increasing as competitive pressures on LE's intensify (Maloni & Benton, 2000). Simatupang and Sridharan (2004) noted the importance of having an incentive system designed to encourage SMEs to perform in an effective and efficient manner in the roles assigned to them by the supply chain. Arend and Wismer (2005) suggest that SMEs might have difficulty executing SCM as an important component of their strategy, the choice of supply chain partners could impede or propel SCM and some firms may employ SCM only when it is easy to do so.

Songini (2001) reported that numerous LEs were frustrated by the lack of information technology expertise demonstrated by many of their smaller suppliers. Quayle (2002) noted that many LEs were developing strategies to leverage their skills in order to align this skill set with the suppliers, but these strategies were undermined by the smaller suppliers' inability or unwillingness to fully integrate with the LEs. Quayle's (2002) research discovered that SMEs resisted SCM for numerous reasons: the inability to overcome traditional practices, a lack of knowledge concerning SCM, insufficient management time, inadequate capital, deficient resources and the incapacity to proceed without external support. Larson, Carr and Dhariwai (2005) discovered manufacturers communicate less frequently with small suppliers compared to large suppliers and manufacturers believe small companies obstruct supply chain implementation more than large suppliers. Therefore, the internet may not be the great leveling agent it has been professed to be (Larson, 2005). Additionally, small firms tend to be more risk-averse and more concerned with survival (Pollard & Hayne, 1998). SCM reluctance might also be attributable to the role that managers play in smaller entities. Typically managers in smaller businesses are required to be involved in the day-to-day and hour-to-hour operations of the organization and have less time to develop the strategy necessary to guide supply chain implementation. Smaller companies with limited resources and skills may simply elect not to implement closer ties with suppliers and customers for numerous reasons, including a loss of freedom and sense of individuality, the required cooperation with other supply chain members, and difficulty integrating information technology (Gales & Blackburn, 1990; Fulantelli et al., 2002; Hvolby et al., 2001; Lyons & Bailey, 1993; Spekman, 1988). Although the concerns raised are not unreasonable, SCM's potential ability to provide more benefits than the traditional model of arms-length supplier relationships demands that SMEs form closer and more collaborative relationships with a reduced set of channel members to achieve this goal (Anderson & Narus, 1990; Dwyer, Schurr & Oh, 1987; Helper, 1991).

The conclusion proposed after evaluating the literature is the growing need for supply chain management practices among SMEs in this customer-driven marketplace. Failure to implement SCM could ultimately result in the loss of customers, something that should be of great concern to SMEs. However, the cost and complexity of implementation, as well as concerns about ROI and closer-than-usual collaboration with other firms still impedes the progress among SMEs. The experience of large enterprises has demonstrated the benefits that can be obtained through SCM and has revealed some of the difficulties of implementation as well.

The reality of the supply chain management literature is that it does not address micro enterprises. Although research studies of SMEs would likely include some micro firms among the sample, these studies do not segregate micros as a separate category and thus provide no conclusions pertaining specifically to micro entities. This research study attempts to develop a supply chain management profile of micro enterprises. The authors hypothesize that many micro firms are indeed utilizing supply chain methods, although they may be doing so primarily due to pressure from larger customers and suppliers.

METHODOLOGY

The Survey Questionnaire

 The intent of this study is to answer five major research questions.

 Which supply chain activities, if any, have been implemented by
 micro firms?

 What benefits, if any, have micro firms gained from their supply
 chain activities?

 What factors have encouraged micro firms to implement supply
 chain activities?

 What factors have discouraged greater implementation of supply
 chain activities?

 About which supply chain methods would micro enterprises most
 like to learn more?

A survey questionnaire was designed to capture the data necessary to answer these five questions. The survey includes questions as well as a series of statements to which respondents can reply with "Agree Strongly," "Agree," "Neutral," "Disagree" and "Disagree Strongly." These questions and statements were carefully developed based on a rigorous review of both the entrepreneurial and supply chain management literature. The questionnaire was reviewed by colleagues with the relevant expertise and revised repeatedly prior to being utilized.

The questionnaire contains eight sections. After the initial section which solicits basic background information about each responding firm, including the number of employees, the remaining sections provide the SCM information that is central to this research.

Section 2 focuses on the environment in which the firm operates. The purpose of this section is to estimate the extent to which a firm's environment might encourage the implementation of SCM practices. For example, a firm with particularly demanding customers might be more motivated than the average firm to pursue various SCM activities in order to improve its ability to meet those stringent customer demands. Similarly, a firm competing in a commodity market may have greater incentive to implement supply chain methods, either for the cost-reduction benefits that would allow it to compete more effectively on the basis of price or for the potential service-related benefits that might allow its product to avoid commodity status. The section contains seven statements, each of which calls for a response of "Agree Strongly," "Agree," "Neutral," "Disagree," or "Disagree Strongly" (as do the statements in Sections 3, 4 and 5 of the questionnaire). The seven environment-related statements capture the degree to which:

 Inputs and outputs are tangible goods rather than services

 Demand varies dramatically and unpredictably

 Customers are demanding and difficult to serve

 Sub-par supplier performance would seriously hurt the firm's
 performance

 The firm's products or services qualify as commodities

 Global sourcing and/or distribution is utilized

 Sales are made to end users rather than to other organizations

Section 3 concentrates on the nature of the entity's leaders, with the underlying assumption that the decision to implement SCM is partially driven by the characteristics of the decision maker and not just by the position and strategy of the organization, as suggested by Park and Krishnan (2001). For instance, a leader with more formal education would be more likely to be familiar with SCM and therefore more inclined to seriously consider its use. A leader possessing significant computer expertise would generally be less likely to resist SCM solely because of its call for an increased utilization of information technology. The four leadership-related statements in this section develop the scope to which the firm's leadership:

 Has received a significant amount of formal education

 Is proactive rather than reactive

 Embraces rather than resists change

 Is proficient with information technology and can recognize
 its benefits

Section 4, the centerpiece of the survey, converges on the firm's implementation of various supply chain management activities. The fourteen statements in this section are organized into three categories--the firm's readiness or preparation for SCM (three statements), the enterprise's implementation of various supplier-oriented supply chain activities (seven statements) and the entity's execution of diverse customer-oriented supply chain activities (four statements). The fourteen questions in this section attempt to discover the extent to which the firm:

 Has a well-defined strategy and knows what its suppliers must do to
 support that strategy

 Possesses the necessary information and telecommunication technology

 Has rationalized its internal processes

 Works regularly with key suppliers to jointly solve problems

 Works with key suppliers to jointly plan future activities

 Shares demand-related information with suppliers

 Reduces its supply base, retaining the best suppliers

 Places serious effort into building trust and commitment with
 key suppliers

 Utilizes the internet to place most supplier orders

 Has improved its processes and technology to enhance coordination

 Works regularly with key customers to jointly solve problems

 Works regularly with key customers to jointly plan future activities

 Has customers willing to share demand-related information with
 the firm

 Has customers that utilize the internet to place orders with the
 firm

Section 5 solicits opinions concerning the degree to which supply chain activities have allowed the firm to achieve each of the five benefits of reduced costs, improved service, impressive growth, increased profits and enhanced trust and collaboration with suppliers and/or customers. Although many of the benefits referenced in this section would seem to call for the use of quantitative measures, the authors chose to rely on opinions rather than more objective results due to the fact that it is often extremely difficult to quantify the impact of specific supply chain activities. LEs with complex accounting systems may have difficulty in accurately determining the precise benefits of individual SCM initiatives. This determination of benefits could be expected to be even more problematic for smaller less formally managed firms. As with sections 2 through 4, this section employees statements calling for responses of "Agree Strongly," "Agree," and so on.

Section 6 requests the respondents to specify the factor or factors that encouraged the firm to initiate SMC. A list of potential factors was provided, with the list including "Other" as an option. It is expected that a large percentage of the micro enterprises that have implemented SCM will have accomplished this task due to pressure from other firms, particularly pressure from important customers. Similarly, Section 7 requests the respondents to specify the determinant or determinants that discouraged the entity from executing supply chain management to a greater extent than it has already accomplished. Assorted weaknesses tied to the micro businesses' small size, such as a lack of capital or technical expertise, are expected to be reported as common impediments to the utilization of supply chain management.

The final section, Section 8, inquires the sample to provide information concerning the supply chain methods about which the firms would like to learn more. This survey is being conducted with the assistance of the local Small Business Development Center and therefore one of its goals is to determine the education and counseling needs of area micro enterprises. Many studies (Committee on Supply Chain Integration, 2000; Gammelgaard & Larson, 2001; Quayle, 2002; Songini, 2001) have noted the need for increased supply chain knowledge among smaller firms, knowledge that can be used to the advantage of the small firms themselves as well as for the benefit of their supply chain partners. This need for increased supply chain expertise is expected to be particularly critical for micro entities.

THE SAMPLE

The data for this study was collected utilizing a survey conducted in the Texas Panhandle with the assistance of the Small Business Development Center (SBDC). Although the study concentrates its primary attention on micro enterprise supply chain practices it was decided to include small firms (10-49 employees) in the sample in order to enable comparisons between the two sizes of organizations. The survey mailing list was developed systematically from an SBDC roster of over 9000 small and micro firms in the region, a region that is largely rural with one SMA of approximately 180,000 people. A mailing list of 480 firms was selected, with micro firms making up approximately two thirds of the list. In an attempt to increase the response rate, graduate students contacted many of the selected firms prior to the mailing in order to determine the appropriate employees at each business to whom the survey should be forwarded. Generally an employee was selected based on involvement with functions such as procurement, inventory management or distribution. A total of 88 responses were received. After removing the surveys with excessive missing data and those that were submitted by organizations employing more than 49 employees, the usable sample contained 43 micro firms and 30 small firms, an overall response rate of approximately 14%. Roughly 75% of the micro firms in the sample classified themselves as either service firms or retailers, with the remainder of the sample categorized as raw material producers, manufacturers or wholesalers/distributors. Service firms comprised the greatest percentage of the small firm sample.

RESULTS

Micro Firm Utilization of Supply Chain Methods

The primary goal of this study is to determine the extent to which micro enterprises are utilizing supply chain methods. As discussed earlier in the paper, the authors hypothesize that micro firms are performing supply chain activities, despite the lack of evidence provided in the literature. The statements concerning micro firm utilization of supply chain activities were presented in Section 4 of the questionnaire and, as discussed earlier, allowed respondents to select from "Agree Strongly," "Agree," "Neutral," "Disagree" and "Disagree Strongly." These five possible responses were coded using the integer values one through five, with one being assigned to "Agree Strongly." Therefore, values of one or two signify a respondent's agreement with a statement that a firm is employing a particular supply chain method while values of three or larger signify a lack of agreement.

The hypothesis test to evaluate if micro enterprises are performing a particular supply chain activity takes the form of Ho: [micro] [greater than or equal to] 3 versus Ha: [micro] < 3, with a lower tail test being appropriate because of the coding scheme using smaller values to signify agreement. A series of fourteen identical hypothesis tests were performed for the statements in Section 4. The results are illustrated in Table 1. All three of the supply chain readiness statements achieved significance, as did three of the supplier-related statements and one of the customer-related statements. Two more of the supplier-related statements and one of the customer-related statements achieved sample means of less than 3.0, but not sufficiently less to achieve statistical significance. Only four statements resulted in sample means of 3.0 or larger. These results provide convincing evidence that supply chain methods are widely employed among even the smallest firms. The activity of building relationships with suppliers received the strongest support, with a sample mean of less than 2.0. This is not surprising given the emphasis on closer supplier relationships depicted not only throughout the supply chain literature but also in the earlier literature concerning just-in-time manufacturing.

Pearson Correlation Coefficients were developed for the environment-related characteristics from Section 2 and the leadership-related attributes from Section 3 with the fourteen supply chain activities listed above. Although a few significant correlations were discovered between pairs of environment-related statements and supply chain statements, there was no one environmental characteristic that demonstrated a consistent pattern of relationships with the supply chain methods. The leadership attributes demonstrated only a few significant correlations. However, having a leader who is proficient with technology was significantly correlated with three supply chain activities: employing the internet to place supplier purchase orders, rationalizing linkages with suppliers and sharing information with customers.

Benefits of Supply Chain Methods

Based on the research findings that micro firms are utilizing supply chain methods, the obvious next step is to determine whether or not these methods are providing tangible benefits. This analysis applies the same lower-tailed testing format discussed above to the five benefit-related statements in Section 5. Significant results were achieved for three of the benefits, improved service, increased profits and enhanced trust and collaboration with suppliers and/or customers. These three benefits achieved sample means of 2.51, 2.71 and 2.40, respectively. The remaining two benefits, reduced costs and impressive growth, achieved sample means of less than 3.0, but the means were not sufficiently less to be statistically significant.

Although it is not the purpose of this paper to discuss at length the potential cause-and-effect relationships between individual supply chain methods and firm performance, Pearson Correlation Coefficients calculated for each pair of statements can provide some cursory insights. The correlations suggest the importance of a firm preparing to take advantage of supply chain practices and methods. All three of the preparation-related statements were significantly correlated with most if not all of the five benefits. Having a well-defined strategy was significantly correlated with all five benefits, with values ranging from .327 to .505. Rationalizing internal processes was highly correlated with all five benefits, with coefficients varying from .459 to .531. Possessing the necessary information and telecommunications technology was significantly correlated with all of the benefits except for collaboration with suppliers.

Of the supplier-related supply chain activities, rationalizing links with suppliers was the most highly correlated and significantly related to all five benefits with coefficients ranging from .425 to .536. Using the internet to purchase from suppliers was significantly correlated with reduced costs, impressive growth and increased profits. Interestingly, the sample mean of 3.70 for employing the internet suggests that most firms do not use the internet to place purchase orders with suppliers. The correlations discussed here, however, suggest that micro organizations that do exploit the internet may be deriving substantial benefits from this activity. Various other supplier-related activities achieved significance with one and sometimes two of the five benefits.

Significant correlations were also identified among the customer-related activities. Joint problem-solving with customers and joint planning with customers were significantly related to all five benefits, with correlations varying from .306 to .573. Sharing information with customers was significantly related to four of the benefits and using the internet to obtain a customer order was significantly correlated to three of the benefits.

Factors Encouraging or Discouraging Supply Chain Implementation

Sections 6 and 7 of the questionnaire inquired respondents to specify the issues that encouraged the use of supply chain management and the factors that had discouraged them from implementing supply chain management to a greater extent than they had so far accomplished. The most commonly cited responses for supporting factors were the firm's recognition of the potential benefits of supply chain management (cited by 15 firms), pressure from suppliers and/or customers (8), the necessary technology becoming available at a reasonable cost (8), the need to match a competitor's supply chain competitive advantage (6) and the necessary skills becoming available (4). These results are quite hopeful for the future of supply chain utilization among micro firms, suggesting that any micro hesitancy to adopt supply chain management may be due more to a lack of resources and skills than to an ignorance of supply chain management and its potential benefits.

The most commonly cited element discouraging greater execution of supply chain methods was the belief that the firm was small enough to operate effectively without formal processes and procedures (cited by 25 firms). While this claim may indeed be valid for some micro enterprises given that inter-functional integration is not as problematic for an organization with fewer employees and employees wear "many hats," it is nevertheless a somewhat disappointing result in that it conjures up a vision of the stereotypical entrepreneurial discomfort with formal command and control structures. This mindset may prevent the leadership at some micro businesses from recognizing the need for supply chain management until that need has become critical. The other most commonly cited determinants discouraging greater implementation were the requirements of time and money (10), the belief that supply chain activities would provide little benefit (8), and the unwillingness to share sensitive information with other organizations (8).

Supply Chain Learning Requirements

In the final section of the questionnaire the respondents were requested to specify the supply chain skills that they wished to further develop. The results (from a sample size of 43) can be seen in Table 2.

Given the earlier findings of low levels of internet usage for accepting customer orders and for placing orders with suppliers, it would seem logical that many firms would be interested in learning more about how to develop the internet to its fullest potential. It is somewhat surprising to the authors that some of the more technology-oriented options such as integrating the firm's computer system with the customers' and suppliers' computer systems, utilizing supply chain software, and technical issues such as RFID and bar coding were not selected by more firms. It might be the case that micro businesses are simply not sufficiently sophisticated yet to even consider the need for these types of skills.

Micro Enterprises Versus Small Firms

The supply chain literature strongly suggests that large firms are more likely to adopt supply chain methods. In this research study the authors determined that micro firms had substantially progressed towards supply chain management implementation. With data available from the research study for both micro businesses (0 to 9 employees) and small firms (10 to 49 employees), it makes sense to contrast the two types in terms of their utilization of supply chain activities.

The appropriate hypothesis test to evaluate whether small firms are making greater application of a particular supply chain method is a two-independent-sample t test utilizing the hypotheses Ho: [[micro].sub.micro] - [[micro].sub.small] [less than or equal to] 0 versus Ha: [[micro].sub.micro] - [[micro].sub.small] > 0. An upper tail test is appropriate because small firms should consistently receive lower scores (noting that "Strongly Agree" was coded as 1) if they are making greater use of the supply chain methods. A series of fourteen identical hypothesis tests were performed for the statements in Section 4. The results demonstrated little statistical significance, with the null hypothesis being rejected for only one activity, rationalizing internal processes. However, the sample mean for the small firms was less than that of the micro enterprises for all but two of the activities. Thus, a consistent pattern that suggests increased use of supply chain methods by small firms despite the fact that the observed differences were too small to achieve statistical significance.

This research study demonstrates, rather surprisingly given the lack of evidence in the literature, that micro organizations are adopting supply chain methods extensively. The contrast of micro enterprises with small firms, however, implies that micro organizations are, as expected, performing supply chain activities somewhat less extensively than small firms.

DISCUSSION

When beginning this study the authors fully expected to discover that micro enterprises were utilizing various supply chain methods despite the lack of evidence in the literature. It was surprising, however, to discover the extent to which micro firms claim to be employing supply chain methods. This higher-than-expected level of supply chain achievement is a hopeful sign, not only for the future success of the micro organizations applying these practices and methods, but for the future success of their suppliers and customers.

Hopeful is also the feeling engendered by the micro firm responses to the question concerning factors encouraging supply chain implementation. It was expected that most of the micro entities that had accomplished supply chain methods would have incorporated these methods primarily due to pressure from important customers or suppliers. The results, however, suggest that many micro businesses are fully aware of the potential benefits of supply chain activities and will implement these activities as soon as the necessary technology becomes cost-effective and the required skills are available. Rather than having to be pressured into adopting these new methods, firms are voluntarily moving forward with supply chain projects to enable themselves to be more competitive in the marketplace.

Another factor that should greatly encourage increased use of supply chain management are the benefits that micro organizations report achieving as a result of SCM. This study depicts that supply chain management is believed to have provided superior customer service, increased profits and higher levels of collaboration and trust with suppliers and customers. Although the remaining two benefits included in the questionnaire, reduced costs and impressive growth, were not statistically significant, both received moderate support in the data. These results indicate increased micro firm success via supply chain management should spur other micro organizations to give more serious consideration to the implementation of supply chain management methods.

However, the research reveals that in their efforts to move toward greater use of supply chain methods it is crucial that micro entities not get ahead of themselves. The findings demonstrate the importance of providing the foundation for successful SCM by developing a formal business strategy to guide supply chain decision-making, installing the necessary information and telecommunication technology, and rationalizing internal processes. It was encouraging to discover the extent to which micro organizations have already achieved this supply chain foundation.

The most discouraging finding of the research was the large number of micro enterprises that believe their small size implies that they would not benefit from formal procedures and policies. Although this claim may indeed be valid on occasion, one cannot help but suspect that some entrepreneurs are resisting supply chain methods not as a result of a rational business decision, but instead due to the stereotypical entrepreneurial distaste for formal structures. If this is the case, these firms may ultimately be harmed by their unwillingness to give supply chain methods the careful analysis that the methods deserve.

A micro organization's lack of technical expertise appears, as expected, to be a roadblock to the implementation of SCM. The research suggests that internet utilization, either for placing purchase orders with suppliers or for accepting purchase orders from customers, is one of the least fully implemented supply chain methods among micro enterprises. This may be a serious omission considering the potential of the technology to increase both efficiency and effectiveness. It is encouraging, however, to observe that many firms recognize the need to learn more about the internet. Universities and Small Business Development Centers obviously have a major role to play in this acquisition of knowledge. Faculty need to continue to increase the coverage given to supply chain management in their courses, particularly in courses oriented toward entrepreneurship.

IMPLICATIONS, LIMITATIONS AND FUTURE RESEARCH DIRECTIONS

The research study adds to the knowledge base in the fields of entrepreneurship and supply chain management by developing a profile of micro enterprise utilization of supply chain management. The research findings provide evidence that micro firms employ SCM practices and methods quite extensively, although possibly not at the same level as that demonstrated by larger firms.

Micro organizations are enjoying the benefits of SCM through increased profits, improved customer service and enhanced collaboration and trust with suppliers and customers. Additionally, micro enterprises appear to have recognized and developed an understanding of these methods and the benefits that they can provide. However some SCM adoption is driven simply by pressure from suppliers and customers, much of it appears to be a result of factors suggesting foresight and awareness on the part of micro enterprises. The benefits achieved and the higher than expected awareness suggest that micro organizations can be expected to implement SCM more rapidly in the future, especially if the necessary skills become more widely available and the technology decreases in cost. Obviously universities can play a major role in preparing students who will have the necessary supply chain expertise to aid these micro entities in their execution efforts. As noted in the survey, web-related training in particular would seem to be very valuable to micro enterprises.

This research contains some limitations. First, the survey requested respondent opinions rather than objective measures of supply chain implementation or performance improvements. Moreover, many of the firms in the sample may have quantitative evidence on which to base their opinions, however, some of the input may have been subjective. It would be helpful in future inquiries to obtain data that is more objective. A second weakness is the small size of the sample. Although there were a number of hypotheses for which statistical significance was achieved, there were a few for which the data supported the alternative hypothesis but too weakly to allow a legitimate rejection of the null.

It is recommended that this study be replicated in other geographical areas to determine if the findings are consistent. Detailed case studies of individual firms could prove useful as well, allowing an investigation of some of the subtleties that can not be captured in a mailed questionnaire. Finally, it is recommended that the definition of micro enterprises be expanded beyond employee size to include industry sector as well as various financial constructs.

CONCLUSION

Micro enterprises perform supply chain management practices and methods, albeit to a lesser extent than larger organizations. Moreover, micro organizations understand the value of supply chain management and its benefits, however, micro firms tend to accept that their size allows them to operate very effectively and the need for formalization is minimal which may impact the implementation of supply chain management negatively. Micros are still concerned about the time and capital required to implement supply chain management as well as providing sensitive information to supply chain members. The more technologically proficient a leader of a micro organization appears, the more a leader is favorably proposed to supply chain management activities. In summation, micro enterprises have employed supply chain management practices and methods despite the paucity of evidence in the literature.

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Table 1: Hypothesis Tests of Micro firm Supply Chain Implementation

Statements Topics Sample Significance
 Mean

Has a well-defined strategy 2.24 .000
Has info and communications technology 2.30 .000
Has rationalized its internal processes 2.67 .000
Performs joint problem-solving with suppliers 2.40 .000
Performs joint planning with suppliers 2.79 .081
Shares information with suppliers 3.12 .751
Reduces supply base 2.12 .000
Builds relationships with suppliers 1.91 .000
Uses web to order from suppliers 3.70 .999
Rationalizes linkages with suppliers 2.84 .151
Performs joint problem-solving with customers 2.37 .001
Performs joint planning with customers 2.86 .192
Shares information with customers 3.33 .970
Have customers use the web to place orders 4.28 .999

Table 2: Supply Chain Learning Needs

Skills Frequency

Measuring customer satisfaction 16

Utilizing the internet to its full potential 15

Developing improved services to increase 13
customer loyalty

Managing inventory 12

Developing better trust and cooperation with 11
customers and suppliers

Evaluating improving and integrating processes 7

Integrating our computer system with customers 6
and suppliers

Applying for governmental grants to support supply 6
chain implementation

Obtaining supply chain implementation assistance 4
from suppliers or customers

Utilizing third-party logistics providers 4

Utilizing supply chain software e.g. ERP, CRM, etc 4

Technical issues e.g. RFID bar coding etc. 4