CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

The term supply chain management was first coined by Keith Oliver in 1982. Though the concept was of great importance in management long before. The main objectives of supply chain management are to improve overall organizational performance and customers satisfaction by improving product or service delivery to customers.

In other to achieve this it focuses on the right quantity delivery, to the right location, at the right time, all in order to maximize total system cost, satisfy customers’ requirements, face global competition and improve standardization. (Robert B. Handfield L. Nichols 1999).

Every organization in one way or another, be it standardized or local, has a trace of how its activities are carried out with is its supply chain. In most cases or generally, supply chains have four stages and two phases. But some advance and large companies may have 5 stages of the supply chain which start from the supplier to the manufacturer, to distribution, to retail, and finally the consumer.

The supplier in most cases is the supplier of raw materials used in the production process. At the level of manufacturing, it could be within the company or it could be outsourced depending on the company in question. The disruption stage is also an activity that could be outsourced or handled by the company itself.

The retail level is usually divided in two in most cases that is the whole seller and the retailer himself. Then the final customer is usually the consumer of the product. But the nature of each supply chain depends on the kind of products produced. These stages of the supply chain in incorporated either internally or externally.

That is it could either be in the internal or external phase of the supply chain. Internal supply chain refers to all activities of the supply chain that occurs within the circumference of the organization. That is, an Internal supply chain refers to the chain of activities within a company that concludes with providing a product to the customer.

This process involves multiple functions within companies such as sales, production, and distribution. It is obvious that a company’s performance would be enhanced by the integration of these functions. (Robert B. Handfield L. Nichols 1999).

Furthermore, the history of the supply chain can be sketched back to 1984 and 1985 in the textile industry. “The supply chain – a term increasingly used by logistics professionals, encompasses every effort involved in producing and delivering a final product, from the supplier’s supplier to the customer’s customer.

All in all supply a chain delivers a finished good or service from supplier to customer. It includes a variety of stages; manufacturer, supplier, transporters, warehouse, retailers, and final customers. A supply chain begins with the supplier of raw material, extending through a manufacturing process to the distributor and retail and finally to the customer.

As supply chains continue to evolve and become more complex with international sourcing, the associated risk increases as well as the probability for supply incremental. With the recent increasing trend of industry responsiveness and agility and the decreasing level of an on-hand inventory, a higher potential for incremental is occurring Goldberg (2009)

Furthermore, exposure in the global supply chain can result from unintentional and intentional events. Examples of unintentional disruptions include natural disasters such as hurricanes and floods.

These types of events can negatively affect transportation infrastructure, supply, and manufacturing facilities, unintentional events can also be manmade such as accidents that create transportation delays, production stoppages and could or could affect production quality (Jonsson et al, 2011). Intentional disruptions such as theft and employee/union strikes can create transportation and manufacturing delays.

As supply chains continue to become more complex there is an interesting need to incorporate effective supply chain management and establish disruptions mitigations strategies within a company. Identifying supply chain risks and predicting disruptions can help a company within the supply. Unfortunately, not all distributions are predictable. How a company handles the disruptions during and after their occurrence can greatly influence the outcome of the disruption and its effects on the company and brand.

No industry is immune to the threat of supply chain management. As companies experience the pressure to remain competitive on both the global and regional scale, an increasing amount of companies are outsourcing product manufacturing, material procurement, from global resources to decrease operations costs.

This information explosion had enabled logistics in the supply chain to become an important weapon in the firm’s arsenal to add a valve to the bottom line (Closs, et al., 2005). Information sharing was a key to the success of logistics performance (Whipple, Lambert, Vermeersch, 2002).

In their study, Wardaya and Baskara (2013) confirmed that information flow had become an important element that reflected collaboration within logistic management and firm performance. Sharing of information on transfer; exchange of information indicating the level and position of inventory, sale data, and information on the measure had become essential to all firms (Wardaya, et al., 2013).

On the other hand, talking of organizational performance, various metrics can be used to evaluate the performance of an organization (small and medium-sized enterprises in Buea Municipality). It is worth mentioning that the metric/metrics to be used in evaluating organizational performance remain subjective to what those in charge of governance consider as the success of the organization in question.

Nonetheless, from a general perspective when talking of organizational performance, the financial aspect cannot be undermined. Kenton (2018) describes the financial performance as a firm’s subjective measure as to how well it uses its assets from its primary mode of business to generate revenues. Another perspective to financial performance views it as a tool used as a general measure of a firm’s overall financial health over a given period of time and can be used to compare similar firms across the same industry or to compare industries or sectors in aggregation.

According to Hatten (2008), the term SME (Small and Medium Enterprises) is used in the European Union and other international organizations to designate companies that have a limited, specified number of employees, while the United States typically uses the term “SMB” (Small to Medium Business) instead.

Classification as an SME is based on the number of employees, generally between 10 and 100, depending on the country in which the business is set up (Norlaphoompipat, 2008). In Kenya, a supply chain in micro-enterprise means no more than 10 employees; a small enterprise with 11-50 employees; and a medium/large enterprise with more than 50 employees, as indicated by National Micro and Small Enterprise Baseline Survey (1999).

SMEs play a crucial role in the market especially during the recession of the market and when domestic growth is limited (Lages and Montgomery, 2004). There is not a widely accepted definition for SMEs around the world, instead of some considered number of employees (Lages and Montgomery, 2004); the other group considered a deficiency of financial resources against large enterprises (Goldberg and Jonsson, 2009). SMEs are not subsidiaries, they are independent firms, but the number of employees will not follow a common and certain rule around the world.

Since the 1960s to date, small and medium-sized enterprises (SMEs) have been given due recognition, especially in the developing nations for playing very important roles towards fostering accelerated economic growth, development, and stability within several economies.

With the outbreak of COVID 19 in the world, which caused a major shutdown in the world including Cameroon, the nation during this period lost billions of FCFA as its economic activities were all on a standstill.

Sea and airports which generate huge money to the companies’ economy drop down by almost 38% during the February to July months. Apart from the government, other organizations and businesses within the company also suffered greatly loss a disruption in their supply chain due to the lockdown.

1.2 Statement Of The Problem.

Longer supply chains due to globalization have increased the pressure to make financing the supply chain more efficient. Due to the increasing volatility of global markets and the complexity of supply chains, companies face huge challenges. These challenges also include financial aspects and risks in their supply chain Narasimhan et al, (2002).

The financial crisis has revealed structural weaknesses. To increase the supply chain stability and to reduce the overall costs, buyers having good credit ratings are increasingly interested in improving their financial supply chain. Financial Supply Chain Management (FSCM) includes a set of approaches (Supply Chain Financing or Natural Hedging) that should help to optimize the financial supply chain setup regarding liquidity and financial risks in order to gain competitive advantages Narasimhan et al, (2002).

FSCM is an emerging field in practice and research and its potential are undisputed. However, there still is a lack of understanding of the various FSCM methods and their impact on the overall benefit, especially regarding organizational performance.

Organizational problems which may be a delay of delivery, breakdown during production, political instability, and more are some of the problems originations are struggling to battle with as supply chain management is on the rise every day while others are getting more complex by the day.

Many organizations have a consistent and effective supply chain but at some point in their operations, disruptions do occur and the effects of such disruptions be it intentional or unintentional are usually very impactful to the organizations. To this effect, this research seeks to assess the gravity of the effect a supply chain can cause on organizational performance and to also see how these effects can be better handled if in any case, they do occur.

1.3 Research Questions

The discussed background and problem formulation lead us to the following research questions. The main research question is thus,

“What is the effect of supply chain management on the performance of small and medium-sized enterprises in Buea Municipality?

Other specific research questions

1. How does delivery affect the performance of small and medium-sized enterprises?
2. To what extent does information flow in the supply chain affect the performance of small and medium-sized enterprises?
3. How does transportation in the supply chain affect the performance of small and medium-sized enterprises?