Business Strategy

An Analysis of the Challenges Facing SMEs in Managing Supplier Relationship

Article Details

Pub. Date	: June' 2021
Product Name	: The IUP Journal of Business Strategy
Product Type	: Article
Product Code	: IJBS30621
Author Name	: Omary Swallehe
Availability	: YES
Subject/Domain	: Strategic Journals
Download Format	: PDF Format
No. of Pages	: 18

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Abstract

The strategic benefits of managing suppliers' relationship cannot be over emphasized as more and more organizations have started to realize that they are becoming completely reliant on the suppliers in terms of innovative power, security of supply, corporate social responsibility, and cost saving. Managing strategic partnerships is the top agenda of many organizations both in developed and developing countries. Despite the strategic benefits of the SRM, not all companies are appreciating the value of building strong relationship with the suppliers. This study investigates the challenges facing organizations in the whole process of creating competitive advantages through building strong supplier relationship. The study investigated 120 small manufacturing organizations in the country in order to gain better understanding of the typical challenges that hinder the ability of the companies to create competitive advantage. The study found that many organizations surveyed encounter difficulties in imitating, developing, and managing the relationships. Out of the surveyed organizations, less than 20% are found to have business relationships with their suppliers, and that relationship is not even strong to guarantee success to both parties. Lack of trust among the suppliers and manufacturers has been cited by many as the main challenge facing organizations in managing supplier relationship. Managers in these organizations believe that creating partnerships with suppliers, is all about exposing the organizations to the competitors and losing ground in the market place. The other challenges mostly mentioned were corporate culture, business strategy, leadership skills, technical and functional competencies among others. By using exploratory factor analysis, the findings were categorized into supplier-buyer interface challenges, buyers own challenges, suppliers own challenges and the size of the organizations.

Description

Supplier relationships have been an issue of concern for organizations in both developing and developed economies. The modern production systems emphasize Just-In-Time (JIT) production which focuses on right quality at the right sources, the right place, at the right time, with the right price and at the right quantity required (Moeller et al., 2006). In this case, outsourcing is an order of the day as a majority of the items in the production are sourced from suppliers unlike in the past where there was a minimum outsourcing activity which led to the minimum number of suppliers, i.e., almost all of the activities were done within the factories which led to high production cost (Abdollahi et al., 2015).

In recent years, the management of strategic relationship between buyers-suppliers has received increasing interest. Supplier Relationship Management (SRM), as defined by Akamp