Academic journal article Journal of Small Business Management

The Characteristics and Features of SMEs: Favorable or Unfavorable to Logistics Integration?

Academic journal article Journal of Small Business Management

The Characteristics and Features of SMEs: Favorable or Unfavorable to Logistics Integration?

Article excerpt

For small and medium-sized enterprises (SMEs), logistics integration is one of the most significant challenges of modern management. Growing numbers of SMEs are under pressure from large manufacturing enterprises (LMEs) to change their traditional management styles, both operationally and organizationally, replacing them with integrated systems that help increase the speed and fluidity of physical and information flows, help synchronize demand with supply, and help manage transactions more accurately. The recent literature discusses integrated logistics chain management quite extensively, but most studies address the issue from the standpoint of large firms. Given the importance of SMEs in the economies of industrialized countries, and given, too, that a constantly growing number of such firms will have to replace their management methods by logistically integrated practices, the authors of this study believe that it is important to examine the characteristics and features of SMEs in order to identify those favorable and unfavorable to logistics integration.

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SMEs and Logistics: A Literature Overview

The consequences of logistics-related strategic decisions have become increasingly difficult to judge, partly because of the many different transportation, distribution, supply, and production options but also because of the complex analyses required to identify the best decision sequences and the virtually unlimited amount of information to be processed. The difficulty lies to a large extent in the fact that the space occupied by logistics chains has increased considerably and has become much more complex, not only because of economic globalization but also because of a number of other factors (see Table 1). Logistics integration appears to be inevitable as a solution to this complexity. For example, Holmlund and Koch (1996) point out the growing complexity of business processes, shorter product life cycles, market globalization, and strong pressure on profitability. Kasouf and Celuch (1997) also propose a number of factors favorable to logistics integration, including pressures forcing firms to reduce new product development times and increase development budgets and changes in supply and subcontracting practices due to a refocusing on basic skills.

Logistics integration consists in implementing mechanisms to ensure fluidity of physical and information flows, accuracy of information, and application of decisions within the supply chain. The phenomenon of logistics integration is growing in importance for a number of reasons. First, using partial approaches to logistics problems enhances the potential for inconsistency in the decision-making process. Second, it is not possible to exercise general control over performance by considering local solutions alone. Third, some of the more advanced competitive strategies cannot be applied unless the logistics chain is taken as a whole (delayed differentiation is a good example). Lastly, the information technologies currently available (Enterprise requirement planning (ERP) systems for example) allow for overall logistics chain management, giving a significant competitive advantage to users and creating new standards for competitors. Reflections such as these on logistics integration can be traced back to the 1980s (Bowersox, Closs, and Helferich 1986).

Despite the popularity of the integrated logistics concept and its many applications (supply-chain management, efficient consumer response, and so forth), very few publications have discussed it from the standpoint of small and medium-sized enterprises (SMEs). Yet the subject already had begun to generate interest in the 1970s, when Love and Gilmour (1976) published one of the first works to consider logistics as it applies to SMEs (A Logistics Review for the Small Company). However, this first step was not taken up by the scientific community in general (Murphy, Daley, and Knemeyer 1999). …

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