The strategic importance of supply chain management in small and medium sized enterprises. A case study of the garment industry in Sri Lanka

Abstract

This research concerns SMEs in the Sri Lankan garment manufacturing and export industry and explores success factors in managing their supply chains. The overall aim of the study is to better understand successful supply chain management (SCM) practices which have been implemented by SMEs in the Sri Lankan garment exporting industry and the obstacles faced in their implementation. Eight telephone interviews were followed by 20 in-depth, face-to-face interviews with senior managers in Sri Lanka. Documentary evidence was also collected and analysed. Combined with a literature review on manufacturing operations, the data collection led to the development of three criteria for the selection of cases for the research: 1) maintaining direct contacts with foreign buyers, 2) shorter lead times and 3) high value added of products. Based on these three criteria, a sample of six cases: three firms that exercised ‗more successful‘ SCM strategies and three characterised by ‗less successful‘ SCM strategies were selected. Data were analysed using NVivo10 software with a combination of theoretically derived codes and indigenous codes as the coding strategy. Successful SCM strategies and constraints on improving SCM performance were identified based on each factor considered: lead time, value added and direct contacts related. While both macro and micro-environmental factors influence SME performance, the micro-environmental ones (in particular the lack of strategic business thinking, a weak resource base, resistance to business risk and low profit marginal niches) were far more salient. Further to this, the lack of a fabric manufacturing base within Sri Lanka is a common barrier for both ‗more‘ and ‗less successful‘ companies while company-specific successful strategies and constrains also were evident. The absence of direct contact with foreign buyers is critical for ‗less successful‘ companies as it has led these companies to work with intermediaries. Critical supply chain decisions have to be channelled via buying offices, which leave these companies at risk. The findings add to a growing body of literature on the role of international buying offices and their impact on the implementation of SCM strategies‘ by exporting SMEs.