Supply Chain Management Practices in Thai SMEs: Antecedents and Outcomes

Abstract

Small and medium-sized enterprises (SMEs) contribute significantly to both local and global economic development. They are a crucial business sector for all nations’ economies. In developed countries, SMEs typically account for 60 per cent of employment, and the figure is even higher in developing countries. In 2011, Thai SMEs employed 83.9 per cent of the Thai workforce. Thai SMEs, like all other firms, face the challenge of satisfying customers by offering quality products at low prices. Furthermore, it is generally argued that, in this increasingly aggressive business world, competition arises between integrated supply chains rather than at the firm level. Therefore, effective supply chain management (SCM) is a key driver of sustainable competitive advantage. However, Thai SMEs have issues in adopting supply chains in their organisations. They have doubts about whether SCM will improve firm performance. Therefore, this study aims to reveal whether SCM practices could help Thai SMEs to improve their performance, and if so which ones and how. To fill the gap in theoretical understanding, an initiation mixed method research design was specified using 20 semi-structured interviews and quantitative questionnaires distributed to 311 subjects. An SCM practices model with antecedents and consequences was identified using previous research. The measurements were evaluated, modified and analysed using several techniques, such as thematic analysis, regression and structural equation modelling. The study makes several notable findings. Firstly, the SMEs were found to implement SCM to reduce costs and improve productivity rather than to satisfy the customer. Secondly, the IT system and top management support were two key factors in helping SMEs to successfully apply SCM. Thirdly, the major barriers to SCM were employees’ lack of understanding and improper organisational design. Fourthly, firm size had no significant relationship to the level of firm performance. Finally, the firm’s performance and SCM practices were positively correlated. This work contributes to academia by expanding research into SCM practices in SMEs, of which there is a dearth in the literature (Quayle, 2003, Meehan and Muir, 2008), especially in the context of developing countries (Katunzi and Zheng, 2010). For practitioners, regarding SMEs in Thailand and other developing countries, this study confirms that SCM practice assists SMEs to gain higher performance. Furthermore, for policy makers, enhancing SCM practices in SMEs by developing SCM enablers such as IT systems and standard performance measurement and metrics, could help SMEs to achieve higher performance.