Supply Chains of Small Retailers, How Are They Different From Those of Large Retail Chains?

05 Dec 16

A team of MISI researchers Lorraine Anne Pasqual (PSCM candidate), Muhilan Ratnam (Research Associate), and Dr. Shardul Phadnis are conducting a research project to explore the supply chain management practices of small-and-medium enterprise (SME) retailers in Malaysia. SMEs are an important part of Malaysian economy: they contributed 36.3% of the country’s GDP in year 2015 and are projected to grow faster than the rest of the economy (Ref: SME Corp Malaysia Annual Report). The sector involving the SME retailers provides about 60% of the revenue from all Malaysian SMEs. MISI’s research project, funded by Malaysia’s Ministry of Higher Education under the Fundamental Research Grant Scheme, uses qualitative field research and a large sample survey to understand the challenges of these companies.

We have completed an in-depth ethnographic field study of one general merchandise retailer and are in the process of conducting interviews with a few dozen SME retailers. Our research provides some interesting insights into this sector.

• The SME retailers seem to plan for product categories, and not for items or stock-keeping-units (SKUs). This suggests a high substitutability among the items they sell, and indicates that they may need a different approach to managing their inventory efficiently than the SKU-based approach prevalent in the Supply Chain Management thinking.
• Exploitation of SME retailers by (large) suppliers may be prevalent. The lack of trust resulting from this engenders non-value added actions—such as multiple checks of orders and invoices, redundant quality checks, risk-averse ordering, etc.—that are known to diminish the performance of the entire supply chain and affect the consumer negatively.
• Retailer performance is affected by a severe limitation of motivated and talented employees. The negative effects of this are seen in the lost opportunities to increase sales, inability to increase revenue through price optimization, rejection of good merchandise as being defective, and so on.

The next step in this research is to find how widespread these and similar issues are among Malaysia’s SME retailers. Our goal for year 2017 is to provide solutions to retailers and make policy recommendations to alleviate the challenges faced by the Malaysian SME retailers and improve their competitiveness.

How else do you think the supply chains of SME retailers are different? Do you think SME retailers can improve their businesses using the mainstream supply chain management practices? Do you know an SME retailer who may want to participate in our study? Tell us in the comments below.