Small Supply Research Articles

Exploring supply chain business bullying of small and medium-sized business suppliers by dominant buyers in the apparel retail sector in Gauteng

Background: Issues relating to dominant behaviour and bullying practices in supply chains are mostly not reported. Some evidence exists of unfair business practices in the apparel retail sector, but the extent and nature of such practices in South Africa, as well as the business implications for small and medium-sized enterprises (SMEs), have not been researched. The reason could be the sensitive nature of these issues and possible adverse implications for the SMEs supplying apparel to the retailers in Gauteng. Aim: The primary research objective is to determine the incidence and type of supply chain dominance experienced by SMEs in the retail apparel sector in Gauteng, as well as the business implications of such dominant behaviour and how SMEs cope with it. Setting: The setting for this study was the business premises of SME apparel suppliers in Gauteng. Methods: Qualitative semi-structured in-depth interviews were conducted with seven SMEs that were apparel suppliers to the large retailers in Gauteng, to obtain the supplier perspective. Results: Six of the seven SMEs had experienced some form of bullying behaviour by large retailers in the apparel sector, such as late payments and long payment terms. For some of these SMEs, it had serious financial implications. Meaningful insight is provided into this supplier–buyer relationship between SMEs and large retailers in the apparel sector in Gauteng. Conclusion: This is the first study in South Africa investigating supply chain dominance, in particular supply chain bullying of SME suppliers through unfair business practices by dominant buyers in the apparel sector.

A Supply Chain Theory of Factoring and Reverse Factoring

Factoring is a financial arrangement where the supplier sells accounts receivable to the factor against a premium and receives cash for immediate working capital needs. Reverse factoring takes advantage of the retailer’s payment guarantee and the credit rating differential between a small supplier and a large retailer, enabling the supplier to receive financing at a more favorable rate. We develop a supply chain theory of (recourse/non-recourse) factoring and reverse factoring showing when these post-shipment financing schemes should be adopted and who really benefits from the adoption. We find that recourse factoring is preferred when the supplier’s credit rating is relatively high, whereas non-recourse factoring is preferred within certain medium range of ratings. Both factoring schemes, if adopted, benefit both the supplier and the retailer, and thus the overall supply chain. Further, we find that reverse factoring may not always be preferred by suppliers compared to recourse and non-recourse factorings. Retailers should only offer reverse factoring to suppliers with low (but above a threshold) to medium credit ratings. The optimally designed reverse factoring program can always increase the retailer’s profit, but it may leave the supplier indifferent to the current factoring option when followed by an aggressive payment extension. More importantly, contrary to conventional wisdom, our theory implies that reverse factoring could be adopted even when the retailer has no credit rating advantage over the supplier, and it could benefit the retailer even without extending payment terms. This paper was accepted by Victor Martínez-de-Albéniz, operations management.

Suppliers as financial intermediaries: Trade credit for undervalued firms

We examine the impact of undervaluation on a firm's use of trade credit. To address potential endogeneity bias, we construct our instrumental variable based on mutual fund outflow-driven price pressure, and our undervaluation measure allows us to distinguish misvaluation from fair valuation. We find that a firm's suppliers play an important role in providing temporary bridge financing when the firm is undervalued. The effect varies with the firm's information environment and with its dependence on external finance. In addition, based on a manually matched supplier-customer sample, we show that small customers in long-term relationships with their suppliers are more likely to obtain trade credit when facing stock market undervaluation, while small suppliers with a smaller customer pool extend more trade credit to their undervalued customers.

Vendor Selection by Analytic Hierarchy Process (AHP) in Livestock Trading Ecosystem

As livestock plays a very crucial role in Indian economy. Livestock trading in India is very unstructured. The Buyer can be farmer or Diary farm owner who wants to procure a livestock. In this research the Livestock which is considered is the Murrah buffalo belong to water buffalo (Bubalus bubalis) breed which are mainly kept for milk production. The buyer is available with 8 suppliers which are fulfilling the same criteria of the breed. The Suppliers are divided into two segments, large scale supplier and small scale supplier. The supplier having more than 10 livestock of same breed has been considered large scale supplier, and the supplier having less than or equal to 10 has been considered small scale supplier. As competition is increasing every day the procurement activities are highly important. So, Multi criteria decision making approach has been used. Specifically, Analytic Hierarchy Process has been used for the selection of vendor among the alternatives available. In this research three criteria, seven sub criteria and eight alternatives has been evaluated. All vendors are ranked according to the result obtained from the AHP to aid the decision making. By implementation of AHP we were able to obtain the best fit vendor. AHP is a practical tool used for aiding the decision making when there are too many parameters. In Livestock trading ecosystem this tool will help in decision making

Innovationswandel in der deutschen Kfz-Industrie: Eine Analyse mit der IW-Patentdatenbank

Social and political change necessitates corresponding innovations in motor vehicle technology. This paper analyses the nature of current technological progress in Germany's motor vehicle industry. Building on an existing methodology for gauging the extent of innovation, the authors present a new procedure for analysing patent performance in the electrified powertrain segment. From 2010 to 2018, the period under review, the total patent output of the motor vehicle industry in Germany increased by 35 per cent. At the same time, the total number of patent applications in Germany identified by the electric hybrid filter (EHF) introduced here increased by almost 125 per cent. Since 2015 there has been a clear shift between patent applications relating to conventional and to electrified powertrains: the proportion of the car industry's total patent output dealing with conventional powertrains has seen a sharp decline, while the share of patent applications based on electrified powertrains has expanded significantly. At Germany's three big car manufacturers, BMW, Daimler and the Volkswagen Group, electric powertrain patents already outnumbered those for its conventional counterpart in 2018. The same shift in innovatory activity has been apparent among the five largest suppliers of automotive components, although here the conventional powertrain still dominates. Aside from these eight automotive giants, which between them have filed 88 per cent of all recent patent applications concerned with electrified powertrains, there is very little patent activity in this field in Germany. Among the smaller suppliers, the transition to electrified powertrains actually seems to have stopped. While this is a serious challenge to their future viability, it also offers a great potential for making up lost ground.

Effect of sintering temperature on the structural, morphological, electrical, and magnetic properties of Ni–Cu–Zn and Ni–Cu–Zn–Sc ferrites

Polycrystalline Ni0.3Cu0.2Zn0.5Fe2O4 and Ni0.3Cu0.2Zn0.5Sc0.05Fe1.95O4 compounds have been prepared by standard solid-state reaction technique and sintered at 1000, 1100, 1150, 1200, and 1250 °C for 5 h in air. The effect of sintering temperature on the structural, morphological, magnetic, dielectric, and electrical properties of these spinel ferrites has been studied thoroughly and comparatively. Formation of the single-phase cubic spinel structure of these compositions is confirmed by X-ray diffraction analysis. The lattice constant increases with sintering temperature as well as with 5% scandium (Sc3+) doping in Ni–Cu–Zn ferrite. Surface morphology reveals that the grain size increases with sintering temperature. Among the prepared ferrites, Ni0.3Cu0.2Zn0.5Sc0.05Fe1.95O4 has the maximum density (5.05 × 103 kg/m3) at sintering temperature 1150 °C, which gives the highest value of initial permeability. It is observed that initial permeability varies with sintering temperature, and it gives the maximum value at optimum sintering temperature. It is noted that Curie temperature decreases with 5% Sc3+ ions doping, whereas it slightly increases with increasing sintering temperature for both compositions. Ni0.3Cu0.2Zn0.5Fe2O4 compound shows the highest Curie temperature 418 °C. Dielectric constant, dielectric loss factor and AC electrical conductivity decrease with 5% Sc3+ ions doping in Ni–Cu–Zn ferrite. The initial permeability decreases sharply at Curie temperature, which indicates a high degree of compositional homogeneity. The ‘Hopkinson’ peak is observed just below the Curie temperature in the real part of initial permeability versus temperature graphs. The mechanism of dielectric polarization and electrical conductivity has been explained based on the electron hopping between Fe3+ and Fe2+ ions. The variation trend of complex impedance and AC electrical conductivity reveals the semiconducting behavior of the ferrite samples. Formation of partial semicircles in the Z/-axis indicates that relaxation process is non-Debye type. The investigated ferrites show relatively high initial permeability, low magnetic loss, and low electrical conductivity in a wide frequency range, which make them potential candidate for various practical applications such as small and compact power suppliers for computers, microprocessors, microwave electronic devices, etc.

Low power, high ambitions: New ventures developing their first supply chains

This paper investigates sourcing decisions for new ventures. Sourcing decisions are especially problematic for start-ups because they lack resources, knowledge and legitimacy to evaluate and interact with suppliers. We develop and apply a framework that connects global sourcing, relationship development and attractiveness. Further, we investigate how new ventures develop their first supply chains by conducting an exploratory multiple case study of six Norwegian start-ups. Based on our findings, we develop three propositions regarding how start-ups mediate their lack of attractiveness through pre-sales and by choosing shorter supply chains and smaller suppliers. The implications for practice include emphasizing the importance of developing a business relationship with the supplier in parallel with making sourcing decisions. This study is a novel contribution to an underexplored topic, and we conclude by proposing a research agenda for future explorations of start-ups and supply chain development.

Supplier selection and supply chain configuration in the projects environment

Suppliers in the Engineering-Procurement-Construction (EPC) projects environment are often qualified based on their annual turnover, and as a result a relatively large number of small suppliers get excluded at a preliminary stage from the approved vendors’ list of EPC contractors. To facilitate an inclusive evaluation of a wide range of capabilities of the suppliers, this research examines the application of a broader perspective for supplier selection in the projects environment. Supply chain configuration is put forward as a capability, the development of which contributes to the improvement of the supply network, and so should be reflected in the supplier selection criteria in projects’ environment. This research offers guidelines for EPC contractors which wish to adopt an all-encompassing approach in supplier selection, and guides suppliers and supply chain researchers to consider the supply chain (re-)configuration as a proactive plan for the survival of suppliers which operate in global high-uncertainty environments.

When value chains go South: Upgrading in the Kenyan leather sector

South-South value chains have grown to play a central role in the organisation of global trade, yet little is known about how this phenomenon affects suppliers’ upgrading prospects. This article theorises whether and how links to North-South and South-South value chains differently affect suppliers’ delivery of product quality and value-added tasks, as well as their improvement over time (respectively defined as product and functional upgrading). To empirically evaluate this question, we draw on a combination of firm-level export data and interviews across the Kenyan leather sector. Results show that product quality and value-added tasks are higher for exports to the North than to the South, but that there is no systematic difference in product and functional upgrading to the two aggregate destinations. Digging deeper, however, we show significant variation in outcomes across Southern destinations. On the one hand, China-led value chains present similar product quality and steeper functional upgrading than North-South value chains. On the other hand, intra-Africa value chains emerge as platforms for small suppliers to specialize in higher value-added tasks. These findings contribute to scholarship on global value chains and the global factory, enhancing our understanding of the implications for suppliers participating in value chains with different product standards and consumer preferences.

Dual-effects of core enterprise management and media attention on occupational health and safety of small and medium suppliers in China

This study examines the construction of an occupational health and safety (OHS) governance model for small- and medium-sized suppliers (SMSs) impacted by the dual effects of core enterprises' management and media attention. The objective of this research is to improve the social governance effect of SMSs' OHS. Drawing on evolutionary economics, an evolutionary game model with three main players—core enterprises, SMSs, and media—is established, and the conditions of each entity's evolutionary stability strategy are analyzed. The results show that the evolution trend for any party is closely related to the strategic choices of the other two parties. Further, a model for SMSs' OHS governance with focus on core enterprise management and media attention can be effectively built by reducing the costs of core enterprise management, enhancing the probability of accurate media reporting, decreasing the OHS input cost of SMSs, increasing the expected exposure returns of the media, and reducing the media's investigation cost. This study is the first to consider the important influence of core enterprises and the media on SMSs' OHS behavior, which bridges the research gap not only from a theoretical perspective, but also a practical one.

Optimal Interest Rates for Supply Chain Payables Finance

Problem definition: Payables finance, also known as reverse factoring or supply chain finance, is a form of trade finance arrangement that provides a supplier with the option to receive a buyer's payables early while allowing the buyer to extend its payment due date. Its recent adoption of the blockchain technology has made the process more efficient and secure. In this paper, we study the supplier's optimal cash management policy under such a payables finance arrangement, based on which we quantify the value of payables finance to the supplier and also determine the equilibrium payment term extension for the buyer. Academic/Practical Relevance: Our work presents one of the first rigorous analyses of the optimal cash management policy with payables finance by extending the classic cash management models to allow all interest gains and costs to accrue together with the cash balance. Methodology: We develop a finite-horizon random cash management model and transform it into a cash flow cost minimization problem with a dynamic program formulation. Results: Our analysis reveals that the optimal cash policy has a cash balance-dependent (L, M, U) structure, which differs from the threshold policies found in the classic cash management models. We show that it is the cash liquidity enabled by payables finance to hedge cash flow uncertainty that generates value to the supplier. Such value increases with a lower payables finance interest rate and/or a higher payables finance amount. We further show that the equilibrium payment term extension for the buyer increases with a lower payables finance interest rate, but not necessarily with a higher payables finance amount. To tackle the computational challenge of the problem, we show that the myopic policy for this problem has a simple threshold policy structure. For performance evaluation purposes, we also derive an easy-to-compute cost lower bound based on a system with slightly modified cash balances. Our numerical study shows that both the myopic policy and the optimal policy of the modified system achieve near-optimal performance in the original problem. Managerial Implications: Our study provides theoretical support for the wide adoption of payables finance for small suppliers with poor credit ratings and tight cash constraints. Our model analysis also suggests that the adoption of the blockchain technology can offer greater value to such suppliers. The computational methods developed in the paper can be used as a means to evaluate the value of payables finance and the payment term extension, especially in a frictionless blockchain setting.

Purchasing alliances and product variety

We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers’ buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.

Quality Efficiency Evaluation of small and medium defense suppliers by utilizing DEA - Focusing on Aeronautical Field -

Quality Efficiency Evaluation of small and medium defense suppliers by utilizing DEA - Focusing on Aeronautical Field -

The performance implication of corporate social responsibility in matched Chinese small and medium-sized buyers and suppliers

Corporate social responsibility (CSR) is a popular and important strategy for businesses to improve ethical behaviours in order to achieve economic sustainable development. Indeed, many social or environmental incidents that occur in one supply chain member could bring huge risks or disruptions for the entire supply chain. Yet the existent CSR studies rarely take buyers and suppliers into consideration in the examination. On the other hand, the existent literature of CSR is primarily concerned with larger organizations and pays very limited attention to small and medium-sized enterprises (SMEs). Thus, this study, viewed from transaction cost economics theory (TCE) and stakeholder theory, examines how buyers' CSR adoption influences suppliers' CSR adoption (i.e. with or without buyers’ proactive efforts) and whether CSR adoption in matched buyers and suppliers can achieve a win-win outcome for both firms in terms of enhancement in financial performance. The posited hypotheses are tested by 154 matched small and medium-sized buyers and suppliers from the Chinese manufacturing sectors. The majority of the hypotheses are supported by our analysis results. This study fills the gap that there is a lack of exploration in the actual value of CSR for firms in a buyer-supplier relationship. Our findings enrich the literature of CSR and operations management by offering empirical insights from a buyer-supplier and SME perspective, and provide managerial guidelines for enterprises, governments and NGOs to promote CSR and related practices to buyers and suppliers in supply chains.

Utility Rate Making: An Intersection of Economics and Social Good [Guest Editorial

Utility rate making is becoming increasingly critical. The high penetration of distributed energy resources changes not only the landscape of utility operating and planning practices but also the business models that govern how utilities recover their service costs. The objective of power generation and delivery has changed from considering only the delivery of reliable and cost-effective energy services to also accounting for sustainability and minimizing adverse environmental impacts. Today’s energy systems are evolving from traditional highly centralized suppliers to multiple distributed small suppliers or even self-suppliers. This evolution could be further accelerated when major technology breakthroughs in energy storage and photovoltaics (PVs) make these systems less expensive, more reliable, and more efficient. All of these electric system changes greatly affect many traditional rate-making principles, methodologies, and processes.

Credit guarantee mechanism with information asymmetry: a single sourcing model

This study concerns small and medium-sized enterprise (SME) suppliers suffering from cash constraints in operations, money shortages with possible disruptions and cost uncertainty because of the distributor’s supply risk and the information asymmetry. Thus, this study adopts the distributor’s (buyer’s) perspective and applies a credit guarantee mechanism with an incentive contract as a risk management tool. The distributor can adopt incentive contracts to reveal the type of its supplier; the higher the inefficient supplier’s contribution to the distributor, the smaller the gap between procurement contract quantities with the efficient supplier and procurement contract quantities with the inefficient supplier. An insight into practice is that incentive contracts are tools for acquiring ideal suppliers in the supply base and help companies such as Li & Fung enhance their competitive capabilities.

Different samples, different results? How sampling techniques affect the results of field experiments on ethnic discrimination

This paper explores a possible sampling bias in field experiments through a unique combination of a large-scale field experiment on ethnic discrimination in the German rental housing market (N = 2,992 tested apartments) and data on the internet housing market where the apartments were sampled from (observation of the whole platform for about one year). Up to now, most field experiments sampled on the level of suppliers (not apartments) and selected the tested suppliers within a short field period (point sampling). This probably led to an over-representation of small suppliers and apartments that had already been advertised for a long time, resulting in an under-representation of large suppliers and new vacancies. We analyze how both issues affect the measurement of ethnic discrimination and its underlying mechanisms. With our case study on the German housing market, we first observed the expected sampling bias: There was a strong over-sampling of small suppliers and apartments already offered for a long time. Second, this bias was found to have only little impact on the descriptive result of substantial discrimination against Turkish applicants. There was only a slight tendency that discrimination was higher for small suppliers and offers advertised for a relatively short time (i.e. new vacancies). Overall, we conclude that evidence on ethnic discrimination and its underlying risk factors is remarkably robust to the used sampling technique. Although there were no indications of a severe bias, our market data illustrate opportunities to test the effects of market conditions that often remained unnoticed.

Suggestions and Constraints Perceived by Shopkeepers towards Goods and Services Tax

The Goods and Services Tax (GST), implemented on July 1, 2017 is regarded as a major taxation reform till date implementedin India since independence. The primary objective behind development of GST was to subsume number of indirect taxes under one umbrella which simplifies taxation system for service and commodity businesses. GST was expected to convey various advantages to economy as an indirect tax and simplifies the workload of shopkeepers but it resulted in lack of clarity and time consuming process. With this assumption, study was planned to find out the constraints faced by shopkeepers and suggestions given by them regarding the implementation of Goods and Services Tax (GST). The study was carried out purposively in Hisar city of Haryana State, where, thirty shopkeepers from five respective section were selected i.e. Foods, Clothing and Textiles, Electrical appliances, Medical and Cosmetics and Communication and Transportation; thus making total sample of 150 respondents. Results from data inferred that majority of the respondent’s complained that filing GST has been more complicated now, there is increased tax compliance, high competition faced by shopkeepers and changing tax rate slabs by the central government is confusing them and making it difficult to understand the process. Furthermore, majority of the shopkeepers also suggested that there should be reduction of legal formalities, tax should be collected by the government at the manufacturing level itself and they don’t have to file for returns at later stages. They also suggested that registration should be there for all the traders and service providers with exemptions for small scale suppliers from collecting and remitting GST and casual trade category should be abolished.

Stakeholder Orientation for Social Value Creation: A Case Study

The integration between business and society is a priority in the current business world, and it is an emergent area of research in the extant literature. Business organizations are pursuing the interdependency between business and society using business ethics, corporate social responsibility, and shared value. Stakeholder orientation is the cornerstone of these new initiatives and it is growing in the future. Therefore, this paper intends to explain the nature of a stakeholder-oriented business organization with its contribution to social value creation. Based on interpretivism, researchers adopted a qualitative embedded single case study design methodology. The organization under study is a small scale manufacturing company in Kandy working with multiple stakeholders. Data was collected using secondary sources and by conducting in-depth interviews with the owner of the company, self-employed rural artisans and entrepreneurial suppliers who were selected using a judgmental sampling method. Data analysis involves transcription, summary and keyword development. The final stage of the analysis was conducted by cross-tab analysis and interview findings are even analyzed using discourse analysis. As per the analysis, the company has shown that a stakeholder-oriented business approach maintains a strong relationship with stakeholders by focusing on multiple stakeholder interests and deep stakeholder understanding. The company works collaboratively with rural artisans, private sector organizations and small scale entrepreneurial suppliers. The continuous stakeholder dialogue is a salient feature in this business approach. Social value creation of stakeholder orientation was evidenced through income enhancement, improvement in living conditions, citizenship enhancement and social capital development. Further, the feeling of engagement in work and supporting the education of the children also emerge in the data as social value creations. Researchers contend that it is important to uncover each stakeholder’s unique social issues in social value creation and conclude that connectivity can be created between a business organization and social issues through stakeholder orientation.

Welfare Estimation in Peer-to-Peer Markets with Heterogenous Agents: The Case of Airbnb

Peer-to-peer markets allow small suppliers to enter markets traditionally occupied by large firms and provide a potential decentralized distribution of opportunities. This paper investigates how these opportunities are distributed across agents and affected by government regulations. Using daily panel data of Airbnb rentals in Chicago, I develop an individual-level multinomial logit model to estimate consumer and producer surpluses across differentiated agents. The results find higher surpluses for low-income property owners but indicate a disproportionate concentration of welfare in high-income neighborhoods. The counterfactual analysis shows that restricting institutional hosts reinforces this concentration. However, increasing tax rates potentially helps redistribute welfare.