The status of supply chain risk management in manufacturing Small and Medium Enterprises (SME) in South Africa

Abstract

This research explores that status of supply chain risk management (SCRM) in manufacturing small and medium enterprise (SMEs) in South Africa. This is accomplished through the development of a conceptual framework based on the extant literature on SCRM, risk and risk management in SMEs and risk theory. The framework is tested through a mixed-method multiple case study design in eight South African manufacturing SMEs of different sizes in the furniture and metal industries in Gauteng, South Africa. This approach addresses theoretical gaps relating to the lack of frameworks that develop and present a holistic approach to better understand how supply chain risk is managed in SMEs, as well as, methodological gaps where there is a call for more case study based empirical studies on SCRM, and in particular in SMEs. A significant finding of this research is that while SME owner-managers do not have formal risk management procedures like their counterparts in large organisations, they informally follow risk management processes advocated in the literature, namely, the risk identification, risk analysis and risk handling aspects of the formal process. This finding, supported by the evidence, is significant as the literature has been ambivalent. Hence, this research is ground-breaking as it provides for a strong position on this debate. These implicit processes make use of environmental scanning for ongoing risk identification, risk analysis and risk handling is exhibited in the owner-manager’s conversations and actions regarding risk to and in the business. Prevention and mitigation are the most common risk handling modes employed by SME owner-manager and are based on the experience; knowledge and intuition of owner-managers. This research contributes through another important finding in that SMEs possess risk management capabilities. Risk management capability is demonstrated by the OMs in this research through their capability to leverage resources and use them effectively in preventing and/or mitigating risk. This research, hence, augments Lindbom et al.’s (2015) theoretical proposition of risk management capability by providing empirical evidence that tests and supports the proposition. Further key findings of this research are that supply chain risks are not the most prevalent risks in manufacturing SMEs in South Africa. Risks within the company operational environment, such as, financial, strategic and operations risks, take precedence. Supply chain risks on the demand side receive more focus than those on the supply side