Abstract:
Although good supply chain management can drive large companies’ financial
performance, its effectiveness in improving financial performance of small and
medium-sized enterprises (SMEs) is still inconclusive, which results from the
heterogeneity of SMEs compared to large companies. The objective of this thesis
is to test the relationship between supply chain activities and SMEs’ financial
performance and examine the moderating effects of firm size and supply chain
position on this relationship. This thesis consists of three independent but
interconnected papers, which fulfil the research objective collectively.
Paper One titled “A conceptual framework of supply chain activities for SMEs’
financial performance” aims to identify supply chain activities that can drive the
financial performance of SMEs based on a systematic literature review. Based
on the 110 papers identified, a conceptual framework is established with nine
supply chain activities that contribute to SMEs’ financial performance:
purchasing, production, transport, inventory management, supplier partnership,
customer partnership, supply chain strategy, quality management, and
information sharing. Firm size and supply chain position are found to moderate
the impact of supply chain activities on SMEs’ financial performance.
To empirically test the conceptual framework, Paper Two titled “Supply chain
activities and SMEs’ financial performance: The moderating effect of supply chain
position” focuses on the performance of four internal supply chain activities
(purchasing, production, transport, and inventory performance) and examines
their relationships with SMEs’ financial performance along with the moderating
effect of supply chain position. Based on survey data collected from 318 SMEs in
the UK upstream food supply chain, partial least squares structural equation
modelling results indicate that superior production and inventory performance
can significantly improve the financial performance of SMEs, while purchasing
and transport performance do not have significant effects. Multigroup analysis
results suggest that supply chain position can moderate the impact of purchasing
performance on profitability and liquidity and the impact of production and
inventory performance on liquidity. Follow-up interviews were conducted with
seven executives from UK food SMEs to triangulate the quantitative results
obtained.
Paper Three titled “Working capital management and SMEs’ financial
performance: Moderating effects of firm size and supply chain position”
empirically investigates the impact of working capital management and its three
components (inventory holding days, accounts receivable days, and accounts
payable days) on SMEs’ financial performance (profitability and liquidity)
incorporating the moderating effects of firm size and supply chain position. Panel
data regression results based on financial data of 325 SMEs in the UK upstream
food supply chain from 2012 to 2018 suggest that cash conversion cycle, as a
proxy of working capital management, is negatively associated with both
profitability and liquidity of SMEs. All three working capital components have
significantly negative relationships with SMEs’ profitability. Firm size and supply
chain position significantly moderate some of those relationships. Those
quantitative results were also triangulated by interviews with seven executives
from UK food SMEs.
This thesis empirically identifies that, the same as large companies, SMEs can
also financially benefit from supply chain management. However, not all supply
chain activities contribute to SMEs’ financial performance. The impact of supply
chain activities on financial performance also varies with SMEs’ supply chain
position and firm size. The results of this thesis can assist owner-managers of
food SMEs with different sizes and supply chain positions to make informed
decisions on the priority of supply chain activities in improving their companies’
financial performance.