Supply Chain Management: An International JournalMain difficulties hindering supply chain performance: An exploratory analysis at Uruguayan SMEs:Martin Tanco Daniel Jurburg Matias Escuder

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Main difficulties hindering supply chain performance:

An exploratory analysis at Uruguayan SMEs

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1 Introduction

Lessening product lifecycles, demanding customers, decreasing acceptable response

times, and increasing levels of global competition on business success characterize the

business environment currently faced by managers across industries (Lockamy, 2012).

Moreover, there is considerable evidence that the turbulence will increase in the future

(Christopher et al., 2011). In particular, today’s intense competition requires firms to be

more aware of their Supply Chains (SC) and achieve excellence in many areas,

especially Small and Medium Enterprises (SMEs) (Singh, 2011). Therefore, Supply

Chain Management (SCM) has become a major component of competitive strategy in

order to enhanced productivity and profitability in industries (Gunasekaran et al., 2004).

As SC have become more interconnectedand global, they have also become more

vulnerable, with more potential points of failure and less margin of error for absorbing

delays and disruptions. SC risk exposure is increasing, and so too is the frequencyof

problems (Marchese and Paramasivam, 2013). In this dynamic environment, identifying

the difficulties which hinder SC performance should be a strong motivator for SC

managers and scholars to develop strategies and solutions to cope with uncertainty,

allowing businesses to achieve their goals (Fawcett et al., 2008, Giunipero et al., 2008).

The aim of this paper is to obtain first-hand information, through an exploratory survey,

of the main difficulties which Uruguayan managers consider have the most negative

impact on their SC within the last three years. In order to detect the difficulties

hindering SC performance an exhaustive literature review was carried out.

This paper is organized as follows: First, the methodology used in this research is

presented. Next, a literature review which intends to document and analyze the literature

regarding the difficulties hindering SC performance and its classification is included.

Then, the exploratory study is presented while discussing survey results. Finally,

conclusions are intended to encourage discussion and allow comparisons of SCs

throughout the rest of the world.

2 Difficulties in Supply Chains

The term “Supply Chain” has received many definitions over the past years as it gained

popularity, with most definitions describing it as a network of different entities (and its

processes) interacting together in order to make materials and information flow

(Lummus and Vokurka, 1999; Cooper et al., 1997). On the other hand, the term “Supply

Chain Management” lacks of a universal definition, mainly due to its multidisciplinary

origin and evolution (Croom et al., 2000; Tan, 2001). In fact, a literature review by

Stock et al. (2010) revealed 166 unique definitions of SCM.

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For this paper, Mentzer et al. (2001) definitions will be adopted, defining SC as a “set of

three or more entities (organizations or individuals) directly involved in the upstream

and downstream flows of products, services, finances, and/or information from a source

to a customer”. Moreover, SCM is defined as the “strategic coordination of all

traditional business functions and tactics that happen across all entities involved in the

SC, with the objective of improving the long-term performance of the individual

companies and the SC as a whole” (Mentzer et al., 2001). Its focus is on co-operation

and trust and the assumption that, if properly managed, the ‘whole can be greater than

the sum of its parts’ (Christopher, 2013).

Since SC analysis, management and improvement have become increasingly important,

developing appropriate performance measurement is crucial. Different SC models have

predominantly utilized two different performance measures (Beamon 1999): costs and a

combination of cost and customer responsiveness. Although organizational managers

are ultimately held accountable for organizational performance, organizational success

first depends upon the performance of the SC in which the organization functions as a

partner (Whitten et al. 2012, Rosenzweig et al., 2003). SC performance is dependent on

the SC partners’ ability to adapt to a dynamic environment (Vanderhaeghe and de

Treville, 2003). However, performance measurement and metrics pertaining to SCM

have not received adequate attention from researchers or practitioners (Gunasekaran,

2004).

Finally, this paper understands a difficulty as any factor that significantly impacts SC

performance, or has impacted it in recent years. Difficulties can exist at multiple levels

of the SC: organizational, intra-organizational, inter-organizational levels (Hendricks

and Singhal, 2003). This definition includes other expressions used frequently in the

literature such as: glitches (Hendricks and Singhal, 2003), barriers (Fawcett et al.,

2008), issues (Thakkar et al., 2012), and problems (Naude and Badenhorst-Weiss,

2011). Since often an issue is a risk which has not been fully mitigated and which has

now materialized, research on risk management was also included in this research.

3 Methodology

The methodology used to complete this research is presented in Figure 1. As shown,

after conducting a general literature review the aim and research question for this study

were specified. Figure 1- Research methodology

Based on the research issues, two different questions (RQ) were stated:

RQ1 – What are the main SC difficulties mentioned in the literature?

RQ2 – Which of those difficulties have had a greater impact over Uruguayan companies

in the last three years?

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Considering these research questions, the article has the double objective of creating a

list of SC related difficulties based upon the existing SC literature, and ascertain the

relevance of these difficulties through obtaining first-hand information from a survey

responded by Uruguayan managers.

3.1 First Step – Review of SC difficulties

Following the methodology presented in Figure 1, a more specific literature review was

needed in order to detect the difficulties hindering SC performance.

In order to detect the difficulties hindering SC performance, a brainstorming session

among our researchers group was conducted. Afterwards, an exhaustive review of

relevant literature of the last 15 years was carried out, through the ISI Web of

KnowledgeSM database. A systematic search was conducted, beginning with the

identification of keywords and search terms built from the literature and discussions

within the research group. Restricting the search to peer-reviewed journals increased the

quality of the review, due to the rigorous process which articles published in such

journals are subject to prior to publication. Searching with the following string “(Supply

Chain*or Logistic*) and (Barrier*or Difficult*or issue*or Glitch* or Problem*)” with

the adequate time span and research area, resulted in over 6.000 results. However,

considering only the title and abstract of them, very few of them were considered

relevant to this article.

Since scarce articles were gathered, it was decided to specifically resort to reputable

journals (JCR 2013 impact factor appear between brackets) in the subject area in the last

five years such as: Journal of Purchasing and Supply Management (JPSM, IF: 1,61);

Journal of Supply Chain Management (JSCM, IF: 3.72); International Journal of

Physical Distribution & Logistics Management (IJPD&LM, IF:1,76) and Supply Chain

Management: An International Journal (SCMIJ, IF: 2,92) in order to assure that articles

were not omitted due to the previous search method.

Only 35 references were considered relevant to the purpose, while limited information

of an exhaustive list of difficulties was available in the literature. Furthermore, the

information is dispersed, repetitive and subjective to different SC research areas such as

Risk Management, Supply Chain Management, Supply Chain Sustainability and

Physical Logistics.

Therefore, affinity diagrams were used to classify the difficulties identified through the

remaining into fewer groups. In spite of the considerable effort taken to classify and

define the difficulties, some of them may not seem entirely exclusive or independent

from each other. Even though some difficulties may be partly caused or affected by the

others, they were listed separately for this research from a managerial perspective.

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3.2 Second Step - Exploratory survey

After gathering the SC difficulties from the literature, a survey was carried out to obtain

first-hand information about the main difficulties Uruguayan managers consider having

the most negative impact on their SCs within the last 3 years.

Although the geographical area of Uruguay may be modest, Uruguay is recognized in

South America as being a strategic regional hub for South America's Southern Cone

region. Due to the geographical location, it provides access to MERCOSUR, a US$2-

trillion-GDP free trade zone that also includes Argentina, Brazil and Paraguay. Uruguay

has the strongest social and political stability in Latin America1, with the highest

income per capita of the continent. Since over 90% of companies in the country are

SMEs, their contribution to the industrial output and economy of the country is relevant.

Although SC literature stretches from the original source to the customer, this study

focuses only on the difficulties experienced by one entity of the SC. Problems may

originate upstream from the supply-side or downstream from the customer side, though,

they are judged from the perspective of the respondent.

The survey was defined considering the literature review aforementioned and a survey

of the Argentinian Supply Chain Summit in 2009, led by the IAE Business School and

Expotrade. The survey had three main sections. The first one aimed to characterize

respondent’s company and their position. The main part focused on the SC difficulties

in which respondents were asked to rate them using a five level Likert scale. Finally, a

third part included several open questions to detect if any difficulty was skipped, while

also ascertain the overall satisfaction of respondents with the questionnaire.

Once the questionnaire was developed, a pre-test was carried out where useful

comments from experts (academicians and non-academicians) were received before

launching the survey. The Survey Monkey® platform was used to construct the web

survey.

The link was sent by e-mail, with a presentation letter, to over 940 company managers

in Uruguay. Company’s information was obtained from the Uruguayan Chamber of

Industry and ISI Emerging Markets® database. The online survey ran for a three-month

period and was available at a local server. The survey was conducted in Spanish, and

thus all references to specific questions have been translated. All participants were

assured of anonymity, since there was only an optional personal question in the survey.

After analysing the survey, an executive meeting was organized to better interpret the

results with managers who previously responded to the questionnaire.

Statistical tools were used to analyse the results. First, a one-way ANOVA was used to

observe if significant differences existed between the ratings of each difficulty. Next,

1 Based on Transparency International’s Corruption Perceptions Index 2009, The Economist Intelligence

Unit’s Democracy Index 2008 and Heritage Foundation’s Economic Freedom Index 2010

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factorial analysis was used to see if it was possible to clarify the difficulties into fewer

groups.

4 Supply Chain Difficulties

The literature review aims at understanding the important difficulties hindering supply

chain performance, through search of articles in related publication database. The

eighteen difficulties (D) identified are explained in this section, supported by the

aforementioned literature review.

4.1 Telecommunications infrastructure (D1)

Some regions lack the technical and communications infrastructure to allow firms to

operate efficiently. For example, in many developing countries, the

telecommunication’s infrastructure limits the ability of firms to exchange information

via voice, fax, or computer. This constrains the standard operating procedures of most

firms by decreasing flexibility and increasing uncertainty (Prater et al., 2001). The

improper telecommunication infrastructure has been recognize as a major issue to adopt

e-Business implementation (Janita et al., 2013). Furthermore, the governance of the

infrastructure is also expected to play a critical role in the success of the technological

approach selected to support collaborative SC processes (Pramatari, 2007).

4.2 Local warehousing infrastructure (D2):

The physical distribution of goods is also affected by distribution centre and facility

location decisions (Power, 2005). For example, shippers are increasingly turning to

third party logistics providers (3PLs) to help with their capacity issues. The main

reasons for outsourcing are the focus on core competencies and the removal of fixed

costs for warehousing (Varma et al., 2006). Lack of necessary infrastructure, poor

storage and warehousing processes are some of the difficulties included in this category

(Thakkar et al., 2012, Power, 2005).

4.3 Air transportation (D3):

Air carriers offer a rapid and fairly expensive mode of transportation. Labour and fuel

costs are largely trip related and independent of the amount of cargo carried or number

of passengers on a flight (Chopra and Meindl, 2007). The main difficulties that face the

SC regarding air transportation are: high prices/costs, price variability due to revenue

management applied by major airlines, frequencies of cargo services, cargo security,

growing fuel cost, overall delivery time and capacity (Chopra and Meindl, 2007, Power,

2005, Ballou, 2004).

4.4 Maritime transportation (D4):

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Water transportation, by its nature, is limited to certain areas, such as inland waterways

or coastal waters. The main difficulties that face the SC regarding water transportation

are: service transit time, availability of shipping lines, port infrastructure, variability in

delivery time caused mainly by delays at terminals and port congestions, poor

management of containers and inefficiency while handling the cargo (Chopra and

Meindl, 2007, Ballou, 2004, Power, 2005)

4.5 Ground transportation (D5):

Ground transportation includes any movement of goods from one location to another on

land, usually by rail or road. Transportation usually represents the most important single

element in logistics costs for most firms (Ballou, 2004), in which ground transportation

represents almost 55% of the total logistics cost (Wilson, 2013). The main difficulties

that face SC regarding ground transportation are: service price, service availability or

capacity, variability of lead time, problems with scheduling and routing, shortage of

qualified drivers, outdated tracks and locomotives, quality of railroads and roads and

urban congestion (Chopra and Meindl, 2007, Ballou, 2004, Power, 2005).

4.6 Custom process and similar paperwork (D6):

This refers to the efficiency and effectiveness in paperwork required for several

customs, administrative and legal processes. Today global shipments are estimated to

require on average 27 separate entities to complete, including brokers for buying cargo

space, carriers for inland transport, compliance intermediaries and governments agents,

global trading depends on an awkward flow of paper and misinformation (Power,

2005). The major problems in global trading identified by Kilgore (2000) are:

fragmented regulatory rules, inadequate intermediaries and cost complications due to

unpredictable variations in duties and taxes between countries.

4.7 Government policies (D7):

It refers to changes in government policies that impact the business community (Miller,

1992). Difficulties arise when a lack of integration exists between the interests of the

public and private sectors. Some of the most relevant changes are unanticipated fiscal

and monetary reforms, price controls, variations in the level of trade barriers, change in

mandatory government regulation and labour incentives (Miller, 1992, Rao and

Glodsby, 2009).

4.8 Political environment (D8):

It includes threats associated with potential or actual changes in the political systems.

The rationale behind separating political and policy difficulties lies in the observation

that changes in government do not necessarily result in changes in government policies

affecting business investment, nor does political stability preclude unchanged

government policies (Miller, 1992). Political instability may rise from a democratic

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change in government, war, revolutions or other political turmoil and could be a key

component of SC risk (Rao and Glodsby, 2009).

4.9 Macroeconomic and Market instability (D9):

Macroeconomic instability is a broad concept encompassing fluctuations in the level of

economic activity and prices (Miller, 1992), such as general price changes in the cost of

goods (inflation) and movement of foreign exchange rates and interest rates (Rao and

Glodsby, 2009). The increasing globalisation, complexity and dynamism of SCs are

leading to greater exposure to risk from economic events, since disruption to supplies in

one country can quickly spread through an entire global SC (Harland et al., 2003). On

the other hand, product market instability refers to unexpected changes in the demand

for an industry output, which can be due to changes in customer tastes or availability of

substitute products (Miller, 1992, Rao and Glodsby, 2009). Volatility of demand due to

shorter life cycles, often driven by changes in technologies, increases the risk of

obsolescence and the variety within product ranges further fragments demand and

makes forecasts less reliable (Jain and Benyoucef, 2008).

4.10 Workforce availability (D10):

This includes difficulties related to availability of skilled and/or unskilled workforce,

such as high employee turnover, lack of employee training programmes, lack of

employee skills, low unemployment rates and worker absenteeism (Halldorsson et al.,

2008, Fawcett et al., 2008, Naude and Badenhorst-Weiss, 2011, Thakkar et al., 2012).

Having the right people is a critical issue which hinders SC performance (Beth et al.,

2003, Handfield and Nichols, 2004). Therefore, organizations should get the suitable

people in place first, and then think about technology (Halldorsson et al., 2008).

4.11 Workforce productivity (D11):

Includes changes in employee productivity, either at a firm-specific level or in the

industry in general, such as labour unrest, strikes, union conflicts, labour disputes, lack

of employee involvement and commitment, work ethic and attitude of the workforce

and organizational culture (Miller, 1992, Naude and Badenhorst-Weiss, 2011, Rao and

Glodsby, 2009, Fawcett et al., 2008). Providing employees with a safe atmosphere in

which to work reduces the personal risk to workers as well as the threat of injury-related

lawsuits directed at the firm (Miller, 1992)

4.12 Supply-side problems (D12):

Includes difficulties with product flow or information emanating from within the

network, upstream of the local firm (Christopher and Peck, 2004, Rao and Glodsby,

2009). Shortages of raw materials, quality changes in input, spare parts restrictions,

financial stability of the suppliers, geographical distances from suppliers and excessive

material lead time are all examples of supply-side problems (Naude and Badenhorst-

Weiss, 2011, Basnet et al., 2003, Thakkar et al., 2012, Tang and Musa 2011). These

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difficulties are likely to be worse when a single supplier provides critical inputs to the

firm (Miller, 1992). Moreover, over the last few years major disruptions to SC

operations were repeatedly caused by natural and man-made disasters, such as

earthquakes, floods, fires, hurricanes and terrorist attacks (Tang, 2006, Rao and

Glodsby, 2009). For example, Ericsson lost 400 million euros after their suppliers

semiconductor plant caught fire in 2000 (Norrman and Jansson, 2004), and Apple lost

many customer orders during a supply shortage of DRAM chips after an earthquake hit

Taiwan in 1999 (Tang, 2006).

4.13 Distribution-side problems (D13):

Includes difficulties with the flow of product, information and cash emanating from

within the network, between the focal firm and the market. In particular, it relates to the

processes, controls, assets and infrastructure dependencies of the organizations

downstream and adjacent to the focal firm (Christopher and Peck, 2004). Pressure by

customers to reduce prices, cancellation of orders, defaults by clients on their debts,

reliance on the business of particular clients, geographical distance and late deliveries

are examples of distribution-side problems (Miller, 1992, Naude and Badenhorst-Weiss,

2011, Basnet et al., 2003, Thakkar et al., 2012, Tang and Musa, 2011).

4.14 Systematic delays in own production (D14):

Under the sequences of value-adding and managerial activities undertaken by a firm,

several difficulties may occur that introduce variations through the output. The

execution of these processes is likely to be immediately dependent on internally owned

or managed assets and on a functioning infrastructure (Christopher and Peck, 2004).

Machine breakdown, capacity limitation, outdated technology, rush orders, balancing

inventory levels, frequent changeovers, higher set up time to cater to small quantity

requirements of customers and other random factors such as accidents that disturb the

production process are all examples that fall under this category (Naude and

Badenhorst-Weiss, 2011, Miller, 1992, Rao and Glodsby, 2009, Thakkar et al., 2012,

Tang and Musa, 2011).

4.15 Internal and external integration (D15):

The basis of integration can be characterised by joint product development,

collaboration, cooperation, mutual exchange information, integrated information

systems, trust, partnerships, shared technology, long term cooperation and fair sharing

of risks and benefits (Naude and Badenhorst-Weiss, 2011, Lambert and Cooper, 2000,

Arshinder and Deshmukh, 2008). Since companies tend to consider their suppliers

external to their business, the lack of trust and sincerity among SC chain members, the

myopic view (focusing more on internal gains) and the lack of visibility and control

procedures lead to SC partners to take decisions without having detailed knowledge of

what is happening in the rest of the chain (Thakkar et al., 2012, Jain and Benyoucef,

2008, Basnet et al., 2003).

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Nevertheless, many SC experts agree that internal alignment is still unresolved and can

be more difficult than building external alliances (Wong et al., 2012, Beth et al., 2003,

Halldorsson et al., 2008). Internal relationships can be difficult to manage due to the

existence of functional silos, often entrenched in the company history, with different

goals within an organisation, the outdated organization structure and internal turf wars

(Bakker et al., 2012, Fawcett et al., 2008, Halldorsson et al., 2008).

4.16 KSA for managing the SC (D16):

Refers to the difficulties associated with the knowledge, skills and abilities (KSA) of

people to effectively manage the SC. It includes lack of skilled individuals, poor

understanding of SCM concept, lack of experience, lack of power and ability to drive

and lead changes within the chain, lack of ability in managing inventories throughout

the entire SC and lack of skills in the areas of communication and information sharing

(Akintoye et al., 2000, Handfield and Nichols, 2004, Basnet et al., 2003, Meehan and

Muir, 2008). Since skilled individuals are needed to oversee and drive their SC

development, organizations are challenged to develop and retain people that have a

global supply base and the education and experience required to work with suppliers

and customers around the globe (Handfield and Nichols, 2004).

4.17 Commitment of top management (D17):

The lack of commitment of top management towards the SC is widely recognized as a

hurdle towards SC performance. Managerial commitment is required for achieving

collaboration breakthrough and customer responsiveness (Akkermans et al., 1999,

Storey et al., 2005). According to Fawcett et al. (2008) top management support, broad-

based functional support, channel support, and infrastructure/governance support are

needed to achieve the highest levels of SC success.

4.18 Information technologies (D18):

Since collaboration is intrinsically information driven, information systems (IS) and

information technologies (IT) play an enabling role in SCM (Fawcett et al., 2008,

Pramatari, 2007). Information sharing helps to improve visibility and therefore

improves the allocation of inventory, production scheduling and knowledge transfer

process (Wong et al., 2012).The lack of sophisticated IS for information sharing among

SC members, the lack of appropriate IT, the lack of transparency of information in SC,

incompatible IS at different levels of SC, the lack of alignment between IT and IS with

business strategy have been recognized as inhibitors to organisational success

(Arshinder and Deshmukh, 2008, Akintoye et al., 2000, Basnet et al., 2003, Wong et al.,

2012).

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5 Difficulties classification

Once difficulties are identified, the next step is trying to assess the nature of each factor.

Since an exhaustive list of difficulties is hardly available in the literature and therefore

there is no a previous classification, it was decided to analyse if any other classification

could be suitable. Several alternatives can be considered, taking into account the

operational process in which difficulties arise, considering the level of analysis of the

SC or considering how the SC network is structured. However, the classification of SC

risk is selected for this purpose, due to the close relation between the SC difficulties and

its risks. This relies in the fact a difficulties is a risk which has not been fully mitigated

and which has now materialized. Moreover, one way of identifying potential risk is by

analysing events with negative outcomes in the past, which includes parts shortages,

sudden shifts in customer demands, production problems, etc. (Shi, 2004).

Since SC risks can be categorized in many different ways and from different

perspectives (Peck, 2004, Handfield and McCormack, 2007, Lockamy, 2012), the most

significant classifications are listed in Table I.

Table I - Categories of supply chain risk

Christopher and Peck (2004) suggested that there are three categories of risk which can

be further subdivided to produce a total of five categories: 1) internal to the firm

(process and control), 2) external to the firm but internal to the SC network (demand,

supply) and 3) external to the network (environmental). Indeed, this classification is

close to the SCOR reference model, based on five distinct management processes. A

similar classification was proposed by Juttner et al. (2003) who suggested classifying

risk sources as: environmental, organizational or SC related. Environmental risk sources

comprise any uncertainties arising from the supply chain-environmental interaction.

Organizational risk sources lie within the boundaries of the SC parties and range from

labour or production uncertainties. Finally, supply-chain related risk sources arise from

interactions between organizations within the SC. Whatever damage caused by

suboptimal cooperation is attributable to SC risk, and whatever losses caused by firms

incompetence and market uncertainties are due to organizational or environmental risk

(Das and Teng, 1998).

SC related risks are an important and so far neglected source of risk (Juttner et al.,

2003). These risks are strictly related to the findings of several articles which identify

significant barriers to effective SCM. These barriers come both from the nature of the

organizations itself and the people that compose the organizations. Park and Ungson

(2001) suggest classifying these barriers under two headings: “inter-rivalry” and

“managerial complexity”. Inter-rivalry is a misalignment of motives and behaviours

among allying partners within the strategic SC, while managerial complexity deals with

the misalignment in allying firms processes, structures and culture. The complex forces

of a SC can yield chaotic effects (Juttner et al., 2003). These chaotic effects stem from

over-reactions, unnecessary interventions, second-guessing, mistrust, and distorted

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information throughout a SC or simply from a lack of SC understanding amongst its

organizations. Several authors from the SCM literature use this dualist classification

(Fawcett et al., 2008, Zahedirad and Shivaraj, 2011). For example, Fawcett et al. (2008)

identify ten barriers in SCM from the literature, and rank them according to several in-

depth case studies conducted mainly over American middle and senior-level managers.

By way of illustration, Table II presents the eighteen difficulties classified according to

Juttner et al. (2003). This classification was selected by the authors due to its simplicity,

holistic perspective and reasonable distribution of difficulties in each category.

However, difficulties can be classified with any of the classifications aforementioned.

Table II - Difficulties hindering supply chain performance

6 Exploratory survey: Response Characterization

A total of 130 questionnaires were received, leading to an initial response rate of 13.6%.

Since some questionnaires were not considered valid or complete, it yielded 99 valid

responses (a response rate of 10.5%). This response rate, leads to a survey-wide sample

error rate of 9.3%2.

Sixty-eight per cent of responses came from local industries; 20% for retailers and 12%

accounted for other activities. Industry size consisted of four groups: large companies

with more than 250 employees, medium companies with between 101 and 250

employees, small companies with 20 to 100 employees, and micro SMEs with fewer

than 20 employees. As shown in Table III, most respondents were small (44%) and

medium (25%) enterprises. Moreover, each of the responses to the questions were

analysed with contingency table for a possible correlation with industry size. In those

cases where the correlation is statistically significant, the results are also presented

stratified by industry size. When there is no correlation, no stratification is made.

Table III - Number of responses classified by industry size

The majority of survey respondents were CLO- logistic managers (27%), CEO - general

managers (25%) and COO- operations managers (22%). Finally, 87% of answers were

about the whole company SC, while the remaining 13% answered over a single business

unit.

7 Results analysis

Respondents were asked to rate the impact of each difficulty (D) over SC performance

using a five level Likert scale from 0 (strongly disagree) to 4 (strongly agree). The

average results obtained for each difficulty are presented graphically in Figure 2.

2 With p=q=0.5 and a significant level of 95%.

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Figure 2 - General rating of Uruguayan SC difficulties, from 0 (strongly disagree) to 4 (strongly agree).

Four different colour groups were identified according to significance in ANOVA.

A one-way ANOVA was used to detect if the rating given to each difficulty was

significantly different from the others. The analysis carried out allowed us to divide the

difficulties into four main groups, which are displayed in different colours in Figure 2.

According to the survey, “Workforce availability” (D10) and “Government policies”

(D7) are the main concerns of managers. Statistical tests show that both difficulties,

which make up group one, are significantly greater than more than ten other difficulties.

The second group is formed by “Supply-side problems” (D12), “Custom process and

similar paperwork” (D6) and “Macroeconomic and market instability” (D9). This group

was formed by those who are at least significantly greater than more than five

difficulties. The third group is formed by the largest group of difficulties, including

difficulties ranked from number 6 to number 13, as shown in Figure 2. The ANOVA

demonstrated that each difficulty of this group is significantly greater than at least one

of the difficulties of the last group. Consequently, the final group includes “KSA for

managing the SC” (D16), “Information technologies” (D18), “Air transportation” (D3),

“Commitment of top management” (D17) and “Telecommunications infrastructure”

(D1). These difficulties appear to be less important for surveyed managers.

Although, the “Information technologies” (D18) rated low in the degree of importance,

this was the only difficulty that presented significant differences between the ratings,

considering industry size. Bigger companies state higher problems with IT compared to

micro and small companies. This could be due to the degree of IT implementation in

company main activities.

Once difficulties were ranked it would be useful to narrow them down into a few

groups. The full component analysis, a kind of factorial analysis, was considered the

most adequate statistical method to complete the task.

Factorial analysis (FA) is a generic name to a class of statistical multivariate methods

with the goal of representing the interrelationships among a set of variables V by a

number of underlying , linearly independent reference variables called factors F, with F

< V. The main goals of factor analytic techniques are: to reduce the number of variables

and detect structures in the relationship between variables (Hair et al., 1999). Principal

components analysis was used as the extraction method. One of the first steps of the FA

was to check the hypothesis, although most are conceptual rather than statistical (Hair et

al., 1999).

Basically, as the researcher must ascertain whether or not the variables are independent,

the data matrix must have enough correlations to justify the application of the FA.

Consequently, the correlation matrix (Table IV) was calculated and analysed to

determine the suitability of the method. The determinant of 0.00014, the p-value of the

Bartlett test of 0.00 and a Kaiser–Meyer–Olkin index of 0.66, indicated that this

technique could be adequately applied (Kaiser, 1974)

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Table IV - Correlation Matrix

There is no lack of criteria to determine the number of factors to keep. Most of them

use, in some way, the resulting “scree plot” shown in Figure 3. The Kaiser rule was

used, which selects only the principal components with an “eigenvalue” greater than

unity. Consequently, as can be seen in the graph, there are only five components with

“eigenvalues” greater than 1. Therefore, the difficulties can be represented by five

principal components, which make up 68% of the total variance3. Moreover, the

resulting communality index for each difficulty (variable) describes which proportion of

the variance is explained by the principal components selected. Since values of

communalities for all difficulties are greater than 0.5, the continuation of our analysis

was justified. Figure 3 - Scree Plot

The next step, after having selected the number of factors to keep, was to choose a

method for the rotation of the components in order to obtain a better interpretation of

the groups. We decided to make an orthogonal rotation, which guarantees that

components remain orthogonal (not correlated) to other components. The technique

used was the “vari-max”, which is the most common among those that make orthogonal

rotations. This result in a rotated components matrix, which represents the relationship

between the variables (difficulties) and the rotated components, called factorial loads.

Important rotated components matrix coefficients are shown in Table V.

To finalize the FA, each of the principal components was analysed by studying which

variables saturate and contribute to each factor. To accomplish this task, rotated

components matrix coefficients was used, shown in Table V. Values lesser than 0.5

have been omitted in order to facilitate interpretation (Hair et al., 1999).

Table V - Simplified Rotated Matrix

Next, the resulting five components are presented with subsequent names. The order in

which they are presented is due to the number of components. The lower the number of

components, the higher the amount of variation it explains. This ranking does not

accurately reflect the significance of each difficulty.

G1. SC materials flows: Considers difficulties that affect the correct transit and

movement of either materials or information along the SC. Included in this

group are: transportation, paperwork bureaucracy and problems in the SC

entities.

3 60% is usually considered as sufficient in social sciences.

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G2. Supply Chain Management (SCM): Considers all difficulties previously

classified as supply-chain related.

G3. Global environment: Considers difficulties generated in the SC environment

such as: policy, political, macroeconomic, market instability.

G4. Workforce: Considers all labour related difficulties.

G5. IT and warehousing infrastructure: Considers the difficulties generated by

the auxiliary infrastructure needed to develop some of the main activities of the

SC, regarding telecommunications and warehousing.

Once the groups were named they were ranked: the difficulties that most impacted

negatively the SC were ranked first, and so on. Figure 4 shows the overall ranking,

considering the general difficulties ratings with factorial punctuations obtained from the

rotated components matrix.

Figure 4 - Difficulties group rating punctuation

8 Practical implications

It was found that, even though there is a growing body of literature concerning isolated

issues that SC have to face, an exhaustive list of difficulties is hardly available. The

information gathered from the literature review was dispersed, repetitive and subjective

to different SC research areas. Affinity diagrams were used to reduce the number of

difficulties. Therefore, eighteen difficulties were identified through an exhaustive

academic literature review. This may be seen as a scholarly contribution in its own

right, thus facilitating subsequent research to build in this ground (Seuring et al., 2012).

Since the researchers’ experience influence the method, the list and number of

difficulties could be considered subjective. However, similar results were obtained

while dealing with more practical literature. For example, a Deloitte report (Marchese

and Paramasivam, 2013) has identified and documented more than 200 sources of SC

risk, classified in four categories mentioned in Table I. On the other hand, a World

Economic Forum report (Blanke et al., 2014) considers a core set of 31 global risks,

while a PwC and MIT report (Strom et al., 2013) present a 14 list of greatest risk to

which SC are exposed. This validates somehow the difficulties used through this

research, since it is argued that consultants and those who daily work with SC problems

instigate the cutting edge discussion of SCM.

Difficulties encountered by SC, whichever the number of them, are not only of interest

to scholars, but also to the managers that face the challenge of the day-to-day managing

of a SC. In today’s ever changing business reality, SC managers and scholars should

focus on developing solutions and strategies to overcome the SC difficulties. Despite

more than 20 years of academic study, there exists a significant gap between SC theory

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and practice, with many scholars reporting that only few companies engage in extensive

SCM practices (Bakker et al., 2012, Halldorsson et al., 2008, Zailani & Rajagopal,

2005, Akkermans et al., 1999, Chicksand et al. 2012).

Once the difficulties over the SC were identified, first-hand information of Uruguayan

managers was ascertained to rank each one using a Likert scale. This information should

help managers and policy makers to develop and prioritize solutions over the most

significant difficulties detected. Moreover, since SC are more extended and globally

dispersed, obtaining similar information from other countries may help managers to get

a regional perspective.

Using a factorial analysis (FA), difficulties were classified in five groups. A

classification is not only needed to analyze the properties of the subgroups but also to

study comparatively the differences between them. The groups obtained through the

aforementioned FA can be compared to the risk categories proposed by Juttner et al.

(2003): environmental, organizational and supply-chain related. Firstly, as shown in

Table V, supply-chain related difficulties are all included in G2 group, resulting from

the FA. Then, organizational difficulties are all included in G1. Finally, environmental

difficulties are included in four groups: G2, G3, G4 and G5. The main differences

between both classifications are firstly that the FA classification differentiates among

environmental difficulties in four groups: workforce, infrastructure, transportation and

global environment. Secondly, difficulties included in G1 shows the significant

interrelationship between organizational difficulties and transportation difficulties. This

may be due to the fact that respondents associate problems from within the SC

(supplier-production-distribution) to transportation difficulties and hence associated to

material flow.

The two strongest groups of difficulties identified from the FA are those related to the

global environment and the workforce. With regard to the first problem, managers

argued that the main concern is the lack of integration between the interest of the public

and private sectors. Although there are some recently created institutions and

organizations in Uruguay, such as INALOG (National Institute of Logistics), there is

still a long way to go in terms of mutual agreements and improvements for the logistics

sector. One subject in particular, is the road transportation infrastructure which,

according to the managers’ opinions, has been quite neglected by the government. The

main problem is the lack of serious investment in the required infrastructure which

should have been solved by the government years ago. Furthermore, managers believe

that multimodal road transportation should be developed, in order to optimize the whole

logistics sector. For instance, since the transportation of cargo by train in Uruguay is

almost insignificant, investment in railroads and trains would help to decongest traffic

and slow down road deterioration.

With regards to the workforce difficulties, managers stated that companies are facing a

cultural problem, since there is a negative tendency in young people who are developing

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unacceptable working habits and high absenteeism. They also believe that there is a lack

of quality training programs available for some of the activities and specific areas

within the SC and lack of government policies that encourage and promote better

education and qualification among workers. In comparison to larger organisations,

SMEs may not have the resources for dedicated SC functions and roles for staff with

specific skills in SCM, which is consistent with Meehan and Muir (2008) results.

While there has been widespread dissemination of the concepts of SCM (Basnet et al.,

2003), the group of difficulties which scores less from the FA is unexpectedly the one

related to SCM. One potential reason for this may be that managers of SMEs still have

not recognized the necessity of implementing SCM. Therefore, the low level of

implementation of SCM as shown in other regions (Basnet et al., 2003, Halldorsson et

al., 2008, Meehan and Muir, 2008, Thakkar et al., 2012), should lead to overlooking

those difficulties. However, Uruguayan SMES firms need to realise they can compete

more effectively with larger overseas enterprises by forming strategic partnerships with

their suppliers and customers, instead of competing individually (Basnet et al., 2003).

Another potential reason is that managers from SMEs tend to rate higher the external

difficulties to their influence area, due to a perceived lack of power over the SC. Despite

the focus of most SMEs on customer service and relational issues, they are reliant on

other organizations in their SC and therefore have little influence over their strategic SC

direction (Meehan and Muir, 2008). However, managers should understand that

introducing SCM in their operations is a key aspect for operational excellence.

To summarize, a clear understanding of the difficulties could help organizations to

prioritize better and manage their resources in an efficient and effective way. Once the

main difficulties over the SC are identified, strategies can be designed and implemented

to attain desired benefits (Fawcett et al., 2008). This should allow SCs to pursue

resilience, understood as the ability of the SC to return to its original state or move to a

new, more desirable state after being disturbed (Christopher and Peck, 2004, Juttner and

Maklan, 2011). There is a need to shift focus from reactive to proactive risk

management, to build agile, transparent and diversified systems (Bathia et al., 2013).

9 Conclusions and Future Research

Not only SC have become more vulnerable, but also the turbulence has increased

through the years. In this context, eighteen difficulties were identified through a

literature review and were later tested by an exploratory survey carried out within

Uruguayan companies. The analysis showed that the main difficulties that hinder SC

performance were workforce availability and government policies. These difficulties

present significant differences in rating over the others; however, there are no

differences between the characteristics of survey respondents. A factorial analysis was

carried out in order to narrow down the group of difficulties, taking into account the

existing correlation between them. It was possible to group all the difficulties into five

main groups: SC materials flow, Supply Chain Management, Global Environment,

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Workforce and IT’s & Warehousing Infrastructure. The most significant groups referred

directly to problems related to the global environment and workforce. On the other

hand, the group of difficulties which scores less from the FA is unexpectedly the one

related to SCM. One potential reason for this may be that managers of SMEs still have

not recognized the necessity of implementing SCM.

Our main research aim was to get first-hand information about the main difficulties that

Uruguayan managers consider to have the most negative impact on their SCs within the

last 3 years. Besides the limitations of this exploratory study and the list of difficulties,

conclusions are intended to encourage the scientific, business and political community

to focus on overcoming the most troublesome difficulties, while considering the

difficulties and solutions holistically. Since today’s context has lead to less margin of

error for absorbing delays and disruptions, the path to SC success could be somewhat

smoother by knowing the difficulties in advance.

Therefore, future research could focus on developing strategic guidelines and

methodologies to help companies find the way to overcome difficulties towards a better

business performance. Moreover, since difficulties to SC lack a commonly agreed

classification schema, more research is required to validate the results obtained through

the FA. Finally, further studies in other regions or with a different time span, could be

useful to overview the significance of each difficulty.

Acknowledgments

The authors wish to thank all the companies that responded to the survey and

participated in the workshop, and the colleagues and business managers who carried out

the survey pilot test. We are also grateful to Sarah-Jane Vokey whose suggestions

helped to improve the paper. Finally, we are grateful to reviewers and editor

suggestions, which significantly improved the overall quality of this article.

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Authors Classification Blanke et al., 2014 Economic, Enviromental, Geopolitical, Societal and Technological

Christopher and Peck 2004 Process, Control, Demand, Supply and Environmental

Chopra and Sodhi 2004 Disruption, Delays, Systems, Forecast, Intellectual property,

Procurement, Receivables, Inventory and Capacity

Cousins et al. 2004 Technological and Strategic

Das and Teng 1998 Relational and Performance

Handfield and McCormack 2007 Operational, Network and External factors

Juttner et al. 2003 Environmental, Organizational and Supply-chain related

Marchese and Paramasivam, 2013 Macro-environment, Extended value chain, Internal operational,

Functional support

Miller 1992 General environmental, Industry and Firm-specific variables

Norrman and Lindroth 2002 Operational accidents, Operational catastrophes and Strategic

uncertainties

Rao and Goldsby 2009 Environmental, Industry, Organizational, Problem-specific and

Decision-maker

Table I - Categories of supply chain risk

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Environmental Organizational Supply-chain related Telecommunications

infrastructure Workforce availability Internal and external integration

Local warehousing

infrastructure Workforce productivity KSA for managing the SC

Air transportation Supply-side problems Commitment of top

management

Maritime transportation Distribution-side problems Information technology

Ground transportation Systematic delays in own

production

Custom process and similar

paperwork

Government policies

Political environment

Macroeconomic and Market

instability

Table II - Difficulties hindering supply chain performance

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Table III - Number of responses classified by industry size

Industry Size % Nº

< 20 18.2 18

20-100 43.4 43

101-250 25.3 25

> 250 13.1 13

Total 100% 99

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Table IV - Correlation Matrix

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11 D12 D13 D14 D15 D16 D17 D18

D1 1,00 0,48 0,40 0,37 0,30 0,16 0,19 0,32 0,28 0,13 0,14 0,18 0,19 0,21 0,17 0,21 0,16 0,19

D2 1,00 0,13 0,12 0,17 0,03 0,04 -0,01 0,14 -0,11 0,02 0,04 0,06 -0,03 0,23 0,25 0,15 0,10

D3 1,00 0,67 0,51 0,43 0,38 0,37 0,28 0,09 0,10 0,19 0,29 0,25 0,11 0,04 -0,05 0,11

D4 1,00 0,66 0,40 0,23 0,24 0,10 0,18 0,16 0,25 0,31 0,48 -0,01 0,01 -0,05 0,07

D5 1,00 0,49 0,23 0,03 -0,04 0,11 0,09 0,33 0,31 0,36 0,18 0,16 0,12 0,15

D6 1,00 0,54 0,24 0,13 -0,03 -0,09 0,28 0,26 0,07 0,03 0,00 -0,06 -0,13

D7 1,00 0,44 0,29 0,11 -0,04 0,03 0,02 0,08 0,05 -0,05 0,02 -0,11

D8 1,00 0,52 0,33 0,35 -0,11 -0,08 -0,05 -0,22 0,03 -0,01 0,10

D9 1,00 0,27 0,12 -0,09 -0,08 0,00 -0,09 -0,01 -0,07 0,05

D10 Symmetric 1,00 0,57 0,12 0,21 0,43 0,18 0,15 0,16 0,25

D11 1,00 0,01 0,09 0,38 0,03 0,11 0,05 0,17

D12 1,00 0,59 0,25 0,36 0,25 0,18 -0,03

D13 1,00 0,53 0,39 0,38 0,22 0,11

D14 1,00 0,35 0,32 0,25 0,17

D15 1,00 0,64 0,59 0,51

D16 1,00 0,73 0,53

D17 1,00 0,42

D18 1,00

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Table V - Simplified Rotated Matrix

1 2 3 4 5

D1 0,723

D2 0,788

D3 0,561

D4 0,713

D5 0,737

D6 0,583 0,559

D7 0,800

D8 0,781

D9 0,639

D10 0,793

D11 0,829

D12 0,656

D13 0,697

D14 0,573

D15 0,824

D16 0,868

D17 0,845

D18 0,629

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Figure 1 – Research Methodology

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Figure 2 - General rating of Uruguayan SC difficulties, from 0 (strongly disagree) to 4 (strongly agree).

Four different color groups were identified according to significance in ANOVA.

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Figure 3 - Scree Plot

Component Number

181716151413121110987654321

Eigenvalue

5

4

3

2

1

0

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Figure 4 - Difficulties group rating punctuation

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