328-2nd icber 2011 pg 1855-1875 malaysian smes enterprises

8/11/2019 328-2nd ICBER 2011 PG 1855-1875 Malaysian SMEs Enterprises

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INVOLVEMENT OF MALAYSIAN SMES IN LOGISTICS: POTENTIAL

AND PROSPECTS

Che Mohd Zulkifli Che Omar

Faculty of Management and Economic

Sultan Idris Education UniversityMalaysia

Osman Jusoh

Faculty of Management and Economic

Sultan Idris Education University

Malaysia

Abstract

Specifically the purpose of this study will help the SMEs within which the companies operating to

determine the level of their logistics practices, challenges and performance and relate it to the benefit tothe Malaysian SMEs. This research attempt to examines the general characteristics of generic capabilities

of SMEs owner/manager, management practices adopted by Malaysian SMEs and challenges faced by

Malaysian SMEs which engages in logistic industry. This research also attempt to investigate if there

exists a relationship between general characteristics of generic capabilities, management practices,

challenges and business performance. This research employed survey research design and was cross-

sectional in nature. A total of 394 respondents from SMEs Logistic Company participated in this

research. The result of the descriptive analyses show that respondent rank entrepreneurial trait has a

higher characteristic of capability in SMEs owner/manager in operating their company. The second andthird were management capability, financial capability, technical capability and innovation capability.

The result of the descriptive analyses also show respondent rank Customer relation Practices as a highest

management practices applied in Logistic SMEs. The result of the analyses revealed that two out of three

independent variables are positively associated with business performance significantly. These results

imply that the higher level of independent variables (characteristics of capability and management

practices) the better business performance would be. In this analysis, characteristics of capability seemedto have a strongest association with the r value of 0.524 followed by management practices (r = 0.368).

However, challenges in logistics SME variables with the r = 0.036 indicated that this variables almost has

correlation with business performance. In addition, the multiple regression analyses also found all

variables have positive relationship with business performance. However, only characteristic of

capability has strong significant relationship with business performance. According to the value R value,

combination of these three variables (characteristics of capability, management practices, and challenges)can only predict 27.6% toward business performance. While72.4% can be predicting by other variables

that need to be identified in the future. Based on F statistic (43.488) at p value 0.01, we can conclude that

the model that has been form is appropriate. As a conclusion, the research findings have contributed to

the body of knowledge and provided further understanding of characteristics of generic capabilities,

management practices, challenges and its relationship to business performance in the Malaysian Logistic

SMEs.

Keywords:Malaysian logistics SMEs, Generic capabilities, Management practices, Business

performance


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INTRODUCTION

In a matter of a few decades, Malaysia has transformed its economy from one based on

agriculture to one driven by trade. Central to powering the growth of this economictransformation is its trading with other nations. International trade has become a critical

component of Malaysias economic engine. Given the importance of international trade to

Malaysia, much of which is seaborne, freight logistics has assumed a very prominent role in

providing the backbone to facilitate it. Freight logistics is one of the key elements in the

production process. The management of the freight logistics chain involves the integration of

various service providers to provide a total supply chain solution.

The governments commitment and concern for the development of SMEs was made evident

from the early 1970s with the introduction of the New Economy Policy in 1971, which aimed to

improve peoples welfare, and restructure ethnic economic imbalances. Furthermore, thegovernments commitment to the development of SMEs can also be seen in the second Industrial

Master Plan (IMP2), which ended in 2005, followed by the Third Industrial Master Plan (IMP3),from 2006-2020, coinciding with the countrys vision for 2020 (MITI, 2005).

Malaysia is a fairly mature market, but surprisingly, only a fraction of the more than half a

million SME establishment ship their products internationally. They have not taken fulladvantage of the support and solutions provided by local ports (Westport Malaysia News, 2006).

A reduction in trade barriers and the emergence of advanced technologies have led to a great

interest in logistics in recent years (Gunasekaran and Ngai, 2003). Unlike large firms, most

SMEs may not compete directly against large enterprises because of their limited resources

(Cooper et al., 1986). Moreover, according to Kotelnikov (2007), SMEs are the drivers ofeconomic growth and innovation. The total number of SMEs in the economy depends on the rate

of SME creation and rate of SME destruction. However, the contribution of SMEs to the

economy is still relatively small. In recognition of this, the government has made thedevelopment of SMEs a high priority area. This is reflected in the national development agendas,

namely the Ninth Malaysia Plan (9MP) and the Third Industrial Master Plan (IMP3), in which

the key strategy for the development of SMEs is outlined for the periods 2006-2010 and 2006-2015.

Small and Medium Enterprises (SMEs) in Malaysia are a rapidly growing force. Recognizing the

growing impact of SMEs on Malaysias aspirations to become a developed nation by 2020, the

government set up the Small and Medium Industries Development Corporation (SMIDEC) in1996 to oversee their business needs. The focus of SMEs is on building their unique

competencies and striving for effective customer and supplier management (Lee et al., 1999).

SMEs that are logistically competitive need to exhibit high levels of achievement in these five

capabilities, as they aim to become crucial and integral members of the global supply chain

(Council of Logistics Management, 1995).


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BACKGROUND

SMEs in many countries face severed and numerous challenges. At the theoretical level previous

studies have identified some of the barriers facing SMEs (for example Wan, 2003; Stuti, 2005;Moha, 1999; Hall, 2002; and SMIDEC, 2002). Wan (2003) highlighted the many challenges

facing SMEs in a globalized environment, including a lack of financing, low productivity, a lack

of managerial capabilities, access to management and technology, and a heavy regulatory

burden. In the Malaysian context, SMEs face many similar challenges, which have been

highlighted by the APEC survey (1994), the SMI development Plan, 2001-2005 (SMIDEC,

2002), Ting (2004), the UPS survey (2005) and others. For example, the major challenges

include lack of access to loans, limited adoption of technology, lack of human resources and

competition from MNCs and globalization.

It is important to know the practices and performance of SMEs engaging in logistics in Malaysia.

Several external factors continue to encourage the organization to adopt the new way ofconducting business, including increasing globalization, decreasing barriers to international trade

(i.e AFTA), improvement in information availability through information technology andincreasing customer demand (Sahay & Mohan 2003; Gunasekaran et al, 2003). In order to

survive, the SMEs must be able to reduce costs, improve quality and provide a rapid response to

the customers needs. One of the ways of achieving that competitive edge is through the

implementations of the best logistic practices.

The main issues facing industry involve a lack of information about industrial players. There is

no firm record of the number of players in the freight logistics industry, and other critical details

about them concerning their size, range of service, or status of operation whether it is local or

foreign. Many of them are not registered with any association. In addition, a lack of informationabout players in the industry have made it difficult for the relevant authorities to assess the state

of the industry to devise polices to promote and develop it.

THE PURPOSE OF THE STUDY

Specifically the purpose of this study will help the SMEs within which the companies operatingto determine the level of their logistics practices, challenges and performance and relate it to the

benefit to the Malaysian SMEs. This research has concluded that effective implementation of

logistics practice will give the competitive advantage to the organization. This study will

determine this in the context of Malaysian SMEs.

The specific objectives of this study are:

1. To examine the general characteristics of the generic capabilities of SME owners and

managers.

2. To examine the management practices adopted by Malaysian SMEs engaging in the

logistics industry.

3. To examine the challenges faced by Malaysian SMEs engaging in the logistics industry.

4. To examine the relationship of the general characteristics of generic capabilities,

management practices, challenges and business performance.


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5. To examine the predictive power of general characteristics of generic capabilities,

management practices, and challenges toward business performance.

Research Questions

1. What are general characteristics of generic capabilities of SME owners and managers?

2. What management practices are adopted by Malaysian SMEs engaging in the logistics

industry?

3. What challenges are faced by Malaysian SMEs engaging in the logistics industry?

4. What is relationship between characteristics and management practices toward SMEs

business performance?

5. How to predict power of general characteristics of generic capabilities, managementpractices, and challenges toward business performance?

LOGISTIC IN MALAYSIASMEs

This section gives an outline description of SMEs in Malaysia and examines the literaturerelating to previous research concerning the logistics SMEs, general characteristics of capability,

management practices, challenges, and business performance.

The logistics operations include purchasing, distribution, the managing of inventories,packaging, manufacturing and even customer services (Bowersox and Closs, 1996) Logistics

defined as the technology for controlling physical flows and information flows (Colin and Fabbe,

1993) is a major contributor to performance development in large corporations, and in this

context it is more commonly known as logistics efficiency (Chow et al., 1994). The firm

becomes efficient with its partners and customers by reducing the cost of logistics activities:suppliers, warehousing, production, transportation, and delivery. Sink et al., (1996) identify the

function and activities of logistics service providers. The details are presented in Table 1.

Table 1: Activities of logistics service providers

Function Activities

Transportation

Warehousing

Inventory management

Order processing

Information system

Packaging

Shipping, forwarding, (de)consolidation, contract delivery, freight bill

payment/audit, household good, relocation, load tendering, brokering

Storing, receiving, assembling, returning goods, marking/labelling, knitting

Forecasting, location analysis, network consulting, slotting/layout design

Order entry fulfilment

EDI, e-commerce, Internet, WWW, routing/scheduling, AI, and expert systems

Designing, recycling

Source: Adapted from Sink et al., (1996)

Sohail and Sohail (2003) predicted that Malaysian companies will moderately increase their

commitment in the logistics services in the near future through the implementation of activitiessuch as warehouse management, inventory replenishment and order fulfilment.

SMEs require quick and cost-effective solutions to expand beyond the borders of Malaysia.

SMEs will be accorded fast and reliable transport and logistics services to get their goods across

the globe, since they can find instant access to more than 300 ports around the world, all at

competitive tariff rates (Westport Malaysia News, 2006). Furthermore, SMEs looking for


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warehouse and cold-storage facilities can use the Westports facility, which has total logistics

solutions at very low cost. Some SMEs wanting to expand beyond our borders intend to set upjoint ventures in the production and distribution of halal products for the international market.

Logistics encompasses all of the information and material flow throughout an organization. It

includes everything from the movement of a product or a service that needs to rendered, through

the management of incoming raw materials, production, and the storing of finished goods, to

delivery to the customer and after sales service (Pollitt, 1998)

In todays highly competitive environment, many companies are aiming to gain a share of the

global market and to take advantage of higher production and sourcing efficiency. A key

determinant of business performance nowadays is the role of the logistics function in ensuringthe smooth flow of materials, products and information throughout a companys supply chains

(Sum et al.,2001).

The general problems that arise in corporate logistics include delayed and inaccurate

information, incomplete services, slow and inefficient operations and high product damage rate.The possible consequences include an inability to provide inter-linked services, high operating

costs, a high rate of inaccuracy, and a lack of flexibility in responding to changing demand

requirements. Furthermore, SMEs face barriers of a number of different kinds, including the lack

of information, limited financial and technical resources, and lack of a well-trained work force(APEC SMEs, 2003). According to Yong, O. K. (2006) the challenges include a speedy time to

market, just-in-time delivery, lean inventories, short turn-around in transit, and low-cost

clearance at borders. Meanwhile, there must be greater focus on core competencies, ensuring

greater supply-side efficiency among the networked and allied partners.

Chiu (1995) identified the Critical Success Factors (CSFs) in effective logistics management.

These include good planning of the logistics system, a well-designed distribution organization,

the prudent selection of allied companies, a close relationship with trading partners, goodlogistics investment analysis, the elimination of barriers to logistics management, the

commitment of top management, and continuous improvement in logistics.

GENERAL CHARACTERISTI OF LOGISTICS MALAYSIA SMEs

Entrepreneurial Traits

Studies have acknowledged different factors that are attributable to the success of anentrepreneur especially to SMEs of logistic factors. However, given the limited time and

resources available for this research, only four personality traits are included for this study. There

are the need for achievement, locus control, innovations and creativity and propensity of risk

taking. Small and medium sized enterprises are created by entrepreneurs. These entrepreneurs

are also responsible for making decisions and solving problems in their organizations. Moreover,

these entrepreneurs tend to exhibit certain characteristics. According to Fafuente and Salas

(1989), the entrepreneurial characteristics can influence the type of firm to be created as well as

the manner in which it is managed. For this reason, it is important to understand theentrepreneurial characteristics of SMEs.


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The table 2 below displays the three groups of entrepreneurial characteristics that can influencethe success of an SME.

Table 2: Entrepreneurial Characteristics

Personality Characteristics Sociological Factors Demographic factors

Need for achievement

Locus of control

Innovation Capability

Propensity of taking risk

Desire for responsibility

High level of energy

Future orientation

Commitment to work

Flexibility

Tolerance for ambiguity

TenacityKnowledge

Experience

Skill at organizing

Reputation

Perception of desirability

Perception of feasibility

Role model and mentors

Entrepreneurial parents

Age

Gender

Education

Marital Status

Sources: Dollinger (1999) and Zimmerer and Scarborough (2008)

Management Capability

Some authors attempted to identify the logistics capabilities a firm may possess and their

relationship to other variables. Lynch et al., (2000) studied the effects of logistics capabilities

and corporate strategy on company performance. They examined process capabilities, value-

added service capabilities, cost leadership strategy, and differentiation strategy. Their resultindicated that process capabilities were positively linked to a cost leadership strategy while

value-added service capabilities were positively linked to a differentiation strategy.

Morash et al., (1996) examined the relationship between logistics capabilities and performance.

The capabilities were grouped into two areas, demand oriented and supply-oriented capabilities.

Demand-oriented capabilities included pre-sale and post-sale customer service, delivery speed,

delivery reliability and responsiveness to target markets. Supply-oriented capabilities included

widespread and selective distribution coverage, and low total cost distribution.

Lack of Managerial and Technical Expertise

In many studies conducted on the common problems of small enterprises, the lack of managerial

and technical expertise is the most reported. According to Chee (1986), this problem results from

entrepreneurs having relatively low level of formal education and limited training in new

management principles and practices.

According to Pickle and Abrahamson (1990) inadequate management can lead a small businessto fail to identify and respond to changing social, economic and environmental conditions, which

can result in serious problems and even the eventual failure of the firm. Furthermore, theseauthors indicate that SME owners encountered problems such as lack of experience in product or


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service lines, lack of management experience, over-concentration on experience and

incompetence of management.

Technical Capability

According to Chee (1986) small business are seriously affected by the shortage of skilled labour.

Chee discovered that SMEs have to compete with large companies for skilled workers. However,

with regard to this problem, SMEs blamed the large companies for taking away their skilled

workers by offering them better wages and working conditions.

Baumack (1998) noted that in a tight labour market the competition between small and large

business for competent employees is intensified, particularly for college graduates and certaintypes of skilled worker. In another study, Mohd Jan et al., (1990) reported that as labour

intensive enterprises, small businesses are unable to attract and then retain skilled workers, and

that one out of four small businesses have problems in attracting the right kind of worker.


According to Martins and Terbalance (2003), Mavondo and Farrell (2003), Robbins and Coulter

(1999), Ozsomer et al., (1997), Kao (1996), Robert and Weiss (1998), Drucker (1985), and

Kanter (1983), an innovative organization is characterised by its ability to channel creativity intouseful outcomes. These authors agree that innovative organizations have the ability to take

creative ideas and turn them into useful products, services or work methods. In other words, the

relative strengths of innovative organizations lie in their entrepreneurial ability to change,

experiment, transform and revolutionize.

According to Megginson, et al.,(1991), besides being sources of new ideas, materials, processes,

and services, small businesses tend in general to be more flexible in their operations. Small

businesses have the tendency to be able to switch their production readily in the face of changingdemands within their field and capacity.

Marketing Capability

Mohd Jan et al., (1990) found that SMEs perceived their inability to generate sufficient sales and

low profit margins as their common marketing problems. According to the authors, the

marketing problems resulted from their inability to access channels of distribution and market

information.

Shahadan et al., (1988) also reported that SMEs have marketing problems. The authors indicated

pricing, late payment from customers, inability to provide quality products and lack of

promotional strategies as the marketing constrains of SMEs. The study indicated that only 40

percent of SMEs advertise their products, using mainly signboards and yellow pages.


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Quality System Capability

In order to make SMEs competitive, numerous quality models or approaches have been proposed

(Husband, 1997). The issue of whether quality methods can be effectively utilised by SMEsremains uncertain (Husband, 1997). Common quality models, such as quality systems and

certification, have been adopted by some SMEs, and yet the rate of implementation is low in

comparison to larger organisations (Brown and van der Weile, 1995; Terziovski et al., 1997; and

Ramsey, 1998). More holistic quality models, such as total quality management (TQM), also

appear to exhibit low implementation rates (Ghobadian and Gallear, 1996; van der Weile and

Brown, 1998). Therefore, the issue of whether quality methods can be applied to SMEs needs to

be explored more thoroughly. Issues related to identifying quality methods that are useful to

SMEs and at what stage should they be introduced need to be examined.

Financial Capability

Business, particularly SMEs, need better financing capabilities in order to improve their success

rates (Van Auken and Carter, 1989). In another study, Diah (1985), in Mohd Jan et al., (1990)identified the inability to raise capital and limited access to institutional credit as two major

problems typically affecting SMEs. Similarly, the study conducted by Shahadan et al., (1990),

also found that majority of the SMEs experience shortage of capital or difficulty in obtaining

loans.

MANAGEMENT PRACTICESIN LOGISTICS MALAYSIAN SMEs

Information Sharing

Following their extensive review of the existing literature on SCM, Li et al., (2002a) proposed

several variables relating to information sharing between players in the supply chain. The

following are factors related to Supply Chain Management (SCM) information sharing practices:sharing of valuable (business proprietary) information among parties, informing of changes,

sharing of core business knowledge and business plans. Information sharing describes the extent

to which one party in the chain communicates critical and proprietary information to anotherparty in the chain (Monezka, 1998).

Through information sharing practices, the supply chain players (trading partners) can

coordinate their activities and help to avoid uncertainties (Ulusoy, 2003). Both suppliers and

buyers can share the information relating to demand forecast, production plans or schedules and

inventory data.

Customer Relation Practices

Li et al., (2002) summarized customer relationship dimensions that included the frequent

evaluation of customer complaints through formal or informal procedures, frequent interaction

with customers, follow up and giving service, measuring and evaluating customer satisfaction,

expectations of customers, facilitating and helping customers, a sense of fair play and evaluating

the importance of relationships.


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Customer responsiveness through enhancing the customers ability to seek assistance has a great

impact on overall company performance (Tan et al., 1999). Furthermore, an effort to improvecustomer satisfaction and practicing customer needs analysis will improve productivity and sales

growth, and increase the companys earnings (Kuei et al.,2001).

CHALLENGES FOR LOGISTICS MALAYSIAN SMEs

Despite their important contribution to exports, employment and economic growth, there is wide

recognition in the literature of the challenges and barriers facing SMEs in Malaysia, preventing

them from growing further and putting them in a critical position to face the new challenges

arising from globalization, liberalization and extensive organizational, institutional and

technological change. It has been documented that the barriers facing SMEs in Malaysiaundermine their performance. Some of the literature, including Wan (2003); Stuti (2005); Moha

(1999); and SMIDEC (2002), highlight many challenges facing SMEs in a globalized

environment, for example from a lack of financing, low productivity, lack of managerialcapabilities, access to management and technology, heavy regulatory burden among many

others. In the previous study, Malaysia SMEs face many challenges, which have beenhighlighted by the APEC survey (1994); the SMI development Plan 2001-2005 (SMIDEC 2002);

and also Ting (2004), and UPS (2005).

OVERALL BUSINESS PERFORMANCE

Nash (1993) claimed that profitability is the best indicator of whether an organization is doing

things right, and so profitability can be used as the primary measure of organizational success.

Furthermore, Doyle (1994) pointed to profitability as the most common measure of performance

in western companies. Profit margin, return on assets, return on equity, return on sales areconsidered to be the common measures of financial profitability (Robinson, 1982; Galbraith &

Schendel, 1983). Abu Kassim et al., (1989) found sales, sales growth, net profit and gross profit

among the financial measures preferred by Malaysian manufacturing firms.

Stank et al.(2003) conducted a survey to address a logistics service providers performance and

how it related to the market, customer satisfaction and loyalty. The model distinguishes betweenthree different kinds of performance: relational performance, operational performance and cost

performance.

METHODOLOGY

This chapter discusses the methodology used in this research. It is divided into subtopics, which

are, research framework, data collection method, subject of study, instrument used, research

procedure, and data analysis.

Research Framework

The dependent variable in this study is business performance, measured by the increase in sales,

overall profits, market scope (internal and domestic market), awards and achievements, market


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share, the rate of employee turnover, the number of skilled employees, and market acceptance of

the company image.

The independent variable in this study involves management practices that measure or determinewhat practices are implemented by the SMEs. The dimensions include information sharing and

customer relations practices. General characteristics of capabilities are also identified as an

independent variable. The dimensions include entrepreneurial traits, management capability,

technical capability, innovation capability, marketing capability, quality system capability, and

financial capability. Another variable for this project involves challenges in Malaysian Logistics

SMEs.

Sampling

For the purpose of collecting the data for this research, the Directory of Malaysian Logistics

2006/2007 was used. However, the list of business names and addresses was compared with theSME info website. The Directory consists of an extensive list of the business names and

addresses of logistics firms associated with the Federation of Malaysian Freight Forwarders(FMFF). The reason for using this Logistics directory is that FMFF is among the most

established associations of logistics firms. It consists of the firms in large industries, and in small

and medium industries, but in this project we concentrate on small and medium industries.

To determine the sample size for the research project, Roscoes (1975) rule of thumb was used.

A sample size of more than 30 but not less than 500 was appropriate for most research. Based on

the above discussion, the sample size of the study was 349 and this considered to be appropriate

and justified as suggested by Krieje and Morgan Table of Determining Sample Size (Sekaran,

2007). However, to ensure sufficient participation and a high response rate, and to cater for themissing non-responses, a sample of 500 set of questionnaires were distributed to all respondent.

However, from 500 set administered only 351 were return and analyze (69.8%) rate of return


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Figure 1: Theoretical Framework

10.3 Data Collection Method

The main research instrument used to collect data in this study is the questionnaire. This

instrument is partly adopted from previous research projects, and partly developed through the

detailed review of the literature.

The Pilot Study

Prior to their adoption for the actual study, the questionnaires were tested on 30 Logistics SMEs

in the Perak area. Perak was chosen on the basis of convenience, cost saving, and timeconstraints. The objective of the pilot study was to test the reliability and validity of the

questionnaire. Another objective was to determine whether or not all the items in the test were

well understood by the respondents. Apart from that, another objective of the pilot study was to

get the suggestions, opinions, and constructive comments from the respondents. The feedback

from respondents, in terms of language clarity and comprehensiveness were gathered and taken

into consideration. Ambiguous questions were amended and technical jargon or clichs wereavoided. The number of items was reduced so that the time taken to complete the questionnairebecame shorter. Consequently, the reliability was also improved after several items were dropped

and several statements reworded.

In addition, the objective of conducting a pilot study is to test the reliability and validity of thequestionnaire or instrument used. The test of reliability is very important as it determines the

stability and consistency of the measurement in order to avoid bias (Sekaran, 2007, Malhotra et

al, 1999).

Business

Performance

CharacteristicPracticesChallenges

Evolution of the

environment

Owner-manager s

perception of evolution

Creation of techno-

organizational form

Distinctivecompetencies

(R&D, training,learning)

Entrepreneurial

competencies(training,

advice)

-Activity system: market, product, process

-Cooperation systems: shock adaptationmechanism

Controllability

SME

Adopted: (Guilhon and Guilhon, Peguin, 1993)

Sources:Logistics efficiency within the small enterprise framework


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The Reliability Test

The data collected from the questionnaire were analyzed using SPSS version 16.0. A reliability

analysis was carried out and various section were found to be reliable and valid according toCronbachs Alpha, the overall reliability coefficient scores obtained for the questionnaire being

0.7856. Generally, the reliability coefficient indicates that there was a high level of consistency

in the responses given by the respondents (Cronbach, 1990). The internal consistency was used

to determine the reliability level. According to Nunnally and Bernstein (1994) a reliability

coefficient of 0.70 and above is considered more than acceptable for most behavioural science

applications. This reliability test is important because it is related to the validity concept, which

is to prove that the instrument used is consistent, stable, and predictable and will yield correct

results without room for doubt (Hair, et al., 1998).

DATA ANALYSIS PROCEDURES

Descriptive Statistics

The data collected from respondents were analyzed for frequency and central tendency. The data

used for the descriptive statistics to determine the level of inclination or adaptation of general

characteristics capabilities of SMEs, management practices, and challenges.

Correlations

In order to determine the relationship of all variable the tool to be used is correlation. Using this

tool an analysis of relationship could be made for management practices with business

performance, general characteristics of capability with business performance, and challengeswith business performance.

Regression

After completing the correlation analysis, the study will be continued with more detail analysis

using regression method. In the regression method, more than a single variable could be used topredict another variable. It will be used to determine which general characteristics capabilities of

SMEs, management practices, and challenges that most causing business performance variable to

either increase or decrease.

DATA ANALYSIS AND FINDING

The aim of this study is to investigate the characteristics of capabilities, management practices,

and challenges in logistics SMEs in Malaysia. The analysis is explained in the following section:

the result of descriptive statistics, demographic variable, and descriptive analysis of variable

understudy (characteristics of capabilities, management practices, and challenges) in Logistics

SMEs in Malaysia. Next Section discussed the correlation analysis of component variable with

follow by linear regression analysis.


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Data Collected

The data for this project was collected from 349 SME logistics managers to represent LogisticsSME owners in Malaysia. The response rate was 69.8%. The population and sample for the study

was discussed at length in chapter four. The following subsection presents a descriptive summary

of the profile of the respondents.

Descriptive Summary of the respondents

The demographic data describes the overall picture and characteristics of the respondents taking

part in this study. The table 3 below shows the demographic factors relating to the respondents.

Descriptive Analysis

This is in line with the first objective of this research, which is to examine the general

characteristics and generic capabilities of SME owners and managers. The descriptive analysis ispresented in Table 4 below.

This analysis supports the second objective of this project, which is to examine the management

practices adopted by Malaysian SMEs in the logistics industry. The descriptive analysis is shownin Table 5 below.

Table 3: Respondent Demographic Factors (n=349)

Characteristics Frequency Percent (%)

Gender

Male

Female

Level of Education

Primary

Secondary

College/University

Type of Company

Sole Proprietor

Sendirian Berhad

Partnership

Major Shareholder/Partner

Bumiputera

Non-Bumiputera

Other

Number of Employees

Less than 5

Between 5 and 50

Between 51 and 150

State of Origin

Johor

250

99

11

122

216

56

260

24

186

145

18

81

210

58

13

71.7

28.3

3.2

35

61.8

16

74.5

9.5

53.3

41.5

5.2

23.2

60.1

16.7

3.7


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Kedah

Kelantan

Kuala Lumpur

MelakaNegeri Sembilan

Pulau Pinang

Perak

Sabah

Sarawak

Selangor

Terengganu

Pahang

12

23

32

382

13

86

10

8

75

20

17

3.4

6.6

9.2

10.90.6

3.7

24.6

2.9

2.3

21.5

5.7

4.9

Table 4: General characteristic generic capabilities of SMEs

Characteristics of Capabilities Mean Ranking

Entrepreneurial Trait

Management Capability

Marketing Capability

Quality System CapabilityFinancial Capability

Technical Capability


4.35

4.13

3.95

3.783.78

3.67

3.35

1

2

3

44

6

7

Table 5: Management practices in Logistics SMEs

Management Practices Mean Ranking

Customer Relation PracticesInformation Sharing

4.083.83

12

The Third analysis was carried out to challenges in Logistics SMEs. This analysis parallels with

the third objective of this research which the descriptive analysis is shown in Table 6 below.

Table 6: Challenges in Logistics SMEs

Management Practices Mean Ranking

Problems with changing government policies and regulations 3.29 1

Problem with coordination across various government agencies 3.29 1

Problems with operating transport costs 3.21 3

Problems with infrastructure integration in the logistics network 3.20 4

Problems in getting better training from government and regulatory authorities topromote logistics

3.02 5

Problems in distribution with regional imbalance 2.96 6

Problems with poor warehousing and storage facilities 2.94 7

Problems with unreliable IT

infrastructure (e.g. internet, phone line, broadband)

2.93 8

Problems in meeting the growing supply chain demand due to undeveloped domestic

industry

2.93 8

Problems with a high level of cronyism 2.82 10


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Correlation

The result of the analysis this section has fulfilled and answered the fourth objective of the study,

namely to determine the relationship between independent variables. Those independentvariables are characteristics of capability, management practices and challenges in logistics

SMEs in Malaysia. The Pearson product moment linear was used to test the develop objective.

The result of the test indicated that two out of three independent are associated positively with

business performance. It seems to conclusively prove that higher level of the characteristics of

capability and management practices and will ensure better business performance. Table 7 below

summarize the test result.

Table 7: Summary of the Test Result: Correlation between (characteristics of capabilities, management practices &

challenge) and business performance

Independent Variables Characteristics of

Capabilities

Management

Practices

Challenges

Business Performance Pearson 0.524** 0.368** 0.036*

Significant 0.000 0.000 0.505

** Correlation is significant at the 0.01 level (2-tailed).

* Correlation is significant at the 0.10 level (2-tailed).

Table 7 shows that the Pearson product moment coefficient correlation result revealed that twoout of the three independent variables are significantly and positively associated with business

performance. These results imply that the higher the level of independent variables

(characteristics of capability and management practices) the better business performance is likely

to be. In this analysis, characteristics of capability seemed to have the strongest association with

the r value of 0.524, followed by management practices (r = 0.368). However, for challenges in

Logistics SME variable with the r = 0.036 indicated that this variable almost has correlation withbusiness performance.

Regression

The fifth objective of this research is to examine the predictive power of general characteristics,

including generic capabilities, management practices, and challenges toward business

performance. Multiple regressions can be conducted by three different methods (Hair et al.,

1998). Firstly, in the standard regression procedure, all independent variables are assumed to be

of equal importance and are entered into the regression equation. Secondly, in the multiple

regression procedures, independent variables are added to the regression equation in an order

pre-determined by the researcher. The choice of regression procedures depends on the objectiveof the analysis. In the present study, the researcher used multiple regressions to check the

significance of the relationship between independent variables and business performance.

Multiple regression analysis is carried out in order to answer research questions posed in anearlier section. One of the objectives is to find out how much the predictor variables

(characteristics of capabilities, management practices, and challenges) influence the rate of

business performance in logistics SMEs.

Based on this method, a regression model was developed to determine the relationship among

the variables under study. The model linear equation is as follows:


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OBP = + 1GC + 2MP + 3CH + e

Where

OBP = Overall Business Performance

= Constant

= Coefficient

GC = General Capabilities of Generic Capabilities

MP = Management Practices

CH = Challenges

e = Standard Error

The results of multiple regression analysis indicate that the multiple regression coefficientR=0.525 with R2=0.276 signifies that 27.6% of the variation in the business performance was

statistically explained or accounted for by the three variables regression equation. Multiple

regression analysis results are shown in Table 8 below.

Table 8: Model Summary of Multiple Regression Analysis

R R2 Adj R

2Std. Error of the

estimate

F Sig F

0.525 0.276 0.270 0.53937 43.488 .000

a. Predictors: (Constant), GC, MP, CH.

b. Dependent Variables: Business Performance

Table 9: Multiple Regression Result for Independent and Dependent Variables

Variables Unstandardised Coefficients Std Coefficient T Significant

B Std Error Beta ()Constant

Characteristics

Of Capabilities

Management

Practices

Challenges

0.530

0.693

0.114

0.012

0.299

0.084

0.73

0.034

0.468

0.088

0.016

1.772

8.249

1.550

0.347

0.77

0.000

0.122

0.729

Level of significance at p


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CONCLUSION AND RECOMMENDATION

The aim of this study is to investigate characteristics relating to generic capability, management

practices, challenges and business performance in logistics SMEs. Following the literaturereview, the researcher found that there were gaps in our knowledge and theory regarding

characteristics relating to of generic capability, management practices, and challenges in logistics

SMEs. It was hoped that this study would investigate the theoretical linkages between

characteristics relating to generic capability, management practices, challenges and business

performance by answering the research questions.

Recommendations for future research

This research project has identified entrepreneur traits as higher characteristics of capability in

SME owners and managers in operating their company. The dimension that has been identified

including goal driven, need for achievement, locus control, propensity for taking risk, and futureorientation. It is recommended that further analysis need to be conducted to indentify other

dimensions that fall under entrepreneur trait such desire for responsibility, high level of energy,commitment to work, flexibility and tolerance for ambiguity. In addition, tenacity, organizing

skill and reputation can be tested in future.

Logistics represents a regrouping of the movement and storage related activities into anintegrated whole, either by formal organization structures or conceptually in the minds of

management that historically may have been partly under production and partly under

marketing. This historical linkage prompted managerial personnel in other countries to identify

different logistics activities with either marketing or production management. The

conceptualization of logistics by Malaysian SME logisticians and how they matched variouslogistics activities with other functional areas of management are seldom investigated. The

outcome of future research on this might shed some light on the problem, and might lead to more

interesting findings.

Logistics is marketing oriented and, as part of the companys marketing efforts, it plays a key

role in satisfying the firms customers and achieving a profit for the company. It is the businessand the industry sectors that tend to gain most from an efficient national logistics system. Hence,

in a resource-scarce nation such as Malaysia, business and industrial organizations must play an

active role in improving the logistics system capabilities by associating themselves with the

marketing strategies. There is the gap in process of implementation marketing in Logistics SMEs

which can be classifying in future.


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