Understanding the Relationship between a Small & Medium Enterprise (SME) and its Suppliers: A Case Study of a Food Industry SME Company in Kedah, Malaysia
Small and Medium Enterprises (SMEs) are aware of the need to implement proper
supply chain management practices, especially to maintain good relationships with
their suppliers. Previous studies indicated that a close relationship between SME
owner-managers and suppliers can avail various benefits, such as operations and
performance improvement, smooth delivery of goods and services to final destinations,
and better negotiation of price and delivery schedule. Thus, this paper presents an
understanding of the relationship between an SME in the food industry and its suppliers.
By employing the Social Exchange Theory (SET) as the underlying theory, this study
highlighted the importance of SMEs in managing relationships with suppliers. This
study also revealed the roles that factors, such as trust, communication, commitment,
and bargaining power, play in the SME-supplier relationship. By employing qualitative
methodology and single case study method, this study indicated that this SME is aware
that maintaining a good relationship with suppliers can lead to the survival of the
business for a longer period of time, and enable them to benefit in terms of cost, quality,
and services in the future. Among all factors, loyalty under the commitment factor is
considered to be not unduly important to maintain the relationship with the suppliers
by the SME owner-manager. However, trust and communication are the most crucial
factors to maintain this relationship.
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