Supply Chain Strategies for Small Firms Facing High Demand Uncertainty and Seasonality

Abstract

Several innovations in operations strategy and supply chain management have taken place, including outsourcing, postponement, quick response and so on. However, research has focused on the large firm's perspective. This paper looks at the issues from the small supplier firm's perspective. Faced with high demand uncertainty, low margins, and very high working capital requirements, such firms are unable to fully take advantage of market opportunities. Studies of small firms often take a financial or economic perspective focusing on policy or the behaviour of small clusters, and emphasize the role of networks and the diffusion of practices and technology. This paper focuses on this issue from an operations perspective, and discusses five stages in the evolution of small firms that could help them to grow and gain higher margins. The main idea is that by designing operations and the supply chain better, and by improving production practices, small firms can simultaneously handle uncertainty, overcome problems of working capital, meet market needs, and command higher prices.