Main Difficulties Hindering Supply Chain Performance

Supply Chain Management: An International Journal
Main difficulties hindering supply chain performance: An exploratory analysis at Uruguayan SMEs:
Martin Tanco Daniel Jurburg Matias Escuder
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Martin Tanco Daniel Jurburg Matias Escuder , (2015),"Main difficulties hindering supply chain performance: An exploratory
analysis at Uruguayan SMEs", Supply Chain Management: An International Journal, Vol. 20 Iss 1 pp. Permanent link to this document:
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Main difficulties hindering supply chain performance:

An exploratory analysis at Uruguayan SMEs
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, todays 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.
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?
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.
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$2trillion-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
respondents 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. Companys 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,
Based on Transparency Internationals Corruption Perceptions Index 2009, The Economist Intelligence
Units Democracy Index 2008 and Heritage Foundations Economic Freedom Index 2010
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
telecommunications 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):
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
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 BadenhorstWeiss, 2011, Basnet et al., 2003, Thakkar et al., 2012, Tang and Musa 2011). These
8
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).
9
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, broadbased 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).
10
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
11
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 indepth 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
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.
With p=q=0.5 and a significant level of 95%.
12
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 KaiserMeyerOlkin index of 0.66, indicated that this
technique could be adequately applied (Kaiser, 1974)
13
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.
60% is usually considered as sufficient in social sciences.
14
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
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 todays 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
15
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
16
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,
17
Workforce and ITs & 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 todays 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.
18
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Authors
Classification
Blanke et al., 2014

Christopher and Peck 2004
Economic, Enviromental, Geopolitical, Societal and Technological

Process, Control, Demand, Supply and Environmental
Disruption, Delays, Systems, Forecast, Intellectual property,
Procurement, Receivables, Inventory and Capacity
Technological and Strategic
Relational and Performance
Operational, Network and External factors
Environmental, Organizational and Supply-chain related
Macro-environment, Extended value chain, Internal operational,
Functional support
General environmental, Industry and Firm-specific variables
Operational accidents, Operational catastrophes and Strategic
uncertainties
Environmental, Industry, Organizational, Problem-specific and
Decision-maker
Chopra and Sodhi 2004

Cousins et al. 2004
Das and Teng 1998
Handfield and McCormack 2007
Juttner et al. 2003
Marchese and Paramasivam, 2013
Miller 1992
Norrman and Lindroth 2002
Rao and Goldsby 2009

Table I - Categories of supply chain risk
Environmental
Telecommunications
infrastructure
Local warehousing
infrastructure
Supply-chain related
Workforce availability
Internal and external integration
Workforce productivity
KSA for managing the SC
Air transportation
Supply-side problems
Maritime transportation
Distribution-side problems
Systematic delays in own
production
Ground transportation
Organizational
Custom process and similar

paperwork
Government policies
Political environment
Macroeconomic and Market
instability
Table II - Difficulties hindering supply chain performance
Commitment of top
management
Information technology
Industry Size
< 20
20-100
101-250
> 250
Total
%
18.2
43.4
25.3
13.1
100%
N
18
43
25
13
99
Table III - Number of responses classified by industry size
D1
D2
D3
D4
D5
D6
D7
D8
D9
D10
D11
D12
D13
D14
D15
D16
D17
D18
D1
1,00
D2
0,48
1,00
D3
0,40
0,13
1,00
D4
0,37
0,12
0,67
1,00
Symmetric
D5
0,30
0,17
0,51
0,66
1,00
D6
0,16
0,03
0,43
0,40
0,49
1,00
D7
0,19
0,04
0,38
0,23
0,23
0,54
1,00
D8
0,32
-0,01
0,37
0,24
0,03
0,24
0,44
1,00
D9
0,28
0,14
0,28
0,10
-0,04
0,13
0,29
0,52
1,00
D10
0,13
-0,11
0,09
0,18
0,11
-0,03
0,11
0,33
0,27
1,00
D11
0,14
0,02
0,10
0,16
0,09
-0,09
-0,04
0,35
0,12
0,57
1,00
D12
0,18
0,04
0,19
0,25
0,33
0,28
0,03
-0,11
-0,09
0,12
0,01
1,00
Table IV - Correlation Matrix
D13
0,19
0,06
0,29
0,31
0,31
0,26
0,02
-0,08
-0,08
0,21
0,09
0,59
1,00
D14
0,21
-0,03
0,25
0,48
0,36
0,07
0,08
-0,05
0,00
0,43
0,38
0,25
0,53
1,00
D15
0,17
0,23
0,11
-0,01
0,18
0,03
0,05
-0,22
-0,09
0,18
0,03
0,36
0,39
0,35
1,00
D16
0,21
0,25
0,04
0,01
0,16
0,00
-0,05
0,03
-0,01
0,15
0,11
0,25
0,38
0,32
0,64
1,00
D17
0,16
0,15
-0,05
-0,05
0,12
-0,06
0,02
-0,01
-0,07
0,16
0,05
0,18
0,22
0,25
0,59
0,73
1,00
D18
0,19
0,10
0,11
0,07
0,15
-0,13
-0,11
0,10
0,05
0,25
0,17
-0,03
0,11
0,17
0,51
0,53
0,42
1,00
D1
D2
D3
D4
D5
D6
D7
D8
D9
D10
D11
D12
D13
D14
D15
D16
D17
D18
0,561
0,713
0,737
0,583
0,559
0,800
0,781
0,639
0,793
0,829
0,656
0,697
0,573
0,824
0,868
0,845
0,629
Table V - Simplified Rotated Matrix
5
0,723
0,788
Figure 1 Research Methodology
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.
Eigenvalue
5
0
1
2
3
4
5
6
7
8
9
10
11
Compone nt Number
Figure 3 - Scree Plot
12
13
14
15
16
17
18
Figure 4 - Difficulties group rating punctuation

Main Difficulties Hindering Supply Chain Performance

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Main Difficulties Hindering Supply Chain Performance

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Supply Chain Management: An International Journal

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