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Shahnorbanun Sahran, Department of Industrial Computing, Faculty of Information Science and
Technology, National University of Malaysia (UKM), Malaysia email: shah@ftsm.ukm.my
Masoomeh Zeinalnezhad, Department of Industrial Computing, Faculty of Information Science and
Technology, National University of Malaysia (UKM), Malaysia email: m.zeinalnezhad@gmail.com
Muriati Mukhtar, Department of Industrial Computing, Faculty of Information Science and Technology,
National University of Malaysia (UKM), Malaysia email: mm@ftsm.ukm.my
Quality Management in Small and medium enterprises:
Experiences from a developing country
Shahnorbanun Sahran, Masoomeh Zeinalnezhad and Muriati Mukhtar
SME sector is the backbone of the developed economies, which is regarded as the
engine of growth for economies all over the world. For developing countries, SMEs
often offer the only realistic prospects for increases in employment since they employ
the largest percentage of the workforce population. With the trend towards global
market orientation and trade liberalization, SMEs are moving towards implementing
quality systems. This empirical study aims to explore current implementation of quality
management tools and advanced improvement techniques in some Malaysian SMEs,
in order to understand what factors impact on how quality control is managed in these
organizations. The results and findings of the surveyed SMEs indicate that the
majority of Malaysian firms have not given due attention for developing their quality
aspects in the past. Consequently, for sustaining their competitiveness, they have to
embrace quality management techniques efficiently, as large organizations need
assurance of high quality goods and services from SMEs.
Field of Research: Management of small business
1. Introduction
Until the mid-seventies, SMEs had a minor role in economic development due to the
dominance of the mass production paradigm in the industry. After this period, this
paradigm was increasingly challenged, leading to large firms’ fragmentation,
unemployment growth and creation of new SMEs (Acs, 1992; cited in Fathian et al.,
2008). When in the early 1980s unemployment rose in many of the European
economies, the interest in SMEs development and self-employment (through micro
businesses) intensified. Many studies were undertaken during that period and a vision
for SMEs based economic growth was developed.
Many nations, particularly developing countries, have acknowledged the value of small
and medium enterprises, which are seen as the engine of growth for any economy
(Okpara, 2009). However, recent global changes have forced manufacturing
organizations across the globe to reconsider their management techniques and tools.
To provide empirical evidence on quality management practices, this study explores the
various quality improvement tools which were applicable and effective to the SMEs’
environments.
After an introductory section, characteristics, needs and importance of SMEs in the
economies will be described. Following that challenges and barriers which hinder SMEs’
growth will be investigated briefly. The rest of this paper is devoted to research
methodology and survey objectives and results of the survey.
2. Literature Review
2.1. Definition, Characteristics and Needs of SMEs
SME refers to small and medium enterprises. There are a number of definitions of what
constitutes an SME (Jafari et al., 2007; Fathian et al., 2008). Definitions of SMEs vary
between countries (Thassanabanjong et al., 2009; Mirbargkar, 2009; Ghanatabadai,
2005) with some using the number of members and others, business capital. However,
many developing countries have defined micro-businesses include sole proprietorships
and partnerships without employees, businesses employing fewer than five people and
other businesses employing five or more people but less than 50 people as small,
whereas medium businesses are defined as those employing fewer than 150 people.
In the manufacturing sector, SMEs act as specialist suppliers of components, parts and
sub-assemblies to larger companies (Gadenne and Sharma, 2009;Singh et al., 2010),
because these items can be produced at a cheaper price compared to the price large
companies must pay for in-house production of the same components (Singh et al.,
2010). Majority of SMEs have simple systems and procedures, which allows flexibility,
immediate feedback, short decision-making chain, better understanding and quicker
response to customer needs than larger organizations (Singh et al. 2008). The success
of SMEs basically depends on the figure of the entrepreneur-owner, who is personally
responsible for managing the activities of the company. SMEs are flexible and can
adapt quickly to changing market conditions, generate employment, and make a
significant contribution to exports and trade (Jain, 2007). Generally, in SMEs, decision-
making processes are not very formalized, rather are very centralized and based on the
experience, personal knowledge and intuition of the people in the key roles in the
company (Garengo et al., 2005).
2.2. The significance of SMEs
SMEs are found in every sector of the economy and play a vital role. They are crucial
for sustained, long-term growth, dynamism and employment (Thassanabanjong et al.,
2009). SMEs are regarded as one of the main driving forces of economic development,
stimulating private ownership and entrepreneurial skills (Gadenne and Sharma, 2009).
For developing economies SMEs often offer the only realistic prospects for increases in
employment and value added services or products (Mirbatrgkar, 2009). They generally
employ the largest percentage of the workforce and are responsible for income
generation opportunities (Singh, 2010). Small and medium enterprises are critical to the
economies of all countries (Akhavan and Jafari, 2008), and especially the developing
ones (Fathian et al., 2008; Gadenne and Sharma, 2009) as Okpara (2009) believed that
they were the engine of growth for any economy. As noted by Singh et al. (2008) and
Mirbargkar (2009), SMEs are considered as the backbone of economic growth in all
countries and they contribute in providing job opportunities, act as supplier of goods and
services to large organizations (Singh et al., 2008; Garengo et al., 2005; McAdam et al.,
2000). The importance of the small and medium industries will become more significant
as the country expands its industrial base in meeting the challenges of the new
millennium (Sohail and Boon Hoong, 2003).
2.3. Barriers to growth in SMEs
Although SMEs are playing an increasingly more important role, only a few has
achieved high growth. The main barriers to growth in the SME sector are niche players,
management resources, market intelligence and long-term strategy (McAdam and Kelly,
2002). Moreover, Khan et al. (2007) observed that SMEs face the resource constraints
in terms of finance, time, people and a general lack of knowledge and expertise relative
to current improvement methodologies and frameworks. Due to a lack of human and
financial resources that keeps SMEs from adopting new technological solutions and
innovative managerial practices, they could not improve their overall performances
(Grando and Belvedere, 2006).
Managers at small businesses face real competitive challenges. Most small ventures
lack the brand recognition, channel power, market reach, and resources that sustain
larger rivals. Lacking these weapons, small-business managers rely on agility, hard
work, and passion to gain market acceptance (Fawcett et al., 2009). These enterprises
often operate under the constraints of scarce resources, a flat organizational structure,
a lack of technical expertise, a paucity of innovation, reduced intellectual capital and the
like. The flat structure of SMEs leaves employees frustrated because they are often
unable to realize either their short- or mid-term career goals. In this setting, SMEs find it
difficult to employ and retain high-caliber staff.
3. Research Methodology
3.1. Survey Objectives
The survey methodology was used to obtain general overall information on application
and effectiveness of quality improvement tools and techniques among Malaysian
industrial SMEs. To achieve this, based on literature review and further information
gathered by interviews to experts, the authors developed a questionnaire comprising of
thirty questions in three parts: General plant information, current implementation of
quality management, and continuous improvement programs. The target population for
the study was 23 manufacturing firms in Selangor, Malaysia. The sample covered
organizations in a variety of industries ranging from plastic products (17.4 per cent),
metal products and precision parts (17.3 per cent), pharmaceutical (8.7 per cent), wood
products (17.3 per cent), food beverage (13 per cent), paper and printing (13 per cent),
chemical petrochemical (4.3 per cent), machinery and engineering (8.7 per cent).
3.2. Survey Results and Findings
3.2.1. Profile of the respondents
The majority (87 per cent) of the companies surveyed were SMEs with less than 150
employees and more than five employees. Moreover, 22% of the companies had less
than RM250000 annual turnover, while about half of them (47.8 percent) had a turnover
which was less than RM10 million and more than RM250000 and 17.4% had less than
RM25 million and more than RM10 million. Others (4.3 per cent) had more than RM25
million annual sales revenue.
The main focus of the target market in about seventy percent of the respondent
companies was basically only on domestic market and only a marginal number of the
companies had targeted international markets (Focus on only domestic market: 34.8%,
more focus on domestic market rather than international market: 34.8%, more focus on
international market rather than domestic: 17.4%, equally focus on domestic and
international market: 13% and there was not any plant that just focused on only
international market).
More than 90% of the sample target enterprises had operated more than five years, as
7.8% had operated for less than 5 years, 34.8% between 5 to 10 years, 17.4% between
11 to 15 years and others (39.1 per cent) had operated more than 15 years.
The majority (65.2 per cent) of surveyed SMEs was completely owned by Malaysians,
meanwhile 17.4% were joint-ventures and the remainder (8.7 per cent) was owned by
foreigners.
3.2.2. Level of Implementation of Quality Management Tools among Malaysian
SMEs
Section 2 and 3 of the survey questionnaire consisted of the current implementation of
quality management and continuous improvement programs. In these sections, the
respondents were asked to indicate their level of management and quality improvement
tools and techniques by using a scale of 0 to 4 for applicability and effectiveness. Table
1 illustrates the mean score for each management and improvement tools and
techniques.
Referring to Table 1, the most frequently applied management tools among Malaysian
SMEs are customer survey, quality assurance, benchmarking and management
training. While, MIS, policy deployment and employee survey had been applied, with the
least frequency.
Rank
Management
improvement tools
and techniques
Applicability
(mean)
Effectiveness
(mean)
Rank
Management
improvement tools
and techniques
Applicability
(mean)
Effectiveness
(mean)
1
Customer survey
1.78
1.61
7
Deming or PDCA
cycle
1.04
1
2
Quality assurance
1.69
1.78
8
Cross functional
team
1
1
3
Benchmarking
1.56
1.17
9
SDCA cycle
0.83
0.74
4
Management training
1.43
1.39
10
Employee survey
0.78
0.83
5
Quality auditing
program
1.39
1.35
11
Policy deployment
0.74
0.83
6
Job rotation
1.04
1.17
12
MIS
0.48
0.48
However, quality assurance, customer survey, management training and quality
auditing program were the most effective management tools in the respondents’
viewpoint (see Figure 1).
According to the questionnaires’ findings, over 69% of the surveyed plants never
entered for any kind of quality award, while 17% had local award, 9% had Malaysian
national award and the remainder had international quality award (13 per cent).
Table 1. Mean scores for applicability and effectiveness of management tools
Figure 1. Mean scores for applicability and effectiveness of management tools
Moreover, a total of 61% of the respondents had not implemented any improvement
program, yet. Considering the rapid changes in the world economy, they have to
embrace quality management concepts in order to improve their productivity and
competitiveness in international markets. It is, therefore, imperative for SMEs to meet
quality standards, as large organizations need assurance of high quality goods and
services from SMEs.
In order to find out the level of quality management understanding and knowledge of
respondents, the respondents were asked if they knew these concepts. A total of 52%
knew quality improvement activities and achieving quality certification, 43% knew
statistical quality control (SQC) concept and 35% knew any best practices and total
quality management (TQM). It could be seen that, in Malaysia, most managers still
experience a lack of knowledge with regards to the management concepts and they do
not recognize the need to compete in the pursuit of modern technologies. Table 2
confirms this fact, as it illustrates the percentage of current programs of operational
competence in these sample SMEs. It is notable that the percentage of e-commerce
usage and TQM in Malaysian firms is relatively low (only 8 per cent). This may be due
to the fact that SMEs have little financial and human resources and their owners-
managers often do not have the required strategic and global view of their enterprise to
conduct quality management tools.
Rank
Current program
Frequency
(%)
Rank
Current program
Frequency
(%)
1.5
Skills upgrading / training workers
48
9
Obtaining ISO14000 certification
13
1.5
Reducing product / service cost
48
9
Benchmarking
13
3
Improving capacity utilization
35
12
Implementing TQM
8
4
Obtaining ISO9000 certification
30
12
Using e-commerce
8
5
Increasing automation and
mechanization
26
12
Implementing business process
reengineering
8
6.5
Employing better forecasting systems
17
14.5
Adoption of management planning IT
systems
4
6.5
Seeking new regional and global
markets
17
14.5
Downsizing / retrenchment
4
9
Implementing just-in-time system
13
Figure 2, clearly, shows none of these quality improvement programs have
implemented in almost half of the sample SMEs. Meanwhile, in majority of firms (about
50 percent), skills upgrading / training workers and reducing product / service cost are
major current programs of operational competence.
Table 2. The frequency (percentage) of current programs of operational competence
competence
Regarding the usage and efficiency of basic improvement tools and techniques, Table 3
clearly demonstrates that the majority of participating firms had found Safety team , 5S
and house keeping and 5M checklist as the most applicable tools, whereas, poka –
yoke, suggestion system and TPM team were the least applicable and effective
improvement techniques among sample SMEs. It is worth noting that where 5M
checklist tool was more applied than statistical process control, SPC had a bigger mean
score for effectiveness.
Rank
Basic improvement
tools and techniques
Applicability
(mean)
Effectiveness
(mean)
Rank
Basic improvement
tools and techniques
Applicability
(mean)
Effectiveness
(mean)
1
Safety team
1.4
1.35
8
Visible management
1
0.83
2
5S and house keeping
1.3
1.3
9
Basic seven tools for
quality control
0.96
0.87
3
5M checklist
1.26
1.13
10
5 Whys
0.96
0.96
4
Statistical Process
Control (SPC)
1.17
1.26
11
TPM team
0.87
0.78
5
Waste elimination
1.13
1.07
12
Suggestion system
0.87
0.96
6
Brainstorming
1.07
1.04
13
Poka - yoke
0.39
0.39
7
Quality circle or small
group activities
1.04
1.09
Table 3. Mean scores for how applicable and effective are the applied basic
improvement tools
Figure 2. The frequency (percentage) of current programs of operational competence
Figure 3 compares the calculated mean scores for applicability and effectiveness of
basic improvement tools in the Malaysian SMEs.
And finally, Malaysian firms surveyed were asked if they had ever used any advanced
improvement tools such as new seven tools of quality control, statistic method, DOE
and etc. The mean score for applicability and effectiveness of these techniques are
summarized in Table 4.
Rank
Advanced improvement tools and
techniques
Applicability
(mean)
Effectiveness
(mean)
1
Quality function deployment
0.78
0.87
2
Design of experiment (DOC)
0.69
0.78
3
Statistic method
0.61
0.65
4
Motion study and time study
0.48
0.52
5
Work design or Ergonomics
0.48
0.48
6
New seven tools of quality control
0.26
0.35
Table 4. Mean score for each advanced improvement tools
Figure 1. Mean scores for applicability and effectiveness of management tools
As Table 4 shows, the most applied and effective advanced techniques in sample SMEs
were quality function deployment and design of experiment. While, new seven tools of
quality control was the least effective and applicable technique among Malaysian firms
surveyed. Overall, it is worthwhile to note that the mean scores for applicability of
advanced improvement tools are less than basic ones.
This may relate to resource constraints in terms of finance, time, people and a general
lack of knowledge and expertise relative to current improvement methodologies and
frameworks (Khan et al., 2007). A wide literature exist which shows that SMEs perform
worse than large companies, due to a lack of human and financial resources that keep
them from adopting new technological solutions and innovative managerial practices,
necessary to improve their overall performances (Grando and Belvedere, 2006).
4. Implications and Conclusion
A wealth of literature exists on benefits of SMEs to an economy. These include: creation
of jobs, reducing income disparities, the development of skilled and semi-skilled
workers for future industrial expansion, an excellent breeding ground for entrepreneurial
and managerial talents, the critical shortage of which is often a barrier to economic
development. To stimulate processes of qualitative growth in SMEs, this study
investigated the application and effectiveness of basic and advanced quality
management tools in Malaysian firms. The results highlighted that most managers still
are experiencing low levels of quality management implementation and they do not
recognize the need to compete in the pursuit of modern technologies. This could be due
to major problems to SMEs such as knowledge loss, human and financial resource
limitation, product design and development capability, training infrastructure and
networking. There is a growing need for advanced and codified quality managerial
practices. SMEs in Malaysia are expected to transcend from their present state through
training and skill development, in order to undertake a more important role in supporting
the requirements of Malaysia's industrialization process. This study was not entirely free
from limitations, especially because of limited sample size; the results must therefore be
treated with caution.
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