Logistics benefits and challenges: The case of SMEs in a South African local municipality

Abstract

Small and medium enterprises (SMEs) are the lifeblood of every economy. However, in order for them to sustain their role of contributing to the mainstream economy, SMEs have to implement effective strategies in all of their business operations, inclusive of logistics. The function of logistics is important to SMEs because it is the quintessence of the organisation’s relationship with suppliers and customers. The aim of this study was to investigate the challenges encountered as well as the benefits realised by SMEs during the implementation of logistics strategies. A quantitative approach using the cross-sectional descriptive survey technique was used in which a three-section questionnaire was administered to a randomly selected sample of 131 SME owners and managers in Emfuleni Local Municipality in Gauteng Province, South Africa. Data analysis was conducted using simple descriptive statistics. The results of the study reveal that financial constraints, the lack of logistics skills among the workforce, high costs of information technology and rapid technological advancements were the most important challenges to SMEs. Challenges related to inventory and environmental management emerged as the least relevant. Enhanced competitive advantage, increased sales and a reduction in operational costs were the most important benefits to SMEs. Reduction in labour turnover and innovation emerged as the least important benefits. Based on the findings, several recommendations were proposed.

Key Words: SME, benefits, challenges, Emfuleni Local Municipality