Challenges for Measuring Value Chain Relation Coordination of SMEs of the Textile and Apparel Industry: The Case of a Small Family Industrial Safety Footwear Firm of Ambato, Ecuador

Challenges for Measuring Value Chain Relation Coordination of SMEs of the Textile and Apparel Industry: The Case of a Small Family Industrial Safety Footwear Firm of Ambato, Ecuador

Marcela Karina Benítez Gaibor (Technical University of Ambato, Ecuador), Juan Pablo Martínez Mesías (Technical University of Ambato, Ecuador) and Ernesto Alfredo Jara Vásquez (Technical University of Ambato, Ecuador)
DOI: 10.4018/978-1-7998-1859-5.ch006

Abstract

The objective of this chapter is to propose a methodology for the measurement of value chain relational coordination of SMEs. For this purpose, the case of the measurement of relational coordination of the value chain of a small safety footwear company of Ambato, Ecuador is analyzed. The results of the analysis show that the measurement of relational coordination in the value chain of SMEs presents several challenges. Some of the challenges are the result of some characteristics of SMEs such as the lack of strategy, processes, and functions formalization. Other challenges are derived from the size and power asymmetry of chain members and the geographical distance between them. Five steps are proposed for the measurement of relational coordination of the value chain of SMEs.
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Introduction

A higher competition in the market due to globalization, product diversity and technology innovation has stimulated firms of the textile and apparel industry to collaborate in value chains in order to remain competitive in the global market. In Europe, the creation of dynamic enterprise networks for the development of products in multi-stage value chains is a tradition in the textile and clothing industry (Fischer & Rhem, 2004). Nike and Benetton are the most mentioned examples (Walters & Lancaster, 2000; Simatupang, Wright & Sridharan, 2002), together with Levi Strauss and Sport Obermeyer (Simatupang et al., 2002), of companies belonging to the textile and apparel industry that have improved performance through the integration and coordination of the value chain.

Small and Medium Sizes Enterprises (SMEs) play an important role in the economic growth of both developed and developing countries, contributing with over 50% to gross domestic product (GDP) and two thirds to formal employment (B20 Germany, 2017). Despite their importance for the domestic economies, the integration of SMEs in global value chains is low (International Trade Centre, 2017). Also, SMEs only account 34% of exports in developed countries, while in developing countries this percentage is much lower, 7.6% of total sales in the manufacturing sector (World Trade Organizations, 2016). Additionally, SMEs are 70% less productive than large companies in developing economies. A report elaborated by the International Trade Center (2017) shows that when SMEs are integrated in international chains, the competitiveness gap between small and large firms decreases with 1.25%.

The gap between small and large firms in productivity and integration in global value chains are attributed to the incapacity of SMEs to benefit of economies of scale, lack of financial resources, informality (World Trade Organization, 2016), the lack of qualified employees and difficulties to adopt new technologies (B20 Germany, 2017). And the policies recommended by G20 (B20 Germany, 2017), World Trade Organization (2016) and International Trade Center (2017) for the integration of SMEs in supply chains are focused especially on the reduction of the legal and administrative burdens, the access to credit and digitalization of SMEs. But, the Edinburg Group (2017) also recommends for the internationalization of SMEs the building of relationships with professionals and firms.

Building relationships are not only important for the integration of SMEs in global value chains, but also for the integration in local value chains. Firms have increasingly realized that value chain good performance requires working closely with suppliers and clients (De Waal, Goedegeburee & Hinfelaar, 2015). But, the integration of local production systems in value chains requires coordination mechanisms developed by the local actors in order to establish proper cooperation relationships for the creation of an environment that enhances innovation (Velásquez-Durán & Rosales-Ortega, 2011). Coordination mechanisms are even more important in the integration of the value chain of the textile and apparel industry, because generally it is characterized by a volatile product demand and the need of quick planning and production (Fornasiero, Tesscaro, Scarso & Gottardi, 2009; Macchion, Danese & Vinelli, 2015).

Gittell (2002) has proposed a relational coordination theory based on two types of dimensions: communication and relationships. According to this theory, coordination that takes place through high quality communication supported by shared goals, shared knowledge and mutual respect empowers organizations to achieve the desired outcomes.

Key Terms in this Chapter

Ambato: The capital of the province of Tungurahua, located in the center of Ecuador.

Coordination: The management of dependencies between tasks.

Value Chain Relational Coordination: The management of communication and relationships with the purpose of the integration of interdependent activities in the value chain.

Relational Coordination: The management of communication and shared goals, shared goals and mutual respect with the purpose of task integration.

Value Chain: A system of interdependent activities performed by firms with mutually defined goals.

Supply Chain: Supply chain and value chain are used interchangeably.

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