Relationship Between Cost And Logistic Practices In Small And Medium Enterprises

African Journal of Business Management Vol.5 (4), pp. 1245-1252, 18 February, 2011 Available online at http://www.academicjournals.org/AJBM ISSN 1993-8233 ©2011 Academic Journals

Full Length Research Paper

Relationship between cost and logistic practices in small and medium enterprises: A case study of Queretaro, Mexico
R. M. Campos-Garcia*, M. A. Garcia-Vidales and O. Gonzalez-GomezDivision of Research and Graduate Studies, Faculty of Engineering, Universidad Autonoma de Queretaro, Cerro de las Campanas s/n,CP 76010, Queretaro, Qro., Mexico.
Accepted 26 November, 2010

Small and medium enterprises are the main employment source throughout the world; consequently they have a great influence on national economies. For these reasons, to study the logistics of small and mediumenterprises is important. The objective of this research is to understand the logistics practices of small and medium enterprises in the state of Queretaro in Mexico, and also to ascertain if a relationship between logistics practices and logistics costs exists. A total of 99 small and medium enterprises were surveyed. The survey consisted of two parts; the first part was about logistics costs andthe second about logistics practices, which was further divided into: purchases, sales, production, storages and transport. Data analysis was carried out using commercial statistical software. Results show a positive relation between logistics practices and logistics costs and how logistics practices can dramatically affect the final costs in small and medium enterprises. Key words: Logisticspractices; small and medium enterprises, logistics costs. INTRODUCTION Logistics is a relevant and essential business activity used for all enterprises throughout the world; it aids in determining if products arrive to the customer on time containing the requested quality requirements and at the lowest possible cost. Therefore, effective logistics practices may represent competitive advantages for theenterprises using them (Schulze, 2009; Lin et al., 2001). A company can generate a competitive advantage if it succeeds in obtaining a distinction over its competitors that is recognized and valued by the overall market. Small and Medium Enterprises (SME’s) represent the global segment of the world economy as they provide the largest number of economic units and employ the most people. Thereforethe relevance of these businesses and the need to strengthen their performance is crucial because of the way they affect to the overall behavior of national economies. In fact, international references state that 90% or more of total economic units consists of SME’s (INEGI 2006). In the case of Mexico, SME’s generate about 64% of the employments in the country and 40% of the Gross Domestic Product(GDP) (CIPI, 2010). Despite this outstanding importance inefficient logistics and other factors lead to 50% of these enterprises going bankruptcy in the first year and the 75% in the second year (Duran, 2010). The aforementioned data clearly demonstrates that it is very important to improve the logistics practices used by these enterprises in order they remain in the market. There are many reasonswhy these companies fail; according to Palomo (2005), the primary reasons for the bankruptcy of SME’s in Mexico appear to be: administrative problems (43%), fiscal problems (16%), inability to recognize requirements (15%), poor marketing (11%), errors in input

*Corresponding author. E-mail: montse.campos@uaq.mx. Tel: +52 442 279 5040. +52 442 192 1200 ext 6023.

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Afr. J. Bus. Manage.and output (8%) and lack of financing (7%). Another important investigation shows that some of the main problems with logistics are associated with purchasing inputs, lack of purchasing power, high operating costs, contracted market, lack of access to credit, of raw materials, of financial liquidity and others that represent higher costs and losses for the enterprises (Jurado et al., 1997)....