Even though the bibliography on SME risk management (RM) in general and for supply chains (SCs) specifically has increased recently, there is still the need for further research. Research on new types of risks like dynamic crises or risks associated with digital transformation (DT) are yet to be explored.
This paper by Johannes Paul Zeiringer, Susanne Durst and Stefan Thalmann attempted to empirically identify patterns based on which SMEs can be categorized in groups based on their risk behaviour. Then it conceptualizes a typology for SMEs with four distinct types of SMEs after a cluster analysis and concludes with some interesting results.
Let us find out more about this paper on supply chain risk management in SMEs prepared in parallel with the BePrepared EU project.
Research Methodology
As soon as the literature review was concluded, the researchers found that there is not enough research on supply chain risk management based on the different types of SMEs.
The quantitative research methodology was considered the best choice for gathering the necessary data to perform a cluster analysis from a sample of 181 European SMEs.
The data was collected through an online survey questionnaire targeted at SMEs in Austria, Estonia, Germany, Greece, Portugal, and Spain.
A cluster analysis was used to identify possible patterns to advance our understanding of supply chain management risks in SMEs. Finally, to verify the accuracy of the clustering process, the researchers carried out a canonical discriminant analysis.
Research Findings
Cluster typology of SME supply chain risk management
The clustering process produced four distinct clusters based on various items around risk management in SMEs.
Cluster 1 (Collective Risk eliminators)
Under this cluster, there are 68 firms (37.6%) mainly small enterprises with 10-49 employees and 2-10 million euros annual turnover. These firms view risks more as threats rather than opportunities, and they are characterized by their efforts to eliminate risks whenever they appear.
Cluster 2 (Collective playing it safe seekers)
49 SMEs in this group represent 27.1% of the sample. In this cluster, firms employ about 50-249 employees and annual turnover between 10-20 million euros. Businesses in this group are considered innovators, and they are primarily in the services sector like logistics, transport or others. They again view risks as threats rather than opportunities and face the lowest frequency of crises, probably since they assess risks more frequently as their impact is higher than others. They encourage risk-sharing among groups for risk minimization, and opt-in for risk insurance as their risks are expensive and difficult to control.
Cluster 3 (Collective risk-ignoring knights of fortune)
This group is full of micro-enterprises with the lowest annual turnover of 1-2 million euros and an employee number ranging between 1-9. Cluster 3 has 51 SMEs and 28.2% of the sample size. Unlike the previous ones, SMEs in this group see risks as opportunities rather than threats. However, they tend to ignore those risks because of their culture, and they are the least innovative businesses. They do not do much in assessing risks, and that is why it seriously affects their operations whenever there is one. They engage in risk transfer activities to SC partners and self-risk elimination over the group.
Cluster 4 (Collective neglecting imperturbable ones)
There are only 13 SMEs (7.1%) in this final cluster but with the highest annual turnover of about 100 million euros. They are also the ones with the number of employees approaching 250. These SMEs are unresponsive to risks despite seeing them as threats rather than opportunities. They do little risk assessments and do not perceive them as costs. They do not eliminate risks as a group, while risk sharing and risk insurance remain neglected.
Conclusion
The discovery of these four clusters for supply chain risk management in SMEs is the main contribution of this study. It shows that SMEs are not a unified front, but so many different perceptions of risks and risk attitudes lead to various risk management behaviours. The findings of this study are more substantial than other similar as it focuses on the differences that SMEs have with one another. In contrast, others examine SMEs as having the same characteristics. This study shows that risk management depends on the size of each company, but SMEs show a significant size variability.
The above is only a small example of the in-depth research done by researchers of the BePrepared partner organizations Tallinna Tehnikaulikool and Universitaet Graz.
Read the full research article called “Show Me What You Do and I Will Tell You Who You Are: A Cluster Typology of Supply Chain Risk Management in SMEs” for free on MDPI.