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Chapter 1

INTRODUCTION

The Problem and Its Background

The performance of an organization these days may be greatly impacted by

supply chain Management (SCM) that may lead to a crucial part of many company

operations. Since, these micro, small, and medium businesses or the MSMEs are very

important to our global economy and it can contribute significant economic growth,

employment and innovation. When it comes to running their businesses particularly

SCM it might end in delays of stocks and losses if this may not address properly to the

business owners. This research study is significant because it will help both suppliers

and businesses to identify the aspect that they should work where SMC may effectively

help to enhance quality and boost satisfaction to the customer.

In India, the MSME industry continues to show low when it comes to technology

in terms of global competition. They are dealing with issues especially in different types

of business, but through that in recent years there has been significant changes in the

business environment. MSMEs can be equitable if this would be managed in a right way

and all businesses big or small must maintain a competitive advantage and gain

sustainable profit (Siddiqui, 2015).

In the Philippines, Canare and Francisco (2019) highlighted that considering

small and medium businesses is only two-thirds of the economy of the country and

having a lack of market opportunities that may lead to unproductive works. Given the
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common issues about insufficient infrastructure, low branding and marketing, not

enough resources, unable to compete and having failures in operations.

Within the municipality of Nabunturan, because there are many entities that have

been established in this municipality and they also suffer from a lack of competitiveness,

strength and other challenges. With this, the researchers were motivated to conduct a

study in order to assess whether there is an impact on supply chain management on

operational performance in MSMEs to determine what are the areàs of strategies they

will do in terms of competition to improve their business despite this competition in

MSMEs entity.

Review of Related Literature

This includes studies from various authors on their notions and ideas that are

relevant to the study's variables. The independent variable is supply chain management

and the indicators are supplier customer relationship management, information sharing

practices, logistics management, and outsourcing practices. Supply chain management

includes managing the distribution of products and services from the starting point

stages of manufacturing to their final transportation to customer (Lu and Swaminathan

2015). The dependent variable is operational performance and the indicators are the

quality performance and cost performance. Operational performance refers to the

measurement used how effectively and efficiently a business entity performs its

procedure and processes (Rompho, 2018).

Supply Chain Management. A supply chain management aligns supplier-

customer relationship, information sharing, logistics practice, and outsourcing practices.

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When these factors align, they attract greater interest and foster deeper partnerships

with merchandisers, focusing on quality over cost. They engage suppliers and

customers in problem identification and quality improvement activities (Zheng, Zhao and

Stylianou, 2013).

The purpose of supply chain management is to connect suppliers, distributors,

and customers into an individual, continuous process. The supplies, retailers,

transportation, manufactures, warehouses, and customers are involved in a dynamic

but constant flow of information, funds and product. Effective integration leads to better

coordination among various supply chain partners which improves feedback capability

and reduces cost (Kushwaha, 2012).

In business to achieve their goals and by sharing data, supply chain

management is the most important. When implementing SCM, operations managers

face a lot of challenges particularly in developing nations like South Africa. Managers of

SMEs must be aware of the major barriers that strive to minimize them and strengthen

their competitiveness (Dubihlela & Omoruyi, 2014). Limited access to financial

resources, a lack of facilities, and a lack of skills are some of the problems that SMEs

face, all of which contribute significantly to their high financial performance. Adopting

supply chain management techniques to strengthen SMEs long-term and functional

capabilities is one of the possible fixes to these functional challenges (Loury-Okoumba,

2018).

White (2018), stated that a lack of controlling, usually multinational firms that

have an impact on global import and export markets and overpopulated micro
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enterprise sectors are problems in many emerging economies. MSMEs have been

slower to acknowledge how an integrated supply chain may lead to significant

improvements in business processes, leading to better quality services, increased

efficiency, and cost savings whereas large firms have recognized the benefits of supply

chain management (Chin et al., 2012).

SCM practices are widely implemented in MSMEs to ensure collaboration among

parties for mutual benefit and streamlined production. Managing these practices is

crucial as they enhance production for both the supply chain and MSMEs. This, in turn,

helps preserve market share and strengthen the supply chain (Kaufmann et al., 2016).

In addition, buyer power often creates challenges such as unfair relationships,

inefficient oversight, and inflated prices. These issues can stifle supplier development

and growth, limiting their potential. As a result, the overall performance of both suppliers

and the supply chain may suffer. Addressing these difficulties is crucial to maintaining a

healthy and productive supplier relationship (Martadisastra, 2014).

Furthermore, Mukhsin’s (2017) stated that in supply chain management,

alignment of goals is the action by which supply chain participants understand particular

objectives to meet. It is recognized as an important aspect of supply chain connection.

According to (Al-Shboul et al., 2017), effective and flexible supply chain management

(SCM) practices are those that maximize supply chain integration, including

coordination, cooperation, collaboration, and communication for customer satisfaction, if

the business can adjust to changes in the environment. The way to successful

performance is effective collaboration among the various SCM practice dimensions.

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Gandhi (2016) highlights the following metrics that can be used to measure a

company’s performance such as net income, profit or investment, market share, return

on assets, total production cycle time, sales growth, net profit growth, productivity ratio,

savings costs, alternating inventory, financial liquidity, and the overall competitive

position of businesses in the industry. Still, we can only see some of these metrics

depending on the company.

Supplier-Customer Relationship Management. Supplier relationship

management and customer relationship management showed significant effect to the

operational performance of the microfinance banks in Nigeria. The study shows

financial health, market performance, sales performance, and operational performance

are all firmly correlated with supplier relationship management and customer

relationship management. Implementing supplier-customer relationship management

into the organization can boost businesses performance if accomplished properly

(Nwachukwu & Hieu, 2021).

According to the study of Vanichchinchai (2021), customer relationship

management has drastically enhanced each performance covering the operation of the

industrial businesses in Thailand. Moreover, supplier relationship management has a

positive direct boost on customer relationship management but it has shown no positive

impact to the supply performance. However, even though it has no direct impact to the

supply performance, it has an indirect positive to the supply performance through the

impact of supplier relationship management to the customer relationship management.

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According to the research by Kim and Swink (2021), supplier relationship

management, alongside their own operational performance, can experience significant

improvements and disadvantages from customer relationship management. Centering

the attention to the supplier relationship can achieve higher market share and

profitability as relationships with customers grow. Proper implementation of supplier-

customer relationship management gains market expansion and it will automatically

gain operational performance of the supply chain.

Customer relationship management can be derived into customer involvement in

the organization’s improvement in terms of sales and marketing, operational

performance, and product innovation. Customer involvement is one of significant things

to consider because it creates opportunities for organization to enhance their innovation

capabilities which can lead to increase market share that eventually boost operational

performance (Nazari-Shirkouhi et al., 2015)

Supplier-customer relationship management emerged as one of the critical

factors for the company to boost both productivity and operational performance

(Dirgiatmo et al., 2024). The links that connect company and supplier will create the

right set of circumstances to increase company’s performance and also it will have

opportunities to reduce costs such as overhead costs, direct costs, and raw materials

costs. Furthermore, it will provide good quality of goods that is also significant in

speeding up the delivery to the customer.

According to the research conducted by Mwangi (2017) through supplier-buyer

relationship management established in the organization, companies can ensure

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various positive effects to the different departments in the organization. This also

captured the idea of encouragement of buyers to participate in the improvement of the

operational performance regarding sales and marketing.

In addition, there is a significant effect to the operational performance when

implementing strategic supplier relationship management as a way of entity to increase

the quality of goods produced. Supplier relationship and customer partnership seen as

positively significant influence reactivity of the supply chain. It also positively affects

operational performance of the entity because of the collaboration in addressing

challenges and concerns arising in customers and seeking honest feedback of goods

and services offered (Nenavani & Jain, 2022).

Moreover, the research conducted by Onyango et al., (2015) showed that

internal operational performance of Kenyan manufacturing companies is enhanced by

supplier-customer collaborative decision-making and supplier communication

administration. This is also indicated that business organizations using successful

oversight of supplier relationship management, effective implementation of supplier-

customer interactive decision-making, and strong communication systems are going to

result in a boost of operational performance.

According to Al-Abdallah et al., (2014) in order to maintain a stable and

dependable flow of deliveries in the modern market today’s fast-changing and very

competitive, businesses must keep managing supplier relationships because it plays a

key role for achieving operational performance. And to be able to achieve sustainable

business and effectively, supplier relationship management must provide value for the
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both parties, combination of the buyer and the supplier. It was found out that procedures

for managing suppliers and customers have a beneficial impact on both supply chain

strategies and overall competitive performance.

Besides, effective communication comes from building a strong relationship

between buyers and suppliers, enabling both supplier and buyer to link their objectives

and to minimize miscommunications, which can help in enhancing operational

performance. Building business integrity provides the flexibility to quickly respond to

changes in demand or unforeseen challenges, minimizing the risk of supply chain

issues. Buyers and suppliers can work together on innovative creation, minimize

processes, reduce delays on operation by allowing both parties each other’s

advantages and disadvantages, which eventually improves operational performance

(Corsten et al., 2011).

As stated by Poku (2022), in buyer-supplier relationship, supplier relationship

management has become significant because of the dynamics present within the

context of the global supply chain. Cost capability and delivery capability must be

standard in order to attain the boost of firm performance. It creates high-quality goods

and services that can provide an international standard of processes to ensure a firm's

profitability.

As extinguished by Emon et al., (2015), supplier-customer relationship

management greatly contributes to the cost efficiency of the company and it also plays

a critical role in optimizing supply chain performance. Cost effectiveness in the supply

chains of Bangladeshi companies is strongly and significantly driven by supplier

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collaboration and long-term supplier relationships. It can also enhance operational

performance of the company as it creates through collaboration can help better

forecasting events, sharing market trends, and timely facts about the major challenges

in productions or logistics.

Through enhancing supplier-customer services by providing high end quality of

goods and services, on-time delivery of products, consistent when it comes to the

quality, prices, and integrity, and maintaining reputation towards suppliers and

customer, it ensures in attaining improved operational performance. It must be

managed consistently and effectively because otherwise it will lessen the efficiency of

services and the profitability of the organization. By focusing on these factors,

businesses can gain advantage towards competitors, building more supplier-customer

relationship, and ensuring continuous improvement (Wambani, 2017).

Practicing supplier relationship management helps the organization gain

profitability and boost organizational performance. The researcher found that there is

great opportunity to improve performance of the organization through proper execution

of supplier relationship management strategies and it is recommended that businesses

should show commitment in this field. This will also help the organization to improve

chances to survive in the most competitive global market (Kosgei et al., 2016).

As claimed by Charles and Omwenga (2018), the most profitable ways to bring

products to the markets is to consider reducing cost and improve efficiency of the

delivery. In order to achieve this idea, supplier relationship management is one of the

means in order to attain optimization of operational performance of the business.

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Supplier selection, supplier involvement, supplier development, and supplier evaluation,

these are the factors you must consider in the supplier relationship management in

order to be an advantage to the businesses to gain competitive edge and enhance

operational performance.

Further, Dza et al., (2024) stated that supplier-customer relationship

management significantly impacts the operational performance of the business. Utilizing

supplier-customer relationship management through supply chain optimization

enhances performance monitoring, drives continuous improvement in products and

services, ensures the delivery of high-quality products and standard services, and

fosters strategic alignment between both parties. This ensures achievement of the goal

of the business to boost operational performance if these are properly implemented by

the management.

Furthermore, transactions in the local currency of the supplier can be facilitated

by multi-currency accounts, which eliminates the need for ongoing currency exchange

(Prymostka et al., 2024). Maintaining long-term business relationships may encourage

partners to negotiate prices, so building strong relationships with suppliers can also act

as a buffer against inflation. Additionally, keeping a flexible pricing strategy can aid in

responding to changes in costs without having a major negative effect on profit margins.

Information Sharing Practices. In the words of Marinagi et al., (2014), that

information sharing is one of the ways to improve operational performance. it enhanced

decision-making in reporting accurate and timely information within the organization.

Those in charge of governance can also utilize this strategy to make factual and data-
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driven decisions to gain a competitive edge in the market. It also mitigates information

risk by reducing uncertainty of the information made available to the users or

management.

Information sharing is one of the essential components of a successful supply

chain management. It provides better communication within the organization; it also

brings better customer services and customer satisfaction as it fastens the response

time of the employee to the customer that will result in better customer responsiveness.

It is also correlated to cost efficiency as it brings effective utilization of resources such

as information, technological, and financial resources (Ye and Wang, 2013).

According to Yang et al., (2021) that information sharing has a positive impact on

the operational performance of the organization. Management can improve strategic

planning to help the organization achieve specific goals and objectives. One of the

benefits of properly implementing information sharing is decreasing errors and lowers

uncertainty of events. It contributes to a significant increase in operational performance

as it enhances the effectiveness and efficiency of supply chain management in the

organization.

In addition, companies are always seeking to enhance their organization

performance through strategic planning and making the most out of the resources.

Information sharing is seen as one of the best ways to boost operational performance

through a higher level of information exchange between the responsible party or the

organization and its customer. Effective information sharing enables the company to

streamline the operation within a specific area of responsibility. It also promotes

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innovation by implementing secure and structured communications channels (Pérez-

López et al., 2022).

Further, Bondü et al., (2013) stated that businesses face numerous burdens on

suppliers and other parties in the supply chain to invest in information sharing and

process integration to improve supply chain performance. One common strategy for

addressing inventory network coordination problems under abnormal data is to use

screening contracts. In this context, a main suspicion is that directors lacking distinct

motivations would rather use their privileged information strategically than disclose it

transparently.

Besides, information sharing and supply chain structure streamlining are

important ways to reduce vulnerability and further increase supply chain performance,

the external environment's vulnerability is a crucial factor impacting how the supply

chain is presented. A numerical model on the relationship between environmental

vulnerability, supply chain structure, data exchange, and supply chain performance

were established from the perspectives of navigation and global streamlining (Zhang

2019).

Furthermore, to stay ahead of the competition and stay relevant, every firm will

do everything in its power to improve efficiency, effectiveness, and rapid,

straightforward support. It will also constantly develop information sharing as it enables

smooth cooperation between supply chain those involved, saving on inefficiencies and

delays (Lotfi et al., 2013).

In addition, the flow of information is necessary to be done properly for controlling

the supply chain management activities and operations in an optimum manner.

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Information Sharing aids the gaps that occur in the supply chain by regulating the

information flow and communicating key messages about safety, stock management,

demand management, stock levels, reordering, and material resource planning.

Information plays a crucial role in these processes to achieve a well-integrated supply

chain; enhances partner collaboration, lowers uncertainty, speeds up order fulfillment,

lowers inventory costs, and boosts customer satisfaction by ensuring timely and

dependable product delivery (Sundram et al., 2020).

Logistics Management Practices. Effective logistics management strategies

play an essential part in increasing productivity, which results in profitability. Businesses

can increase value by improving supply chain processes, lowering operational costs,

and improving delivery times. Majid et al., (2024) stated that prioritizing efficient

transportation not only improves overall effectiveness but also ensures higher levels of

customer loyalty, encouraging long-term corporate success. Moreover, disasters

frequently strike unforeseen, making it difficult to sufficiently establish humanitarian

activities in advance. However, humanitarian logistics play an important role in providing

real-time information regarding various circumstances of crisis. This timely data allows

organizations to respond rapidly and effectively, tailoring their strategies to the changing

needs of affected people.

Further, Korir et al., (2023) stated that humanitarian responders can better

negotiate the complexity of disaster relief by embracing technology and creative

logistics solutions, resulting in more effective and timely aid in times of crisis.

Operational efficiency has a significant impact on business performance, operating as

an essential driver of profitability, decrease in costs, and overall competitiveness.

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Businesses that streamline their operations, reduce waste, and optimize resource

allocation can produce more output with the same or less input. Increasing operational

efficiency frequently results in higher product and service quality, which promotes client

satisfaction and loyalty. To promote environmental sustainability and green logistics

management practices, organizations must commit to implementing eco-friendly

initiatives. Businesses that priorities sustainability can not only reduce their

environmental footprint, but also save capital, improve operational efficiency, and

improve their reputation among ecologically concerned customers (Rutto and Omwenga,

2024)

Furthermore, Sarpong et al., (2024) stated that organizations should optimize

their supply chain operations by using data analytics and logistics software to improve

cargo integration, transportation scheduling, and inventory management, reducing

waste and energy usage. Manufacturing and delivering commodities require significant

work and time, which becomes more severe by restricted transportation routes as well

as poor infrastructure, impeding trade among countries dealing with large amounts of

goods. Mathiyazhagan et al., (2022) stated that technological developments have not

only enhanced the quality of economic operations, but also greatly increased the

volume and complexity of trade transactions, allowing for smoother and more effective

international transactions.

Moreover, Chinalu et al., (2024) technological breakthroughs and increasing

demands from customers, businesses must negotiate complicated supply networks with

ease in order to optimize operations, decrease costs, and improve satisfaction with

consumers. As the environment evolves, the ability to efficiently manage the logistics
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and supply chain will remain a crucial factor of success for organizations aiming to

prosper in an increasingly competitive industry.

In addition, by comprehensively understanding and effectively addressing risks

through robust management practices and innovative solutions, logistics companies can

significantly strengthen their resilience, elevate performance levels, and solidify their

market position. Quliyev (2024) stated that embracing a proactive approach to risk

management not only mitigates potential disruptions but also fosters adaptability and

agility in an ever-evolving industry landscape. This strategic focus empowers logistics

firms to optimize their operations, enhance customer satisfaction, and maintain a

competitive edge in the marketplace. Enhancing the quality system for management in

the transportation and logistics sector is crucial for increasing satisfaction among

consumers, lowering costs, and optimizing efficiency in operations.

As stated by Moskvichenko (2024) organizations in the industry can create a

strong quality management system that supports business excellence and

competitiveness by focusing on important areas for improvement, forming quality control

teams, establishing a quality strategy, and completing a gap assessment. Urban

logistics promotes functional efficiency, strengthens organizational reputation, improves

service delivery timeliness, and maximizes resource utilization in fast food restaurants.

As claimed by Wanga (2022) good urban logistics strategies play in driving

operational excellence and competitive advantage in the fast-food business. Moreover,

develop and execute realistic ideas that address current challenges whereas also

increasing long term resilience in operations. According to (Maina and Dr. Mirriam

Thogori, 2023) cultivating a culture of continuous enhancement and utilizing data-driven

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insights, we may guarantee not just the solution of present challenges, but also the

sustained development and stability of our business operations in the face of

foreseeable uncertainty.

Strategic logistics management can greatly improve operational performance by

reducing procedures and lowering costs, ultimately increasing profitability. Furthermore,

optimized logistics increases delivery times while also increasing consumer

contentment, promoting brand loyalty and return business. Sustainability has become

an important concern, prompting businesses to integrate eco-friendly practices within

their logistics operations. From reducing packaging waste to optimizing delivery routes

for lower carbon emissions, the emphasis on sustainability is reshaping logistics

strategies and aligning them with consumer values (Huang et al., 2016)

Further, Marjan et al., (2022) stated that businesses can attain the maximum

financial viability by investing in workers' knowledge acquisition and non-financial

actions that include satisfaction with work, creativity, and actively seeking market

opportunities. Furthermore, overall quality management procedures have a beneficials

influence on SME financial performance through non-financial performance.

Outsourcing Practices. The transfer to management of an association's

capabilities to a third-party supplier for services that were recently performed in-house is

known as outsourcing. After analyzing its center activities, businesses often decide to

outsource some of their capabilities. Many associations have chosen to reevaluate

some of their administrations in order to increase the performance of their current

systems; they are also driven by the desire to reduce overheads in order to concentrate

on their primary business activities (Supalak, 2010).

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Furthermore, Lawrence (2011) explained that procurement outsourcing is the

practice of assigning specific, important procurement tasks related to sourcing and

supplier management to a third party, possibly in order to lower overall expenses or to

help the business focus more on its strengths. The most common activities that are

outsourced are usually the groups and vendor management of indirect goods and

services (indirect procurement). However, Big businesses are expected to increase the

extent of procurement outsourcing in the upcoming years, according to Hackett (2011).

In addition, sustainability depends on a particular agreement that is flexible

enough to deal with evolving business models throughout the course of the contract, as

the process framework makes clear. To guarantee that the jointly agreed-upon goals

are fulfilled, active performance, service, and communication management are

important. In outsourcing firms, suppliers and their customers often fail to recognize the

complexity of the resources and the level of interaction needed to effectively manage a

structured relationship. It indicates that customers and providers are not interacting

effectively. Due to ongoing contract management, it is usually either nonexistent or very

minimal (Hila & Dumitrascu, 2014).

Moreover, in order to prevent information leaks or an error of company privacy,

management of manufacturing firms should take legal precautions against the third

parties that are providing the services or products being outsourced. In order to improve

their procurement outsourcing practices, management of manufacturing firms should

benchmark against the competitors in the market (Kinyanjui, 2014). In addition to having

an impact on expenses, the sourcing strategy also establishes some restrictions that a
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business sets for its activities. Businesses are more inclined to outsource operations

and deemed more marginal than to retain internal transactions that are identified to be

part of their activity (Monczka et al., 2010)

On top of that, in international supply chains, outsourcing decision-making is

essential to a company's ability to compete. Different sectors should use different

outsourcing tactics, and successful outsourcing depends on having positive working

relationships with both suppliers and customers. The ability of suppliers to produce on

schedule, long-term contract strategy with suppliers, supplier evaluation, and supplier

quality of products are all significant challenges in supplier management (Wee et al.,

2010).

As claimed by Mwichigi and Waiganjo (2015) that outsourcing administrative and

financial services can significantly reduce operating costs. This approach also

contributes to improved operational efficiency. By outsourcing, companies can provide

more effective services while ensuring the optimal allocation of resources.

Supported by the study of Kenyon et al. (2016), outsourcing production is one

effective strategy to enhance operational performance. It provides opportunities to

enhance marketing of the products, increased supply chain competitiveness in the

global aspect. Production outsourcing holds a value that has a power to gain a faster

competitive edge as it increases efficiency and productivity of the entity and also

contributes to profit.
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Further, Zack (2015) stated that the act of re-evaluating an action (sourcing

governance) and the geographic or locational plans to achieve (sourcing proximity) are

two important sub-choices that should be divided into the re-appropriating option when

adopting the outsourcing procedure. Before making an outsourcing decision, an

organization should evaluate an outsourcing movement and should evaluate the value

of the operation. The local or foreign location is the focus of the sourcing connection.

The purpose behind outsourcing is the cost of reserve funds, quality improvement,

focus on core business, and access to the resources that cannot be accessed internally,

development in worldwide information, minimization of risk, access to big capacities,

access to current innovation and skill (Brown & Wilson 2015).

Besides, outsourcing is becoming widely used but it’s not exactly a new discovery.

According to a leadership poll, businesses are increasingly concerned currently with

strategically moving their IT infrastructures from an internal to the external model.

Seventy percent of all infrastructures will be outsourced in the next five years stated.

Years past most people thought that outsourcing had a bad effect on customer service.

In the last three years, there has been a rise in organizations’ interest in outsourcing

operations to support various office functions and processes in areas like IT, HR, and

procurement. Companies are now aware that they can get the full financial benefits of

outsourcing without sacrificing the quality (Von Maltitz, 2014).

Further, Isaksson and Lantz (2015) argued that some companies choose to

contract out key functions within their production chains to third-party vendors not due to

concerns about relative capability but rather because they can use their resources to
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leverage the chain’s rents while depleting their asset base. Manufacturing, purchasing,

warehousing, sales force, and customer service are the activities that are closely

connected to the main operations. (Maku & Iravo, 2013) stated that the challenges of

outsourcing may be include of loss of control over the outsourced services, loss of

reliance on suppliers, loss of confidentiality of essential information and that could fall

into the hands of competitors and giving a poor quality of certain products like some

problems of the outsourcing service, and cases of staff strikes may have an impact on

the outsourced company from the provider company.

Many Kenyan businesses choose to outsource their goods and services to

external partners, an organization typically decides to outsource critical but secondary

processes while maintaining control over critical and important. As outsourcing can

boost customer satisfaction, lowers costs, and most importantly frees up management

to handle more important issues by delegating secondary duties to external service

providers (Sivakumar, Kannan and Murugesan, 2015).

Operational Performance. According to Truong et al., (2017), supply chain

management has both direct and indirect impact on the operational performance of the

business organization. By implementing practices such as risk management and

resilience, supplier-customer relationship management, and customer focus, the entity

can generate a significant boost of the operational performance of the entity. This

concept will not only boost the entity’s operational performance but it will also help the

entity to gain competitive advantage towards global competitors as supply chain

management can make the entity sustainable.

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Furthermore, a company's bottom line can be significantly enhanced by

establishing in place a performance improvement program. Considering its simplest

form, this operational performance measurement technique provides an effective

outcome. Managers may swiftly put into action the principle, which can help them to

control the market, enhance performance, boost their own productivity, and ultimately

efficiency of the operation. In the context of operational performance measurement,

increasing total productivity involves figuring out how to improve outcome in relation to

the input across all organizational resources. Implementing operational performance

measurement effectively ensures the company to get the best result they want (Kaydos,

2020).

In addition, the relationship between total quality management practices and

operational performance can be defined as deeply complex. Leadership, people

management, and customer focus are some elements of the total quality management

that significantly affect the total operational performance of the entity. It also enhances

the product quality, provides customer expectation, and also streamline the operations

of the entity. It will also provide the entity competitive edge as it minimized the cost

while maintaining the quality of the goods or services provided (Oakland, 2014).

As stated by Baird et al., (2011), there are so many factors affecting operational

performance of the company but they found out that teamwork and respect for people

are the key role components to achieve high operational performance. Organizational

culture plays a significant role also in total quality management by contributing

achievement to the desired result to the operations of the company. Respect creates
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greater innovation and creativity of the employee. Employees are more likely to be

productive and efficient if they are contributing or being part of the innovation of the

company and to be able to achieve that psychological safety, it must be that employees

are respected for being who they are.

Furthermore, operational success has not included financial issues, such as

asset management. The delivery of goods and services to consumers, cost

containment, and maintaining improved quality levels are all necessary for the supply

chain to function efficiently. Businesses that are not aware of the success elements for

maintaining low supply chain costs may find themselves in a precarious scenario and

ultimately fail. Lower supply chain costs are necessary, as is a better standard of quality

and reliability, incorporation of flexibility, and responsiveness (Wu et al., 2014).

As claimed by Tarigan (2018), performance refers to the results an organization

achieves over a specific period, evaluated by both the quantity and quality of its outputs.

Operational performance measures how effectively an organization’s personnel carry

out their responsibilities, meeting the established standards. It includes key factors such

as client satisfaction, product quality, and productivity within the organization.

Additionally, operational performance is closely linked to the company’s growth,

innovation, and its ability to sustain long-term financial success.

On top of that, operational performance was chosen as one of the variables for

several reasons. First off, a lot of research is focused on operational performance since

it is a key facilitator of supply chain performance. Second, the digital supply chain may

have an impact on operational performance, a measurable variable. Thirdly, it is

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undeniable that a number of the performance measuring systems now in use depend

heavily on operational performance. It stands out from other performance metrics

because of its unique focus on aspects such as the cost, responsiveness, agility, and

reliability of the supply chain, rather than the financial side of a firm’s performance (Yu

et al., 2013).

Quality Performance. Tarigan (2018) asserts that an entity’s operational

performance is significantly impacted by the quality of the products it offers. Considering

these factors; process innovation, product innovation, and organization commitment, the

entity can utilize these ideas to the supply chain that can contribute to enhance

operational performance. A precise first order concept that may be measured in terms

of product flexibility, on-time delivery, quality standards and processing time.

As reported by Zhou and Li (2020), quality has become a critical factor in supply

chain management. Their research highlights that integrating Total Quality Management

within lean manufacturing systems significantly boosts sustainability performance. By

combining these approaches, organizations can achieve more efficient operations,

improve product quality, and enhance long-term environmental and economic

sustainability outcomes. This integration is essential for fostering continuous

improvement and competitiveness in modern supply chains.

Furthermore, quality is a crucial determinant of a supply chain's capacity to

continuously satisfy customer demands and preserve operational effectiveness, the

dependability of a supply chain may be efficiently evaluated by analyzing its quality

performance. Supply chain that delivers high-quality products and services consistently
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is more likely to demonstrate reliability in terms of timely deliveries, cost management,

and risk mitigation. Organizations may increase the resilience of their supply chain,

reduce interruptions, and cultivate closer ties with suppliers and customers by

concentrating on continuous quality improvement, ultimately leading to long-term

success and competitive advantage (Lee, 2015).

In addition, as per Putro & Subhan (2017) that quality management and supply

chain management strategies are essential for boosting competitiveness and

addressing the poor performance challenges faced by Micro, Small, and Medium

Enterprises (MSMEs). By implementing strong quality management practices, MSMEs

can increase operational efficiency, reduce waste, and ensure the delivery of high-

quality products and services, which in turn enhances customer satisfaction and loyalty.

Furthermore, effective supply chain management techniques enable these companies

to improve inventory control, expedite the procurement process, and maximize resource

utilization, thereby minimizing costs and maximizing profitability. These strategies are

crucial for MSMEs to gain a competitive edge in an increasingly dynamic and globalized

marketplace.

However, supply chain quality management is viewed as a synergy between

supply chain and quality management, and quality management inside an organization

is the key to improve the performance throughout the supply chain, providing a strong

connection between the two that enhances the overall performance of the company

according to the study of Zheng et al., (2013).

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Moreover, quality Performance can help an enterprise coordinate and implement

all activities smoothly in its supply chain, thus improving its operational quality and the

level of customer satisfaction (Hong et al., 2019).

Besides, quality is a strategic variable that needs to be managed and taken into

account by the supply chain as a whole. The relationship between the buyer’s and

supplier’s quality assurance procedures was investigated amongst automotive

component suppliers. It was emphasized how important it is for all supply chain to be

dedicated to quality assurance. Further, Performance is dependent on quality

dimensions, capability, and business strategy equivalency (Peng et al., 2020).

As extinguished by Gambi et al. (2015) that looks into the relationships between

performance, organizational culture, quality culture, and quality management practices.

They find that when a company’s quality culture is not a well-established component of

its organizational culture, quality exploitation practices are strongly linked to

performance outcomes. On the other hand, quality exploration practices are strongly

linked to performance if a firm’s organizational culture is dominated by its quality culture.

As claimed by Shaheen (2022) that quality performance plays a significant role in

operational performance. Enhancement of operational performance by ensuring

efficiency, consistency, and ongoing development. Customer focus is one of the

components that will bring customer satisfaction and loyalty. Decreasing the production

costs and faults by ensuring the effectiveness of quality control methods.

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Cost Performance. As reported by Lapinskaite and Kuckailyte (2014) that

consumption along with production rising at a pace that has never occurred before,

businesses are becoming more focused on cost reduction to preserve their competitive

advantage.

Besides, MSMEs encounter a number of problems, including high production

costs, limited resources, and restricted market access. They also face strong rivalry,

tight costs, and a lack of product and service innovation leading to diminishing sales

that can have a substantial impact on profitability, making it difficult for these

organizations to continue growing and being competitive (Rustan, 2023). This leads the

firm to decline purchasing and distribution activities, which can significantly impair its

capacity to maintain appropriate inventory turnover. This could interrupt the firm's

capacity to meet consumer demand quickly, which can reduce customer satisfaction,

diminish competitive advantage, and negatively affect overall business performance.

In addition, Superlinah et al., (2019) stated that MSME performance can be

improved by staying focused on the financial aspect such as, financial literacy, funding

and the business size. By improving financial literacy, entrepreneurs can make more

informed decisions, while securing adequate funding enables growth and innovation.

Other business improvement can be pursued by enhancing competencies through

training programs and applying entrepreneurial orientation in their business and it is

very important to control cost as an internal factor that can be controlled.

On the other hand, cost and financial management play a pivotal role in the field

of business management, serving as a foundation for strategic decision-making. These

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practices not only help organizations create and deliver empirical knowledge but also

contribute to practical applications and solutions that are vital for the overall success of

a business. By focusing on efficient cost allocation and financial planning, businesses

can ensure sustainable growth, improve profitability, and navigate complex economic

environments. Furthermore, effective cost and financial management enable companies

to align their resources with organizational goals, ensuring that decisions are data-

driven and contextually relevant (Malayeri & Mastorakis, 2012).

On the other hand, the study by Lestari and Asra (2024) found that one of the

key factors driving consumer interest in MSMEs, particularly within the food sector, is

the affordability of their products without compromising on quality. By offering lower

prices that align with consumer expectations and maintaining high standards of quality,

MSMEs can attract a larger customer base, foster brand loyalty, and increase their

competitive edge in the market. This balance between cost-effectiveness and quality is

crucial for MSMEs to establish a strong presence and thrive in a highly competitive

industry.

As stated by Wu et al. (2015), lowering supply chain costs is essential for

improving overall efficiency, but it must be coupled with higher standards of quality and

reliability. Furthermore, incorporating flexibility and responsiveness—defined as the

ability to quickly adapt to market changes or address emerging concerns—is crucial for

maintaining a competitive edge. By balancing cost reduction with responsiveness and

ensuring product quality, businesses can not only meet customer expectations but also

remain agile in a dynamic market environment.

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Furthermore, it also enhances product quality, meets consumer expectations,

and streamlines the organization's processes. Furthermore, this gives the company a

competitive advantage by reducing costs while maintaining constant supply of high-

quality goods or services. As Oakland (2014) explains, aligning cost reduction with

quality maintenance not only improves operational efficiency but also increases the

organization's market position, resulting in customer satisfaction and long-term success.

In addition, pricing plays a crucial role in shaping consumer buying behavior.

Generally, higher product prices lead to reduced sales volumes as consumers become

more price-sensitive. Conversely, products priced below the market rate tend to attract

more buyers, resulting in increased sales. Competitive pricing strategies can therefore

significantly boost demand and market share. Ultimately, understanding the relationship

between price and consumer behavior is essential for businesses aiming to optimize

sales and profitability (Humaidi et al., 2020).

As extinguished by Al-Salamin et al. (2015), high pricing for well-known brands

might have an unfavorable impact on purchase decisions, especially among young

customers. While people want to buy branded things, their limited means frequently

keeps them from doing so. The gap between brand appeal and pricing may impact

sales. Price is the only component of the marketing mix that directly creates income,

whilst the others incur expenditures. Thus, efficient pricing methods are essential for

balancing profitability and the ability to reach customers.

Moreover, consumer satisfaction is a key factor influencing product sales and

buying behavior (Tu and Chih, 2013). Satisfied customers are more likely to make

repeat purchases and recommend products to others. Moreover, satisfaction mediates

 29

the relationship between buying behavior, pricing, and packaging, affecting how

consumers perceive value (Rambabu and Porika, 2020). Attractive pricing and

packaging alone may not drive sales if consumer satisfaction is low. Therefore,

businesses must prioritize customer satisfaction to enhance loyalty and overall sales

performance.

Besides, global supply chain cost management is further complicated by

economic turbulence, such as inflation and volatile currency exchange rates. While

changes in currency exchange rates can have an impact on a product's ability to

compete on the global market on the basis of cost, inflation can reduce purchasing

power and raise the cost of goods and services (Christopher & Holweg, 2011). Using

financial instruments like forwards and options to hedge against currency risk is a

popular tactic to guard against unfavorable currency fluctuations.

As claimed by Ingenbleek (2015) that one way to maintain the sustainability of

the business is to continue to innovate product selling prices. By consistently reviewing

and adjusting pricing strategies, businesses can better meet consumer expectations

and adapt to market fluctuations. This approach not only helps maintain

competitiveness but also ensures profitability in the face of changing economic

conditions. Ultimately, innovative pricing is essential for long-term growth and success

in a dynamic market environment.

As reported by Santoso et al. (2020) revealed that in addition to product

innovation, consumers place significant emphasis on the price of the product. They tend

to prioritize competitive pricing over more expensive alternatives when making

 30

purchasing decisions. This indicates that consumers are increasingly seeking value for

money, comparing options to ensure they get the best deal.

Furthermore, to maintain a competitive edge and ensure long-term sustainability,

effective cost management in global supply chains is crucial (Madhani, 2019). By

optimizing cost structures and improving operational efficiencies, companies can

enhance their profitability while adapting to the complexities of global markets. Effective

cost management not only helps in reducing unnecessary expenditures but also

enables businesses to allocate resources more strategically, ensuring resilience against

market fluctuations and securing a strong position in an increasingly competitive

environment.

Theoretical Framework

A supply chain is just a collection of systematically interconnected operations and

procedures that go into the manufacturing and distribution of a product. On the other

hand, a supply chain might be perceived as a demand if one views the same activities

in the opposite way (Christopher, 2005). This study employs Resource-based View

theory and Supply chain quality management. The first theory that we will review is

about the Resource-based view theory by (Narongchai Kitrangsikul, 2017).

This theory highlights the significant influence of operational performance into the

company by possessing the necessary resources and implementing strategic

management towards the achievement of competitive advantage among competitors.

These may be in the form of effective management of customer relationships, physical

 31

locations, human resource management, technological advancement and innovation,

organizational practices and capabilities.

The second theory is Supply Chain Quality Management. The early definition of

supply chain quality management (SCQM) was the engagement of everyone involved in

a supply chain network, going beyond the limitations of individual organizations, in order

to enhance goods, services, and procedures, hence generating competitive distinction

and offering value to customers. In today's world, quality management within a company

is the key to enhancing performance throughout the supply chain, and supply chain

quality management is seen as a synergy between supply chain and quality

management. demonstrating a close bond between the two that improves the

organization's performance as a whole (Zheng, Zhao and Stylianou, 2013).

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Independent Variable Dependent Variable

Supplier-customer
Relationship
Quality
management
Performance
Information sharing Cost Performance
practices

Logistics
management

Outsourcing
Figure 1. Conceptual Framework
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Statement of the Problem

The purpose of this study was to determine if there is a relationship between the

supply chain management and operational performance of MSMEs in Nabunturan,

Davao de Oro. Specifically, it sought to answer the following questions:

1. What is the level of the supply chain management of MSMEs in Nabunturan,

Davao de Oro in terms of:

1.1 Supplier and Customer relationship management;

1.2 Information sharing practices;

1.3 Logistics Management Practices; and

1.4 Outsourcing practices

2. What is the level of operational performance of MSMEs in Nabunturan, Davao

de Oro in terms of:

2.1 Quality Performance

2.2 Cost Performance

3. Is there a significant relationship between supply chain management and

operational performance of MSMEs in Nabunturan, Davao de Oro?

4. Can the supply chain management indicators predict the operational

performance of MSMEs in Nabunturan, Davao de Oro.

Null Hypothesis

The study was tested at a 0.05 level of significance.

Ho1: There is no significant relationship between supply chain management and

operational performance of MSMEs in Nabunturan, Davao de Oro.

 34

Ho2: There are no indicators in supply chain management that can predict the

operational performance of MSMEs in Nabunturan, Davao de Oro.

Scope and Delimitation of the Study

This research study aimed to determine if there is a relationship between the

supply chain management and operational performance of MSMEs. The supply chain

management mentioned in this study were supplier-customer relationship management,

information sharing practices, logistics management practices, and outsourcing

practices, the research respondents were 100 individuals composed of business owners

or managers that would be conducted in Nabunturan, Davao de Oro. The study was

conducted from the school year 2024 - 2025.

Significance of the Study

The result of the study was beneficial to the following:

Business Owners. The business owners would be aware of what they should

improve in terms of their decision making, to drive the operational performances of their

business, they can be responsible for cost control, quality control, and employee

engagement to achieve goals in their business.

Producers. The producers would be able to know the areas on how they control

or influence a certain stage, especially in supply chain resource management, and

environment stewardship. By adopting supply chain management, they can lead to

improved operational performance, cost efficiencies, and enhanced product quality for

fast food SMEs. They can also encourage suppliers and partners to do the same by

fostering supply chain management through the entire resources.

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Future Researchers. This study could help other researchers to identify

environmental and social challenges that may be facing in the supply chain

management and operational performance to be more inspired to develop solutions to

address them, and strengthen more different exploration about this aspect.

Definition of Terms

The following terms used in the study are operationally defined for clarity and easy

understanding.

Cost performance. This refers to the measurements of the project’s financial

efficacy and efficiency.

Customer relationship management. This refers to the process in which a

business or other organization administers its interactions with customers.

Information sharing practices. This refers to data exchange and delivery

between different organizations in the transaction or cooperation process.

Logistics management practices. This refers to the process of planning and

executing the efficient transportation and storage of goods from the point of origin to the

point of consumption.

Micro Small and Medium Enterprises (MSMEs). This refers to businesses

whose work force and income numbers are below a specific limit.

Operational Performance. This refers to how well a company performs its core

business activities.

Outsourcing practices. This refers to the practice of hiring a party outside a

company to perform services or create goods that were traditionally performed in-house

by the company's own employees and staff.

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Quality performance. This refers to the level to which a project deliverable

satisfies the quality standards and criteria that were established at the beginning of the

project.

Supplier relationship management. This refers to the management and

maintenance of the relationship between a buyer and supplier.

Supply Chain Management. This refers to the handling of the whole

presentation flow of goods or services—starting from the raw materials to delivering the

final product to consumers.

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Chapter II

METHODS

This study provides an explanation of the methodology used. The research

design, research setting, research participants, research instrument, data collection

process, and statistical tool utilized in the data analysis and interpretation are all

covered.

Research Design

This study employed a quantitative correlational descriptive design in the entirety

of the study since it focused more on the relationship between the supply chain

management and operation performance of MSMEs. According to Bhatt et al., (2020),

correlational research is a type of non-experimental research method, in which a

researcher measures two variables, understands and assesses the statistical

relationship between them with no influence from any extraneous variable. This allowed

the researchers to make predictions based on the relationship that they have

discovered between the two variables of this research study.

Research Locale

The study was conducted in the province of Davao de Oro, municipality of

Nabunturan, a landlocked municipality in the coastal province of Davao de Oro. It

serves as the provincial capital. The municipality has a land area of 270.00 square

kilometers or 104.25 square miles which constitutes 5.92% of Davao de Oro's total
 38

area. Its population as determined by the 2020 Census was 84,340. This represented

10.99% of the total population of Davao de Oro province, or 1.61% of the overall

population of the Davao Region. Based on these figures, the population density is

computed at 312 inhabitants per square kilometer or 809 inhabitants per square mile.

The municipality of Nabunturan has 28 barangays.

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Figure 2. Location Map of the Municipality of Nabunturan

 40

Respondents of the Study

The researchers determined the appropriate respondents, specify the criteria of

selection and number the number of respondents. The researchers personally

distributed the questionnaire and asked permission to answer the questionnaires via

face to face. A total of 100 questionnaires were distributed to the identified participants

of this study. The respondents were 100 individuals, who are MSMEs owners or

managers that are situated at the municipality of Nabunturan, Davao de Oro.

The researchers used the universal sampling method. A universal sampling

approach is a strategy that, without having task-specific adaptations, can effectively

select representative data points across a variety of tasks, models, or datasets. The

objective of this approach is to optimize computing efficiency and effectiveness by

striking a balance between maintaining informative points for a particular activity and

being flexible enough to accommodate many scenarios. Studies have demonstrated

that optimal complexity can be achieved for signal reconstruction tasks with constrained

Fourier structures, such as bandlimited, sparse, and multiband signals, using universal

sampling algorithms, like statistical leverage score sampling and column-based matrix

reconstruction (Avron et al., 2019).

Additionally, (Mei et al., 2022) state that universal sampling methods, such as

farthest point sampling, function across multiple tasks and datasets without modification

but lack task-specific knowledge, potentially discarding relevant points for particular
 41

tasks. The idea of an almost-universal smaller has been proposed to learn the most

useful points for a given task while being easily adaptable to different models or

datasets, ultimately improving accuracy and performance across multiple tasks and

models.

Research Instruments

The researchers gathered the data through an adapted research questionnaire to

determine the supply chain management (Supplier-customer relationship management,

Information sharing practices, Logistics Management Practices, Outsourcing Practices)

and operational performance of MSMEs. The adapted research questionnaire used for

supply chain management was from the study of Maina (2020), while operational

performance was from the study of Dilago (2022).

The questionnaire was validated, approved, checked for its reliability by the

chosen validators of the study. The researchers sent the questionnaires face to face

and also researchers used the four-point Likert Scale method to measure the degree of

sample approval on the questionnaire’s items.

The corresponding rating shown below would identify the role of supply chain

management on operational performance of MSMEs.

Interpretation of the Likert Scale

Range of Means for Supply Chain Management

Rating Range Description Interpretation

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Scale

4 3.50-4.00 Strongly Agree Always manifested/ this means that

the condition embodied in the item is

manifested all the time.

3 2.50-3.49 Agree Oftentimes manifested/ this means

that the condition embodied in the

item is sometimes manifested.

2 1.50-2.49 Disagree Rarely manifested/ this means that the

condition embodied in the item is

poorly manifested.

1 1.00-1.49 Strongly Disagree Never manifested/ this means that the

condition embodied in the item is not

manifested.

Range of means for Operational Performance

Rating Scale Range Description Interpretation

4 3.50-4.00 Strongly Agree Always observed/ this means that

the condition embodied in the item is

observed all the time.

3 2.50-3.49 Agree Oftentimes observed/ this means

that the condition embodied in the

 43

item is sometimes observed.

2 1.50-2.49 Disagree Rarely observed/ this means that the

condition embodied in the item is

poorly observed.

1 1.00-1.49 Strongly Never observed/ this means that the

Disagree condition embodied in the item is not

observed.

Validation of Instrument

The researchers secured and adopted questionnaires. The questionnaires were

modified after the consultation with the panel making them suitable for the respondents

and were submitted for validation. After being validated, the researchers conducted a

pilot testing to test the adapted questionnaire. Additionally, it was assessed using the 4-

Point Likert scale.

Prior to the actual data gathering, a pilot testing was done to test the reliability of

the instrument. The overall Cronbach’s alpha was .926 hence, the instrument used in

the study is considered reliable.

Data Gathering Procedure

The following steps were observed in the implementation of the study.

Before Implementation. First, the researchers complied with the requirements

given by the Ethics committee of the school and answered some significant questions

regarding the research to be conducted. The researchers then acquired an

 44

endorsement letter from the Research and Publication Development Center (RDPC) of

Assumption College of Nabunturan to conduct the study. Second, the researchers

prepared a formal letter addressed to the municipal Mayor of the specified location

where the researchers collect and gather the data of identified respondents. And also,

the researchers prepared a formal letter addressed to the identified MSMEs through

universal sampling to obtain 100 target respondents of this study.

During Implementation. The researchers instructed the respondents to

answer the given questionnaire. The researchers were available during the day where

the respondents were answering their questionnaires in order for them to be guided on

the questions that they did not understand.

After Implementation. The researchers gathered the questionnaires that had

been answered by the respondents and tabulated the gathered data. Finally, the

researchers consulted a statistician to analyze the data and got the results. Afterwards,

the researchers interpreted the results and also identified whether the null hypothesis

was to be accepted or rejected.

The results were examined and then utilized to create the study's conclusions

and recommendations, providing an understanding of the link between Supply chain

management on Operational performance. This systematic approach guaranteed

that the research results were reliable and relevant, providing valuable insights into

the field.

Statistical Treatment of Data

 45

A count and recording of the survey response had been made. The Statistical

Package for the Social Sciences (SPSS) was used to evaluate the study's results. It

provides straightforward instructions and is also used by researchers for intricate

statistical data analysis. This is an advanced analytical program that is highly regarded

for its exceptional results in research studies. The researchers at Assumption College of

Nabunturan employed SPSS to ascertain the extent to which four independent variables

in this study exhibit a statistically significant correlation with the supply chain

management on operational performance of MSMEs.

Mean. The level of supply chain management, as well as the operational

performance of those who adhere to survey questionnaire requirements, were assessed

using this statistical method.

Pearson r Correlation. The strength of the links between two variables is

statistically determined by the Pearson correlation coefficient, often known as the

Pearson's r. In other words, it measures the degree to which two variables depend on

one another. The data was examined using the SPSS program to determine the null

hypothesis and indicate the relationship between the independent and dependent

variables.

Regression Analysis. The strength of the relationship between the indicators of

supply chain management and operational performance were determined through this

statistical technique as well as modelling the future relationship between the

independent and dependent variables.

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