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Int. J. Production Economics 108 (2007) 119–126

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Logistics management and firm size; a survey among Polishsmall and medium enterprises

Job de Haana, Danuta Kisperska-Moronb,�, Ewa Placzekb

aTilburg University, The NetherlandsbUniversity of Economics in Katowice, Poland

Available online 9 February 2007

Abstract

Managerial techniques in SMEs change together with their growth and logistics management constantly gets better

support, adequate to requirements of smaller companies if financial and material assets are at their disposal. Those changes

are reflected by various growth models of firms, showing that organisational forms should be in line with the quantity of

the firms’ operations to be efficient. In those models stages consist of phases characterised by a specific type of division of

labour and of co-ordination. In this paper we apply the Greiner’s model to logistics, as this function in its broad sense

represents management of a number of traditional activities such as warehousing, transport, customer service, etc. From a

survey among Polish SMEs we learn that firms use different co-ordination mechanisms when they grow in size. Larger

firms apply more formal management techniques, e.g. on inventory management and modelling as well as more

sophisticated information systems to deal with the increased complexity they face. These results give empirical support to

the conceptual growth models and provide the description of managerial environment for decision making in logistics.

r 2007 Elsevier B.V. All rights reserved.

Keywords: Small and medium enterprises; Logistics information systems; Supply chain management

1. Introduction

During the last few decades, logistics developed froman unglamorous function to an important set ofactivities that add value to firms (Sharman, 1984).However, in its broad sense it is rather a horizontalchain of processes than a vertical pillar in thetraditional functional organisations. As such it is acomplex task to manage these activities, especiallywhen firms grow.

These qualitative and quantitative developmentsand changes may cause ‘‘growing pains’’ (Flamholtz

front matter r 2007 Elsevier B.V. All rights reserved

e.2006.12.009

ng author. Tel.: +4832 257 7302;

7303.

ss: kispersk@ae.katowice.pl

oron).

and Hua, 2002). Such pains are symptoms oforganisational distress and are an indication of theneed to change, if the organisation wants tocontinue to operate successfully. In growth modelsa balance is proposed between organisationalinfrastructure and operations, although in a con-ceptual form. Among these models, Greiner is theclassic as his 1972 HBR article was reprinted by thejournal in 1998 with only a brief addendum. InGreiner’s terms ‘‘growing pains’’ are the revolutionscharacterising the end of one of the five evolu-tionary phases (Greiner, 1998). For each of thesephases the division of labour as well as the relevantco-ordination mechanisms are described. A firm canfollow a specific growth path dependent on its ageand its size.

.

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We believe that managerial techniques in SMEschange together with their growth and logisticsmanagement constantly gets better support, ade-quate to requirements of smaller companies iffinancial and material assets are at their disposal.Single SMEs naturally have smaller capacities thanlarge corporations but it does not mean that they donot require professional logistics management. Onthe contrary, very often a single top manager has toacquire a portion of knowledge significantly largerthan managers in big companies, being assistedby their deputies and employed experts. SMEsmanager should be quite universal in his decisionmaking and it requires some profound knowledge oflogistics and supply chain management (Kisperska-Moron, 2002).

All that is especially true for managerial techni-ques used to support these processes. Literature onSMEs pays quite some attention to the usage ofinformation, information systems and computers.Generally, the claim is that SMEs lag behind notonly quantitative but also qualitative standards,largely restricting use of information technology(IT) to operational and administrative tasks. How-ever, Bridge and Peel (1999) refer to evidence thatuse of microcomputers is moving away from thesetasks to decision making (financial modelling anddata management). As such it also serves as a co-ordination mechanism. Hence, we believe that themain components of managerial environment im-portant for the excellence of logistics managementin SMEs are:

�

IT and available systems supporting decisionmaking and enabling joint access to data basesand all kinds of information. � Organisation of logistics and supply chain

management and proper structures for decisionmaking and responsibility in that area.

Logistics and/or supply chain management depart-ments are not to be found in the majority of PolishSMEs. That fact is not surprising in small and part ofmedium enterprises, where specialisation of functionsis not too deep. However, one can expect that firmsusing more than 150 staff members should bestructured in such a way that they demonstrate‘‘logistics and supply chain orientation’’ defined as‘‘the recognition by a company of the systemic,strategic implications of the activities and processesinvolved in managing the various flows in a supplychain’’ (Mentzer and others, 2001, p. 14).

Many businesses are ‘‘young’’ enough in order tobuild supply chain management into their businessstrategy as it develops. In Poland, surveys carriedout by a consulting company Grant Thortonindicate that 88% of respondents declared to bethe founders of their companies (‘‘Rodzina y’’,2002). That means that the majority of SMEs beingquite young companies, do not have to undertake,like larger companies, the difficult process of re-engineering the existing business while adoptingproper logistics and supply chain managementapproach.

However, effective logistics management andactive participation of small businesses in supplychain operations depends on a perspective, whichthey adopt while making strategic decisions.

On the basis of these observations the mainresearch question tackled in this paper would be:How do SMEs change the management of theirlogistics and supply chain processes when they growand can these changes be understood in terms ofstages in growth models?

The remainder of the article consists of foursections. The next section consists of a literaturereview on growth of companies with special atten-tion to the role of co-ordination mechanismssupported by IT. From this review we construct athree-stage model to be applied in SME’s. In thefollowing sections we present and analyse the resultsof a survey among Polish SME’s. In the survey weconcentrate on the logistics function, as this is thecement between the various functional areas and assuch represents the co-ordination problems in themost extreme form. First, we distinguish three sizecategories to find out whether each of them has aspecific use of IT for co-ordination. We assume thatthese categories reflect the development phases ofindividual firms. We expect firms to choose theoptimal coordination mechanism, both as anindependent firm and as part of one or more supplychains, in line with the relevant contingencies. Then,we go into a more detailed analysis of our findings.In the last section, we discuss the findings within theframework of our conceptual model.

2. Co-ordinating logistics when organisations grow

Size does matter when organisations are designed,despite differences in outcomes of research. Moreemployees, associated with the growth of a firm,facilitate division of labour resulting in specialisa-tion and potential efficiency gains. Mintzberg (1979)

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distinguishes two types of division of labour:vertical and horizontal. The first refers to separatingsimple, routine operational tasks from more com-plex decision-making procedures. Horizontal divi-sion means splitting up the tasks on one level intoseparate jobs. These two forms are normally appliedin this order when an entrepreneur starts a firm: firstsubordinates are hired to do the routine work andonly later more sensitive tasks are left to hiredspecialists.

The same process can be observed in the area oflogistics operations. At first only simple tasks are atstake: transportation, storing, etc. The entrepreneuror a functional manager, who was involved in thoseactivities, co-ordinated all these tasks. However, inthe last few decades the role of logistics has becomemore prominent and it is seen as the value-addingactivities instead of cost-generating operations(Sharman, 1984). Now it is an internal reflectionof the supply chain to which a given companybelongs. That means that all activities have to beorganised as chains of processes, co-ordinated as tocontribute to the objectives set by the company andsupply chain.

Division of labour, either horizontal, vertical,functional or process-based, calls for co-ordination.Galbraith (1973) proposed a taxonomy of co-ordination mechanisms based on how to deal withinformation:

�

In one category he proposes to reduce the needfor information (i.e., co-ordination) when buffersare positioned between processes (so each canfunction more independently of the other) orwhen managers or teams get autonomy indecision making (e.g., delegation) within theframework of an overall plan. � In the other category he suggests to increase the

information capacity, for example, enablinglateral relationships on one horizontal level orby implementing information systems not just forstoring but also processing information to sup-port decision making and horizontal and verticalcommunication.

In the field of logistics computer-aided tools tosupport decision making are abundant and have along-standing tradition. From the early inventoryand reordering systems and the economic order andbatch size models they grew into what now is ERP.These packages are developed, sold and applied ona large scale, basically to support managers in their

decision making. However, less sophisticated toolslike the buffers in socio-technology and kanbancards in lean production, also provide powerfulsupport. The largest system achievements have beendesigned first of all for big companies with largefinancial assets. The ERP types of systems in smallercompanies often meet a barrier of high prices andinsufficient assets to implement these systems (Haanet al., 2004).

Flamholtz and Hua (2002) put, as a rule ofthumb, whenever an organisation doubles in size, itis essentially a different company and requires a newinfrastructure to support its operations. If theorganisational design is not adjusted to the in-creased size a variety of ‘‘growing pains’’ will occur.Employees are overburdened and not well led, workis lagging behind and management improvisesrather than plans, to give a few examples. Thesegrowing pains occur in organisation of all sizes,including the largest industrial enterprises. How-ever, they are most characteristic of early stageentrepreneurial companies. If this is true, growthstage models can be useful guides for firms toprevent and deal with these growing pains.

Storey (1994) does not seem to agree with this ashe claims that many firms show no desire to makeprogress.

McMahon (2001) found that, on the basis ofanalysis of age, size and growth rate, three types offirms could be distinguished after the period of 15years of operation:

�

traditional SMEs (70%) existing to provide theirowners or/and managers with a source ofemployment, � capped growth SMEs (25%) limiting their size

deliberately to prevent surrender of control andaccountability by the owner/manager and

� entrepreneurial SMEs (5%) gifted with entrepre-

neurial aptitude and technical and commercialinnovation.

So, SMEs can grow but may deliberately choosenot to and as such prevent growing pains. Growthmodels of companies seem to be useful tools todescribe and explain the nature of the environment forlogistics decision making in SMEs of different sizes.

Greiner (1998) is one of many authors whoproduced organisation life cycle models describingnot only stages but also frequent problems (Mintzberg,1979). He observed that such phases exist withtheir own unique structure, systems, leadership and

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Table 1

Information systems for order receiving, order tracking and

forwarding orders to operators

Size/system 20–99

employees (%)

100–249

employees (%)

More than 250

employees (%)

Manual 19 15 13

Hybrid 47 46 42

Computerised 34 39 45

J. de Haan et al. / Int. J. Production Economics 108 (2007) 119–126122

smooth growth. Yet, transitions between thosephases do not occur naturally and many firms falter,plateau or get acquired rather than grow furtherduring those ‘‘revolutions’’. Greiner distinguishedfive stages. In the first, ‘creativity’ phase thefounding entrepreneur reacts informally to themarket. In the creativity phase the entrepreneurknows his employees, suppliers and customers andhardly any formal decision making is needed as atthe end of the day the bottom line shows whetherthe firm (i.e., entrepreneur) did well or not.However, because of the ‘leadership crisis’ he has tochange to the ‘direction phase’ with a centralisedstructure and standards–base leadership. However,in the direction phase the entrepreneur needsinformation on how things are developing andadministrative systems and standards are intro-duced. From these (book keeping) results, the entre-preneur can conclude whether his newlyappointed managers do their job properly. Thisresults in the ‘autonomy crisis’, which has to beovercome in the ‘delegation phase’, with its suppor-tive and participative leadership. In the delegationphase the entrepreneur wants to see what data dosupport decisions made as well as what models canbe used.

Continued growth will cause the ‘control crisis’.Next is the ‘co-ordination phase’, where divisionsare controlled with the help of plans and outputs tobe reached. This will end up in a ‘red-tape crisis’, tobe followed by a ‘collaboration phase’.

In a ‘research note’ Bridge and Peel (1999) citedifferent positions illustrating that small firms (wewould say in their direction phase) use computersmainly for operational and administrative tasks butthey also provide some evidence for movementtowards decision making. Their research clearlyshows that small and medium-sized firms usecomputers differently: medium-sized companiesuse various packages more extensively than smallfirms. Their analysis demonstrated that both smalland medium-sized firms use operational systems(e.g., word processing and accounting) more exten-sively than specialised decision support systems(databases and statistical packages). The frequencyof use of computer-aided systems’ profit forecastsand sales planning differed significantly betweensmall and medium-sized firms. Only 9.8% of themedium-sized firms in their research used computer-aided systems for profit forecasts and sales planningwhile 24.2% of the small firms indicated that theynever used such systems.

To summarize this literature review we present asour conceptual model that three types of SMEs existrepresenting three development stages:

�

the traditional one, in which the entrepreneurreacts informally and creatively to the marketand uses IT only for operational matters, � the capped one, in which the entrepreneur uses

IT to support his centralised use of standards todirect his immediate subordinates and

� the entrepreneurial one, in which the entrepre-

neur and his middle managers use IT to supporttheir decision making.

The growth and size of companies are measuredby the number of employees since it defines thescope of specialisation creating coordination pro-blems.

3. General results from research on information

systems

In 2003, a survey was held among Polish SMEs inwhich the co-ordination of the logistics function wasdealt with. The results of this survey are used toanalyse the managerial environment for logisticsmanagement and find out whether Greiner’s modelon evolutionary phases in a firms’ developmentprocess is valid in this particular empirical setting.In total 127 surveys were received back. Theresponse rate was positively influenced by an activeapproach of the SMEs involved as researchassistants visited the firms to support the manage-ment when filling out the questionnaire.

In our sample three groups of firms have beendistinguished based on number of employees:20–99, 100–249 and more than 250. Out of oursample 49% are small and 18% belong to the largeSMEs, showing that, compared with McMahon(2001) the smaller companies are underrepresented,whereas the large are overrepresented. The largestportion of firms is from the service industry (41%),

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only 16% of the sample are traders and 19%manufacturers.

Surveyed SMEs use very traditional means ofinformation transfer, limiting adaptation of modernand expensive technologies. If computer technologyis used, very seldom a network is implemented,which would allow managing and directly transfer-ring information to workers responsible for orderfulfilment. Table 1 shows, on the example of systemsfor order receiving, order tracking and orderforwarding, what kind of technology the firms use.

From Table 1 we learn that indeed three types ofSMEs can be distinguished based on size categoryand IT in use. On the one hand, the share of manualsystems drops by 50% (19 in the smallest firms toonly 13% in the over 250 employees category),whereas on the other hand, the share of thecomputerised systems increases by 33% (from 34in the smallest to 45% in the category of the largestfirms). However, the hybrid systems are abundant inall three categories. This is in line with what weexpected from our conceptual model.

We will now continue our analysis to find outwhether the firms in the three categories use IT indifferent ways as well, assuming that having a toolalso means that it is used.

4. Insight into the details of managerial techniques

On the basis of 50 variables we were able toexamine more details of how IT systems support (ordo not support) decision-making process in logisticsin surveyed SMEs. Our research indicated severaltrends to be found in the practical application of thefollowing groups of management techniques:

�

Ta

Ma

Siz

Sur

Sta

Inv

De

customer surveys,

� statistical and mathematical models, � inventory classification methods, � management support systems and expert systems

and

� databases.

ble 2

nagement techniques used by SMEs

e/management techniques 20–99 employees (%)

veys 31.75

tistical and mathematical methods 30.16

entory control 11.90

cision support systems 26.19

management techniques (surveys, inventory control,

Table 2 presents the general results of the use of

decision support systems, etc.) in firms of thevarious size categories. Table 3 suggests that whenSMEs grow decision support systems replacesurveys technique and more statistical and mathe-matical models are used. We found those relationsproven statistically.

Our research shows that:

�

1

3

3

1

2

Surveys that are more popular in smallercompanies are used as a source of informationfor logistics management, particularly whenperiodical customer surveys are used frequently;they are mainly used as a method of evaluationof customer service level.

� Surveying customers in smaller SMEs seems to

be a technique substituting formal demandforecasting.

� Increased use of statistical and mathematical

models was typical of more computerised largerSMEs, and they were mostly used for demandand materials and spare parts requirementsforecasting; use of these models in larger SMEsis correlated with use of internal measurementsystems as a method of customer service levelsevaluation.

� Inventory classification systems seem to be only a

pre-condition to support decision making and/orcontrolling inventory.

� Full use of IT takes place in the largest SMEs in

the form of decision support systems and expertsystems and is associated with use of databases,especially concerning customers’ service.

5. Conclusions and discussion

The main research question we put was: How doSMEs change the management of their logistics andsupply chain processes when they grow and canthese changes be understood in terms of stages ingrowth models?

00–249 employees (%) More than 250 employees (%)

2.08 25.81

2.08 32.26

0.38 12.90

5.46 29.03

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Here, we will answer this question in two steps:first we deal with the existence of phases in growthand secondly with the use of IT in the co-ordinationand management processes in use. For each of thesequestions we first summarize our findings fromliterature and then we confront these with findingsfrom our survey among Polish SMEs. In a finaldiscussion we reconsider our conclusions to deriverecommendations for management of logistics andissues for further research.

5.1. Phases in growth

For practical reasons our study is not a long-itudinal one, but we consider the distinguishedcategories of firms’ sizes as phases of growth. InPoland, 88% of the respondents indicated that theywere the founders of their companies (Rodzina,2002). Larger firms were not established as such, butrather grew into that.

The first category McMahon (2001) distinguishes,70% of firms with low growth, fits into Greiner’screativity phase of entrepreneurial exploiting of themarket. These smallest firms are ‘‘just’’ a source ofincome for their owners and are managed in aninformal way. This requires a limited size to preventthe leadership crisis to emerge.

The second category McMahon (2001) distin-guishes, 25% of firms with moderate growth, fitsmore or less Greiner’s direction phase, whereentrepreneurs use standards to exercise directiveleadership in a centralised structure. These firmschanged the structure to overcome Flamholtz andHua’s (2002) ‘‘growing pains’’ of the leadershipcrisis. However, their owners seem to limit thegrowth, intuitively (?) in order to prevent theemergence of the autonomy crisis.

The third category McMahon (2001) distin-guishes, 5% of firms with high growth, fitswith the delegation phase where support systemsand participative leadership facilitate the linestaff structure. The size of the firms caused theautonomy crisis for middle managers that were notin a position to manage, but the owner realisedthis and delegated authority. However, leadershipstyle and support systems ensure that top manage-ment still is in charge and decisive, albeit ondistance.

To conclude, SMEs can grow if markets allowand management goes for it, although growth is notinevitable but rather a deliberate choice. If manage-ment chooses to grow it has to adapt also logistics

management style to the size of the firm to remaineffective, as logistics is the cement between the otherfunctional areas.

The findings in Table 1 seem to indicate that threecategories in size can be distinguished with each aspecific pattern of use of IT. The category of thesmallest firms showed a considerably higher share ofmanual information systems but a considerablylower share of computerised systems when com-pared with the category of the largest firms. Asexpected the medium-sized category took a positionin between the other two. However, the results werestatistically not very strong. The organisationalstructure for logistics activities does not just dependon the size of a company but rather on the quality ofthe decisions made by the entrepreneur in theseSMEs. The entrepreneurs decide whether to growand how to organize within the framework of thesupply chains they are in.

Nevertheless, we consider these results goodenough to continue our analyses to answer ourresearch question.

5.2. Use of IT for co-ordination and management of

logistics

Combining the results on categorisation with thefindings of Bridge and Peel (1999), we can distin-guish three scenarios of how IT can influence the co-ordination and management processes for logisticsand supply chain management in SMEs:

(1)

For the smallest firms where mainly manualsystems will be in use, IT is used for operationaltasks. This is in line with the results of Bridgeand Peel (1999). In addition to this, firms mayoutsource IT-related activities such as account-ing to specialised firms. That would enable themto reduce the number of employees and con-centrate on their core activities.

(2)

In the second category, IT can be used formonitoring i.e. the planning and checkingactivities of the management cycle. The verticalinformation processing, one of the co-ordina-tion strategies of Galbraith (1973), facilitates theco-ordination task. Databases, IT-based or not,can be of help here. This is somewhat differentfrom Bridge and Peel (1999), as this refers tomore than just operational activities, but not yettotal decision making. Information systemsenable an easier and more consistent analysisof what is going on in various departments as

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well as increase the overview over the firm as awhole.

(3)

For the largest firms in the sample statisticalpackages allow management to apply decisionsupport systems. The entrepreneurs, togetherwith their middle managers can calculate sce-narios from data available to support theirdiscussions on how and where to go. This ismore or less in line with Bridge and Peels’findings on the larger SMEs (1999).

The results of our survey do not give clear-cutpositive support to the three scenarios developedfrom literature. That can partly be due to theambiguous character of some of the results.Inventory classification systems, for instance, canbe used in very different ways. On the one hand,they are basic in sophisticated models to forecast thedemand for materials and parts. Our results dosupport this, as we found statistically soundcorrelations between these variables. As such theuse of inventory classification systems fits into thethird scenario we described. On the other hand,inventory classification can also be used to supportinventory control and decision making in a verysimple way. Re-ordering of parts whenever aspecific inventory level has been passed based onpast experience of the entrepreneur. As such theclassification system refers to the standards andnorms that are in use in Greiner’s direction phase asdescribed in our second scenario.

However, we do find some support for ourscenarios in our survey findings as well. Increaseduse of statistical and mathematical models, typicalof more computerised larger SMEs, was associatedwith their smaller need for separate (i.e., notincluded in the information system) demand fore-casting procedures. When statistical and mathema-tical models were used, customers’ orders andmaterials and spare parts requirements were fore-casted mostly with the use of models being part of adata base being a part of the company’s informationsystem. This reflects exactly what we expected in ourscenario three.

On the other hand, it shows that surveys are usedas a source of information for logistics manage-ment, and particularly when periodical customersurveys are used frequently, they are used mainly asa method of evaluation of customer service level.However, surveying customers being more typicalof smaller companies seems to be a techniquesubstituting formal demand forecasting. Results

such as these do support scenario two, as informa-tion is gathered on isolated standards to supportcontrol and decision making on logistics.

6. Conclusion

Finally, we can conclude that Greiner’s modelprovides us with a framework to integrate variousapproaches we found in literature, to re-interpretstage models and adopt them to logistics manage-ment in SMEs, show more precisely where and whatkind of managerial ‘‘growing pains’’ can occur, andspecify the role of IT use for logistics managementpurposes. The results of our survey showed the samedifferences in patterns in the three categories ofSMEs we distinguished. Together with the growthof a single SME, information systems become morecomputerised and the quality of IT technologyadvances from simple surveying techniques towardsmore complex decision support systems. So, thesurvey results seem to support the Greiner’s modelas a tool to understand why and how SMEs use co-ordination mechanisms in the logistics function.

The overall results of the research suggest thatmost of the Polish SMEs are very well aware of therequirements of competitive market environmentbut they have not yet arrived at the point of anadvanced approach to integrated efforts of con-forming to these requirements. Most of SMEsoperate in a very traditional way, not evenattempting to create logistics alliances allowingreducing inventory holdings and increasing securityof deliveries. The main change in logistics manage-ment deals with the progress in IT and its gradualdevelopment towards limited use of decision sup-port systems. Implementation of more and moresophisticated IT systems leads to a higher quality indecision making, thus creating a basis for doingbusiness in a sound way with adequate profitabilityand correct risk analysis.

7. Discussion

Logistics and supply chain management are not(yet) well developed in the majority of Polish SMEs.That fact is not surprising in small and part of themedium-sized enterprises where specialisation offunctions is not too deep. However, one can, withMentzer et al. (2001), expect that firms with 150 ormore employees show logistics co-ordinationand management processes that demonstrate: ‘lo-gistics and supply chain orientation’. Many Polish

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companies, particularly the recently founded SMEsare ‘young’ enough to implement such an orienta-tion. These companies need not undertake, likethe large bureaucratic ones, the difficult process ofre-engineering the existing business, while adoptingthe proper logistics and supply chain manage-ment approach. However, effective logistics man-agement and active participation of SMEs in supplychain operations depends on a perspective, whichthey adopt while making strategic decisions. So,entrepreneurs should not only make deliberatechoices on what firm size suits them, but also whatis the appropriate structure for it given the rolethey want to play in their supply chains. In thesestructures IT plays an important role and its usemay reflect to what extent the entrepreneur isaware of the firm’s position in the chain and itsmanagement.

In order to improve the understanding of the roleof IT in logistics co-ordination and manage-ment processes additional research should becarried out. Here, we concentrated on only onecontingency, i.e., size, but others such as technol-ogy, industry, etc. may also be of importance. Thetype of co-ordination and management needed alsodependence on the type of division of labour in use,either functional or processual, reflecting anotherline of research. Finally, we would mention thenature and content of the co-ordination andmanagement processes and how IT could improvethem.

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