Why is it that most of the micro and small firms that represent 99% of the businesses operating in Latin America survive for less than a year? One of the main reasons is a lack of supply chain expertise – an issue that has received scant attention from researchers up until now. This knowledge gap is being addressed by a new research project from the MIT Global SCALE Network, that involves on-site research at some 500 enterprises across Latin America in collaboration with at least 14 of the region’s top universities.
For the purposes of the project, micro and small firms are defined as those that have fewer than 50 employees and have been in operation for a minimum of two years. These enterprises may be modest in size, but their economic impact is huge. They collectively contribute about 30% of the region’s gross national product and dominate some channels; nano-stores represent 60% to 70% of the Latin American consumer packaged goods market, for example.
Small-sized firms also exert tremendous influence on the efficiency of supply chains in the region. As suppliers to major companies in Latin America as well as other regions including North America, their operational inefficiencies and high failure rates inevitably impact larger players.
A lack of education often prevents micro and small firms from improving their supply chain practices. In many organizations, they don’t have the right people making decisions in key areas such as placing orders, coordinating production schedules with market demand, and selecting suppliers.