Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Supply Chain Practices

And Challenges In The Craft
Industry In Gauteng, South Africa
Khathutshelo M. Makhitha, University of South Africa, South Africa

ABSTRACT

Craft producers in South Africa (SA) face many challenges including supply chain challenges.
There is no existing study that has investigated the supply chain management of the craft industry
in SA. There is also dearth of literature on supply chain management of small businesses. The
purpose of this study was to investigate the supply chain practices and challenges of craft
producers in South Africa. A survey was conducted among 199 craft producers in Gauteng, South
Africa. A convenience sampling method was adopted owing to the difficulty of accessing a reliable
database of craft producers. Craft producers rely mainly on telephones for customers to place
orders. However, they use variety of methods for order placement. Customers are allowed to also
visit the factory to buy products and they can buy at the exhibition. They use a variety of
production methods. Due to transportation challenges, craft producers also make use of public
transport to deliver goods and keep some products at the warehouse.

Keywords: Supply Chain Management; Production Strategy; Order Placement; Transportation; Warehouse/Factory;
Inventory Management; Craft Producers; Small Businesses

INTRODUCTION

T he Department of Trade and Industry (2005) define craft as “the creation and production of a broad
range of utilitarian and decorative items produced on a small scale with hand processes being a
significant part of the value added content. The production of goods uses a range of natural and
synthetic materials”. Products produced in the industry include home furnishing, jewellery, fashion and fashion
accessories, novelties and gifts including corporate gifts, garden and outdoor, curios, collectibles, one of a kind,
high value, individually made objects and indigenous artefacts, as well as culturally derived objects (Department of
Trade & Industry, 2005). Craft production usually is initiated in regions where it is still regarded as a way of life.
Craft product designs are traditional and functional in nature (Wesgro, 2000:4). Regions such as Gauteng and the
Western Cape have the highest population of crafters because of urbanisation and the fact that they have an
established tourism industry (Wesgro, 2000).

The craft industry is highly significant due to the employment it creates, and incorporates both informal
craft producers selling on the roadside and formal craft producers that sell their products locally and internationally
(Elk, 2004). The craft industry contributes R2 billion to the gross domestic product (GDP) in the craft industry value
chain (Kaiser & Associates, 2005) and consists of over 7 000 craft producer businesses (Department of Trade and
Industry, 2005). The industry employs 40 000 people (DED and SEDA cited in McCarthy & Mavundla, 2009). The
local market has shown a strong growth of between 3 to 4 percent annually, and the sector contributes 0.14 percent
to the GDP, of which R150 million is from export sales. The number of craft producer businesses has also increased
by 40 percent, with an average growth of 8 percent per year, double the national average (Department of Labour,
2008). The SA government spent R97 million on the establishment and growth of the craft industry in SA between
2001 and 2003 (Create SA cited in Grobler, 2005), making this an important sector.

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Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Craft producers lack the skills necessary to conduct and run businesses. As a result, they are unable to
identify market opportunities and, where they are able to do so; they are unable to pursue them because of their
limited skills (Department of Sports, Arts, Recreation & Culture, 2007). Due to the lack of skills and limited access
to resources, they are unable to match the quality standards and production capacity needed by their customers. For
example, formal craft retailers have to deal with informal craft producers who lack understanding of what they (craft
retailers) are look for (Broembsen, 2011). The craft industry has a high level of diversity in comparison with other
industries in SA. Raw materials, scale of production, product types and quality vary across the industry (Rogerson,
2010:131). Furthermore, the quality standards, scales of production as well as craft product positioning differ for
different products (DTI, 2005:85). Craft producers with unique products face less competition and are able to sell
their products in high numbers (Perreira et al., 2006:483). The industry is highly fragmented with the majority of
craft producers being sole traders or small informal producers and cooperatives (Department of Economic
Development, 2009:5).

In SA, the number of craft producers increased by an estimated 40 percent between 2005 and 2009, with an
average growth of 8 percent per year. Growth was attributed to growth in tourism (SouthAfricaWeb). This is an
indication that there are growing market opportunities for craft producers both locally and internationally. Growth in
the craft market is associated with the rise in local interest in SA craft fuelled by trends towards ethnic, rustic, earthy
African styles, increasing national pride and the return of African values (Sellschop, Goldblatt, & Hemp, 2005). The
growth of the black middle class and its ability to earn and spend its income on goods and services has also impacted
on the growth in this market (Wesgro, 2000). However, such opportunities cannot materialise unless craft producers
are competitive. Craft producers need an effective and efficient supply chain that will get the right product at the
right time and at the right place.

Craft products are sold through formal and informal retail channels. The formal retail channels consist of
various retail outlets such as those in formal craft markets, and formal large and small retailers ranging from
boutique shops and gift shops to large outlets in airports as well as national retailers such as Mr Price Home, Pep
Home and Woolworths (Department of Sports, Arts, Recreation & Culture, 2007). The informal retail channels
consist of those involved craft producers selling directly to consumers such as the street hawkers operating alongside
the Tshwane Zoo in Tshwane, South Africa.

Formal craft retailers consequently form an important part of the value chain. Retailers provide access
points to the consumer market for most products (Collins & Burt, 2003). This makes selling to formal craft retailers
and an understanding of an effective and efficient supply chain practice of great significance to craft producers,
since it will help them create competitive advantages for their businesses and gain access to a bigger share of the
market.

LITERATURE REVIEW

Supply chain management (SCM) is a key to success for any businesses as purchased goods and services
account for 80 percent of sales revenue (Quayle, 2003). Managing SCM can create a competitive advantage as well
greater profit for businesses (Chen & Li 2006, Li 2006; Cooper & Ellram, 1993). SCM and related strategies are
crucially important to the success of a manufacturing firm because the cost and quality of goods and services sold
are directly related to the cost and quality of goods and services purchased (Koh, Demirbag, Bayraktar, Tatoglu &
Zaim, 2007). Building effective supply chains offers businesses opportunities to create sustainable competitive
advantage (Cooper, Lambert & Pagh, 1997). SCM impact on key competitive dimensions such as product
availability, order to delivery cycle time, costs, and customer service (Tracey, Lim & Vonderembse, 2005).

The Global Supply Chain Forum defines the supply chain as the integration of key business processes from
the end user through to original suppliers, and which provides products, services and information that add value for
customers and other stakeholders (Lambert & Cooper 2000). This definition includes upstream linkages, such as
sources of supply, the internal linkages inside the business and downstream linkages such as distribution to ultimate
customers. These activities are concerned with the integration of business processes from end user through to
original suppliers that provide products, services and information and add value for customers (Burt Petcavage. &
Pinkerton, 2012; Mangan Lalwani, Butcher, & Javadpour, 2012; Trott 2012:412; Hugo & Badenhorst-Weiss 2013).
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Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Hilletofth (2009) define supply chain management as a set of approaches utilised to efficiently integrate and
coordinate the materials, information and financial flow across the supply chain so that merchandise is supplied,
produced and distributed at the right quantities, to the right location, at the right time, in the most cost efficient way,
whilst satisfying customer requirements. According to Pienaar and Vogt (2012), the purpose of supply chain
management is to create value, enhance efficiency, and to satisfy customers.

There are four major components of an SCM:

• The flow of physical materials from suppliers, downstream through the business itself and finally to
distributors and/or customers
• The flow of money upstream from customers back to companies and suppliers
• The flow of information up and down the stream
• The flow of products back (upstream) from the customers, typically for repair or recycling (Arnold, Slama
& Sisler, 2012).

This research will focus on the first component, with specific focus on the downstream linkages, to
determine the supply chain practices of craft producers. Furthermore, Sutherland & Canwell (cited in Pienaar &
Vogt 2012) define supply chain as the integrated management and control of the flow of information, materials and
services from suppliers of raw materials, through to the factories, warehouses and retailers, to the end customers.
SCM offer several benefits including product and delivery process quality such as shorter delivery times, more
reliable delivery promises, fewer schedule disruptions, cost savings (for example, significant reductions in
inventories) and risk reductions (Bask & Juga, 2001).

Supply chain include all the activities involved in delivering a product from raw material through to the
customer including sourcing raw materials and parts, manufacturing and assembly, transportation, warehousing and
inventory tracking, order entry and order management, distribution across all channels, delivery to the customer, and
the information systems necessary to monitor all of these activities (Lummus & Vokurka, 1999; Tan, 2001). Grant,
Lambert, Stock and Ellram (2006) grouped the SCM activities as consisting of customer service and support;
demand forecasting and planning; purchasing and procurement; inventory management; order processing and
logistics communications; material handling and packaging; transportation; facilities site selection, warehousing and
storage and return goods handling and reverse logistics. Chan and Qi (2003) suggested that supply chain activities
include supply base management; inbound material transportation and storage; outbound transportation and
distribution; manufacturing; warehousing and marketing and sales. SCM can benefit businesses both in the short
term and long rum. Its short-term objective is to increase productivity and reduce inventory and cycle time, while
the long-term strategic goal is to increase customer satisfaction, market share, and profits (Tan, 2006). The purpose
of this study is to investigate the supply chain practices of craft producers in South Africa. Specifically, the research
will investigate the SCM activities such as the production strategy, distribution, order placement, warehouse/factory
space, transportation and inventory management. This will determine how craft businesses perform and practice the
activities in the supply chain.

The quality of the SCM activities of production, warehousing, inventory control, and outbound
transportation has important repercussions regarding the firm’s capacity to satisfy customers. For businesses to
please customers, they need to produce and deliver the right product at the right time and at the right place (Tracey
et al, 2005). This implies that businesses must have certain abilities to keep the stock at the warehouse for delivery
as and when customers need them. Transportation maintains the flow of goods from the plant, through the
distribution network and to the final customer and impact on customer satisfaction. The choice of the transportation
method used determines how effective transportation will be and has impact on the product’s cost (Thompson &
Manrodt, 1997).

Productive and profitable businesses examine their internal as well as external processes for the creation
and distribution of goods and services. This enable manager to access the value of activities in each process and
determine how to increase the value of these activities that form a value chain from supplier to firm to distributor to
customer (Beheshti, Hultman, Jung, Opoku & Salehi-Sangari, 2007).

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Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Beheshti, Hultman, Jung, Opoku and Salehi-Sangari Beheshti, Hultman, Jung, Opoku and Salehi-Sangari
(2007) conducted a study on the use of internet in the SCM by small businesses. The study found that small
businesses use internet mainly for purchasing, followed by customer service and customer order processing. The
findings differed from those of Lacione, Smith & Oliva (2000) who found that SMEs use internet for the
management of transportation services followed by order processing and purchasing a well as relating with
customers. According to Beheshti et al (2007), inventory management is the most important area of the supply chain
management. The most common SCM practices among SMEs are the holding of safety stock and sub-contracting to
cope with uncertainties in a supply chain (Koh & Tan, 2006). However, SMEs may not have the required capacity
and resources to maintain safety (Bayraktar, Demirbag, Koh, Tatoglu & Zaim, 2009).

Most multinational corporations are pursuing different operations strategies to secure market share and
improve profits due to increasing global competition and a decline in profit margins (Gunasekeran & Ngai, 2005).
By working closely with suppliers, inventories of components and materials are minimized. Building products to
order means that there is no finished product inventory in the channel to manage (Bowersox, Stank & Daugherty,
1999).

Customer satisfaction is influenced by the quality of the manufacturer’s outbound transportation service. It
maintains the flow of finished goods from the plant, through the distribution network, and often concluding with
delivery to the final customer. Its effectiveness depends on choices made concerning the method of shipment, the
specific carrier(s) used, the route, and compliance with local, state, federal, and international regulations. Even
though it accounts for a significant share of a product’s cost and is critical to customer satisfaction, transportation is
often the missing link in SCM (Thompson & Manrodt, 1997).

The advancement in Internet technology has created many opportunities for large and small enterprises.
The Internet is a low-cost way of conducting economic activities (De Klerk & Kroon, 2005). It provides a number of
benefits including email messaging, communication with customers, placing business and product information on
the Internet, access to product and component information, search for new suppliers, gathering of information about
current suppliers, providing information to suppliers, gathering competitive information and online ordering (Cloete,
Ourtney & Fintz, 2002; Osmonbekov, Bello & Gilliland, 2002). Suppliers can also post information about their
products and businesses and allow for the placement and filling of orders, and facilitate product delivery and service
performance (Gilmore, Gallagher & Henry, 2007).

The Internet has become the most important medium for craft producers (United Nations Educational
Scientific & Cultural Organisation, 1997) and can bring enhancement to craft producers that are willing and able to
integrate their marketing and daily operations (Batchelor & Webb 2002). Internet adoption could give small
businesses a wider market access since they can reach customers across the globe that they would otherwise not be
able to reach owing to resource limitations. Internet adoption also helps enterprises to gather information about their
customers, to keep abreast of changes in consumer behaviour as well as to gain new product ideas (Migiro &
Ocholla 2005). The Internet-based supply chain management provides many opportunities for businesses and
includes streamlining the supply chain, improving speed, lowering costs and to be more flexible ((Lankford 2004). It
improves communications among customers and suppliers and can also smooth the existing flow of goods and
services throughout the supply chain (Lancioni et al., 2003).

Small and Medium Businesses (SMEs) and the Supply Chain

Research on supply chain has focused to a large extent on large businesses (Burt et al, 2012). There is
dearth of literature on small business supply chain management. Small businesses do not have an effective supply
chain management (SCM) (Vaaland & Heide, 2007). They end up being reactive instead of proactive in their supply
chain. This in turn creates supply chain and logistic challenges for them (Voortman & Makhitha, 2014). SMEs are
not able to implement SCM fully because they are managed at arm’s length by larger customers and have to follow
the norms stipulated by the buyer (Arend & Wisner, 2005). They are known to have few products, few customers
and low volume, lacking economies of experience and learning capacity, being bounded rational, having higher
capital and transaction costs, having a reactive nature, being technologically focused with weak marketing skills and
having limited resources (Coviello & McAuley, 1999; O’Gorman, 2001).

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Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Thakkar, Kanda and Deshmukh(2008) define supply chain from a small business perspective as a set of
business activities including purchase from open/spot market, manufacturing or processing of
subcomponents/subassembly within the plant and delivery to large enterprises using hired transportation to enhance
value of end product and in-turn to ensure long-term regular purchase orders.

Supply chain inefficiency is one of the most prevalent issues facing the small- to mid-size enterprise
(Lewis, 2005). SCM can provide quality, cost, customer service, leverage and even risk reduction benefits for the
SMEs but exposes the SME to greater management and control hazards while reducing its private differentiation
advantages (Arend & Winser, 2004). Purchasing seems to have received little attention from owner-managers and
was ranked 14 out of a total 19 attributes valued by SMES owner-managers when managing their firms (Quayle,
2000). SMEs face severe pressure to produce the ‘‘best’’ product, at the cheapest price, and with the shortest
manufacturing lead time (Thakkar et al., 2008).

SMEs are less likely to harness the benefits of SCM and also experience difficulties in implementing SCM
practices (Vaaland & Heide, 2007). SMEs do not implement SCM deeply as much as the large businesses. SMEs
lack of effective adoption of SCM techniques and ignore issues such as new technology, R&D and ecommerce,
which are normally associated with innovations in a supply chain context (Quayle, 2003). However, SMEs consider
email order processing as important in future (Vaaland & Heide, 2007).

Problem Statement and Objectives

The craft industry is dominated by small and medium craft producer businesses (Hay, 2008). There is a
lack of reliable and accessible research data (Department of Economic Development, 2009), which impedes the
industry’s development and competitiveness. Supply chain and logistics are the major challenges facing the industry
(Department of Sports, Arts, Recreation & Culture, 2007). Craft producers face difficulties selling their products due
to lack of access to production and retail space, lack of access to equipment and raw materials, lack of access to
information, marketing and markets, lack of access to finance and lack of access to transportation (Department of
Sports, Arts, Recreation & Culture, 2007).

Although some research has been conducted on the craft industry in South Africa, no research studies exist
on the supply chain practices and challenges of the craft producers in South Africa. Existing research focused on
marketing of craft products and include craft product development by design (Rankin, 2007), product development
strategies for community craft projects in Mpumalanga (Grobler, 2005) and the importance of a market-led approach
to the growth and sustainability of craft businesses (Obiri, 2002). Additional studies include craft marketing
strategies in roadside Kwazulu-Natal (KZN) (Dludla, 2005), craft retailers’ supplier selection criteria –a key to
market access (Makhitha, Wiese, Van Heerden, 2014), reflections on the constraints in entrepreneurial development
among emerging survivalist and micro craft enterprises in Gauteng (Dhurup & Makhitha, 2014) and increasing
South Africa’s contribution to the global trade in craft (Sujee, 2008).

Voortman and Makhitha (2014) studied the integration of supply chain and product strategy of craft
producers. It was found that the supply chain and logistic efficiency of the small craft businesses was very poorly
defined and that they could not afford or utilise transport and storage optimally. The purpose of this research was to
investigate the supply chain practices of craft producers in South Africa. Specifically this research will:

•! determine the supply chain practices of producers in the craft industry

•! determine the SCM challenges facing the craft industry in SA.

Research Methodology

The study adopted a survey method targeted at craft producers in Gauteng, South Africa. This included
craft producers producing different types of products. A non-probability convenience sampling method was adopted
owing to the difficulties of identifying craft producers and the fact that there was no reliable and easily accessible
database of craft retailers. The convenience sampling method is suitable when there are time constraints and lists of
available units are either incomplete and not up-to date, as with the case of SA craft producers (Cooper & Schindler,
2006).
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Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Data were collected using bachelor of technology logistics students from a university of technology.
Students were trained to perform their fieldwork duties. Data were collected from either owners or managers of the
businesses. Since the study adopted the convenience sampling method, craft producers that were located in flea and
craft markets were targeted for the sample. Flea and craft markets are the places most visited by tourists and other
consumers looking for craft products. A total of 250 questionnaires were completed, however, only 199 of them
were considered usable. The other questionnaires were discarded because they were either incomplete or many had
missing answers. This yielded a response rate of 80 percent.

A questionnaire was developed based on the literature of previous studies, including government sources
such as reports from the South African Craft Industry and Department of Trade and Industry. There were 40
questionnaire items, which measured five constructs: production strategy, distribution, order placement,
warehouse/factory space, transportation, inventory management and Internet adoption. Questions were formulated in
Likert-scale format with 1=strongly disagree, 2=disagree, 3=moderately agree, 4=agree and 5=strongly agree. There
were six items measuring production strategy, four measuring distribution, six measuring order placement, seven
measuring warehouse/factory space, five measuring transportation, six measuring inventory management and six
measuring Internet adoption. There were two demographic items in the questionnaire, one measuring the length of
time the business was in operation and the other determining the number of workers employed by each enterprise.

Data were analysed using SPSS version 22. Descriptive statistics and factor analysis were conducted and
the results are reported and discussed in the next section.

Reliability and Validity

The reliability assessment for the supply chain instrument was ascertained by computing the Cronbach
alpha coefficient values. According to Malhotra (2010), Cronbach alpha coefficients of less than 0.50 are deemed
unacceptable; those between 0.50 and 0.69 are considered as being adequate, whereas those above 0.70 are regarded
as being acceptable in social science enquiry. The sub-scale reliability values ranged between 0.345 and 0.904,
while the standardised Cronbach alpha value for the entire scale was established at 0.785, indicating an acceptable
level of internal consistency among the scale items.

Content validity is the representativeness of the content of the measurement instrument (Malhotra, 2010).
The questionnaire was pilot-tested with a sample of 30 conveniently selected respondents in order to check the
wording, phrasing and language appropriateness of the questionnaire items. Exploratory factor analysis was
conducted with a view to establish construct validity of the scale. There were no cross-loadings among the factors,
thus providing evidence of discriminant validity (items loading on each construct were theoretically dissimilar from
those loading on the other constructs) as suggested by Zikmund & Babin (2007).

RESULTS

Descriptive Statistics

The sample consisted of craft producers operating in Gauteng province, South Africa. Of the 199 craft
producers, majority (30%, n=61) of them have been operating for between three and five years. This was followed
by those that have been in operation for between six and 10 years and were represented by 25 percent (n=50) of the
respondents. This is shown in Table 1. Since craft producers are mostly small businesses, the majority (58%, n=96)
of the businesses employ two and five persons, followed by those who work by themselves (37.7, n=75).

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Table 1. Demographic profile of respondents

Variable Categories Population Sample frequency Percentages
Less than 1 year 199 11 5.5
Between 1 and 2 years 199 28 14.1
Years of business operation Between 3 and 5 years 199 61 30.7
Between 6 and 10 years 199 50 25.1
More than 10 years 199 49 24.6
I person- myself 199 75 37.7
1-5 persons 199 96 48.2
No of people employed
6 to 10 persons 199 16 8.0
More than 10 people 199 3 1.5

Table 2 depicts the mean and standard deviation of the variables. As can be seen from the table, craft
producers place more emphasis on order placement and inventory management. The mean scores for ‘customers can
order the product over the phone’ is 3.86, higher than for all the SCM activities listed in the table. This is followed
by the inventory management practice ‘keep enough stock to supply as and when there is an order’ which has a
mean score of 3.81. Another important practice for craft producers is ‘design and produce products according to
customer specification’ M=3.77 followed by ‘customers visit the factory whenever they want to buy’ (M=3.66).
Craft producers use less rail transport to deliver their goods (M=2.01). Due to lack of access to own transportation,
craft producers make use of public transportation to deliver goods to customers. They use Internet less to sell and
advertise their products (M=2.39). Overall, internet adoption is moderately practiced by craft producers.

Table 2. Descriptive statistics: Mean and standard deviation

Variable Variable description M SD
Produce few products at a time 3.11 1.293
Produce products as and when we receive the order 3.11 1.384
Production Produce products to keep in the warehouse 3.43 1.270
strategy Design and produce products according to customer specification 3.77 1.264
Do not have access to production machinery 3.23 1.390
We cannot produce in bulk 2.77 1.303
Customers come collect products at the factory 3.42 1.305
Products are delivered to the customers 3.14 1.240
Distribution
Products are couriered to international customers 2.97 1.548
Customers buy and collect products at the exhibition 3.64 1.235
Customers visit the factory whenever they want to buy 3.66 1.325
Customers can order the product over the phone 3.86 1.221
Customers can order the product by email 2.85 1.463
Order placement
Customers can order the product at the exhibitions 3.53 1.346
Customers can order the product via the Internet 2.67 1.449
It is sometimes difficult for customers to contact us when they want to place orders 2.53 1.202
Have my own space 3.56 1.326
I share the space with others the space 3.22 1.381
Use space provided by government buy pay for it 2.69 1.396
Warehouse/
Warehouse and production space pose a major challenge for my business 3.16 1.357
factory space
Renting out the space is very expensive 3.44 1.408
There is not enough space to keep the stock 3.31 1.344
It is difficult to find a less expensive space for rental 3.56 1.379
Use my own transport 3.48 1.430
Hire a delivery vehicle as and when there is an order to deliver 2.79 1.310
Transportation Use public transport to deliver goods to customers 2.55 1.322
Use rail transport to deliver our goods 2.01 1.111
Transportation is one of the major challenges facing my businesses 3.06 1.434

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(Table 2 continued)
Variable Variable description M SD
Keep enough stock to supply as and when there is an order 3.81 1.187
Produce products as and when there is an order 3.27 1.140
Inventory It takes us two weeks to produce products for big orders 3.09 1.101
management Do not have enough space to keep our products 3.02 1.305
It cost us more to keep the stock 3.02 1.323
Customers sometimes require more stock than we have available 3.32 1.311
Internet Have access to own Internet 2.69 1.454
Access Internet at the Internet café 2.83 1.320
Use Internet to sell and advertise the products 2.39 1.319
Use of email to communicate with customers 2.67 1.358
Internet is useful for our businesses 2.90 1.438
Use of email to communicate with suppliers 2.60 1.387

Factor analysis

Factor analysis was conducted to ascertain whether the variables developed from a review of the literature
and from the preliminary qualitative research could, in fact, be grouped into meaningful dimensions to describe the
supplier selection criteria and sources of information. The main purpose of factor analysis is to define the underlying
structure among variables in the analysis (Hair et al., 2010). The principal component factor analysis with varimax
rotation was performed. Principal component analysis establishes which linear components exist within data and
how each variable contributes to that component (Field & Miles, 2010).

Prior to performing the factor analysis, the suitability of the data for factor analysis was assessed. Pallent
(2010) states that, ideally, the overall sample size should be over 150 for factor analysis; therefore, the sample size
for this study of 199 was deemed sufficient. The Bartlett test was used to test the overall significance of all
correlations within the correlation matrix (Hair et al., 2010). It evaluates all factors and each of the factors is
evaluated separately against the hypothesis that there are no factors (Tabachnik & Fidell, 2001). The Kaiser-Meyer-
Olkin (KMO) measure of sampling adequacy of 0.716 indicated that the data were suitable for factor analysis.
According to Field & Miles (2010), a KMO closer to one indicates the patterns of correlations that are relatively
compact and that factor analysis could yield distinct and reliable factors. Items with factor loading of 0.5 were
considered part of the variables and those with less than 0.5 were omitted.

The total variance explained by the extracted factors was 64.46. As guided by Kim and Mueller (1978), the
threshold of 0.37 to 0.82 was maintained on the communalities, as well as a cut-off point of 0.30 on the item-to-total
correlations. This resulted in nine items being dropped from factor analysis after they loaded unsatisfactory in the
initial scale refinement procedure, suggesting that those items may be incapable of differentiating between factors.
Table 3 shows nine factors. Factor 1 loaded six factors, and was named Internet adoption; this factor had a 13.23
percent variance. Items loaded in this factor included ‘have access to Internet’, ‘access Internet at the Internet café’,
‘use Internet to sell and advertise the products’, ‘use of email to communicate with customers’, ‘Internet is useful for
our businesses’ and ‘use of email to communicate with suppliers’.

Factor 2 was named factory visit and included items such as ‘customers come collect products at the
factory’, ‘customers visit the factory whenever they want to buy’ and ‘design and produce products according to
customer specification’. It constituted 11.93 percent of the variance. The next factor, Factor 3, had 8.42 percent of
the total variance and was named SCM challenges since it addressed some challenges that craft producers
experiences. These included ‘It is difficult to find a less expensive space for rental’, ‘renting out the space is very
expensive’ and ‘transportation is one of the major challenges facing my businesses’.

Factor 4 was named factory space and included items such as ‘There is not enough space to keep the stock’
and ‘do not have enough space to keep our products’. It comprised of 5.14 percent of the total variance. Factor 5
loaded two items ‘Customers can order the product by email’, ‘customers can order the product via the Internet’ and
‘products can be couriered to international customers’. This factor was named online ordering. It constituted 4.60
percent of the total variance.

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The next factor, Factor 6, loaded 4.05 percent of the total variance and was named exhibition. It included
two items such as ‘customers can order the product at the exhibitions’ and ‘customers buy and collect products at the
exhibition’. Factor 7 loaded three factors accounting for 3.92 percent of the total variance and included ‘use rail
transport to deliver our goods’, ‘use public transport to deliver goods to customers’ and ‘hire a delivery vehicle as
and when there is an order to deliver’. It was named transportation (transport).

The next factor, Factor 8, loaded two items, was named resources and included ‘use my own transport’ and
‘have my own space’. It loaded 3.66 percent of the total variance. This was followed by Factor 9, which loaded three
factors and included items such as ‘Produce products as and when there is an order’, ‘It takes us two weeks to
produce products for big orders’ and ‘Produce products as and when we receive the order’. This was named
production strategy and it constituted 3.46 percent of the total variance.

Factor 10 was named distribution and loaded two items. These included ‘Products are delivered to the
customers’ and ‘Customers can order the product over the phone’. The total percentage of variance was 3.01
percent. The last factor, Factor 11 also loaded two items and constituted 3.00 percent of the total variance. The items
loading were ‘Do not have access to production machinery’ and ‘cannot produce in bulk’.

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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Table 3. Factor analysis

Factor 1 Factor 3 Factor 4 Factor 5 Factor 9 Factor 11
Factor 2 Factor 6 Factor 7 Factor 8 Factor 10
Internet SCM Factory Order Production Resource
Factory visit Exhibition Transport Resources Distribution
Adoption challenges space placement strategy constraints
Use of email to communicate with
.901 .015 -.033 -.003 -.023 .016 -.021 .093 .030 .028 -.018
customers
Have access to own Internet .850 .058 .038 -.052 -.013 -.065 -.028 -.030 .047 .043 .065

Internet is useful for our businesses .845 -.069 .129 -.040 .051 -.031 .042 -.069 -.019 -.092 .030
Use of email to communicate with
.834 -.036 .038 .049 .042 .073 .109 .091 .007 .006 .114
suppliers
Use Internet to sell and advertise the
.814 .064 -.036 .057 -.031 -.131 -.084 .031 .041 -.083 -.040
products
Access Internet at the Internet café .674 -.184 -.098 .021 -.075 .187 -.039 -.120 .021 .115 -.168
Customers come collect products at the
.014 .782 .234 -.047 .008 .103 -.019 .015 .040 .026 -.025
factory
Customers visit the factory whenever
-.048 .779 .026 .092 -.075 .095 .004 .135 .053 .046 .003
they want to buy
Design and produce products according
-.068 .537 -.128 .202 .200 -.004 .106 -.063 .257 .137 -.068
to customer specification
It is difficult to find a less expensive
-.036 -.104 .776 .063 .026 -.100 .073 .096 .153 .243 .080
space for rental
Renting out the space is very expensive .061 .152 .766 .212 .087 .014 -.033 .038 .052 -.051 -.073
Transportation is one of the major
-.033 .047 .546 .207 -.158 .226 .272 -.144 -.088 -.151 .114
challenges facing my businesses
Do not have enough space to keep our
.027 .082 .075 .779 -.102 .013 -.029 -.127 .135 .020 .050
products
There is not enough space to keep the
-.080 .076 .305 .647 .077 -.051 .106 .145 .018 .081 .043
stock
Customers can order the product via the
-.025 -.035 -.042 .084 .833 .032 .028 .082 -.022 .045 -.069
Internet
Customers can order the product by
-.037 .028 .088 -.066 .800 .085 -.129 .016 .112 .223 -.034
email
Products are couriered to international
.067 .192 -.008 -.105 .553 .374 .247 .140 -.059 -.067 .087
customers
Customers buy and collect products at
-.040 .118 -.025 -.018 .094 .808 .024 .121 .048 -.103 .125
the exhibition

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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

(Table 3 continued)
Factor 1 Factor 3 Factor 4 Factor 5 Factor 9 Factor 11
Factor 2 Factor 6 Factor 7 Factor 8 Factor 10
Internet SCM Factory Order Production Resource
Factory visit Exhibition Transport Resources Distribution
Adoption challenges space placement strategy constraints
Customers can order the product at the
.020 .156 .081 .102 .151 .741 -.101 -.023 .181 .297 -.060
exhibitions
Use rail transport to deliver our goods -.039 -.032 -.027 -.124 .036 -.015 .798 .054 .062 -.120 -.018
Use public transport to deliver goods to
.040 .081 .266 .238 -.177 -.110 .657 -.133 .091 .218 .122
customers
Hire a delivery vehicle as and when
-.006 -.016 .050 .511 .158 .122 .545 -.040 -.010 -.001 -.026
there is an order to deliver
Use my own transport .033 .003 .043 .110 .084 .032 -.028 .784 -.008 .002 -.091

Have my own space -.035 .236 .030 -.197 .099 .081 -.021 .695 .112 .154 .119
Produce products as and when we
.048 .078 -.106 .020 .002 -.106 .061 -.067 .808 .041 .015
receive the order
It takes us two weeks to produce
-.023 -.007 .132 .010 .028 .216 -.032 .247 .609 -.037 .169
products for big orders
Produce products as and when there is
.106 .231 .196 .100 .023 .180 .080 .007 .552 .074 .047
an order
Customers can order the product over
-.044 .388 .119 -.058 .154 .210 .058 .004 .131 .667 .186
the phone
Produce products as and when we
.032 .166 -.002 .096 .321 -.101 -.081 .176 -.017 .545 .110
receive the order
Cannot produce in bulk .013 -.054 .027 -.015 -.050 .045 .067 -.199 .092 -.030 .746
Do not have access to production
.013 .057 .033 .109 -.013 .037 -.020 .177 .069 .177 .681
machinery
% of variance Total variance: 64.46 13.23 11.93 8.42 5.14 4.60 4.05 3.92 3.66 3.46 3.01 3.00
Eigen values 4.631 4.177 2.949 1.800 1.611 1.420 1.373 1.282 1.212 1.056 1.052
Factor reliability .904 .639 .658 .575 .750 .640 .578 .512 .506 .511 .345

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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

Implications and Recommendations

This study investigated the supply chain practices of craft producers in Gauteng, South Africa. Craft
producers place more emphasis on some supply chain activities than on others. Although craft producers have access
to the Internet, there is no indication that the Internet is fully adopted by craft producers since some of them still
access the Internet at the Internet café. It is still of limited use and confirms previous studies on Internet adoption by
small businesses that found that the Internet is considered of moderate importance by small businesses (Cloete et al.,
2002; Department of Sports, Arts, Culture & Recreation, 2008; Al-Allak 2010). Craft producers could use internet to
communicate out of stock situations with the customers and can also use it for order processing.

Customers visit the factory to collect their products, which is also necessary if products are designed
according to customer specifications. Customers can also visit the factory to discuss their specifications with the
craft producers. Craft producers face challenges regarding the availability of factory space and transportation.
Where factory space is available it is too expensive for them to afford. This is why craft producers do not have
sufficient space to keep their products. Transportation poses a challenge since some craft producers do not have their
own transportation and have to either hire delivery vehicles or use public transport. These findings are similar to
those of Voortman & Makhitha (2014). Another challenge is the fact that craft producers do not have access to
machinery and that they cannot produce in bulk. This is a disadvantage should they receive a big order that requires
bulk production. However, craft producers could overcome this challenge by cooperating with other craft producers
and co-produce the products in order to meet the quantity needs of customers.

Craft producers use various methods of order placement including ordering via the phone and the Internet.
The use of a phone is convenient since this is the main method of communication on which craft producers rely. The
fact that customers can order products at the exhibition also provides an opportunity for craft producers to reach
more customers. This applies specifically to those who might not be able to visit the factory or reach them by phone
and email. However, not all craft producers can afford to exhibit their products (Voortman & Makhitha, 2014).

Craft producers also adopt various production strategies where products can produced as and when there is
an order, but also produce to keep at the warehouse. Producing as and when there is an order helps them overcome
the space challenge, since they might not be able to produce more products to keep at the warehouse due to shortage
of space. It also takes craft producers two weeks to execute an order, which implies that producing as and when
there is an order is more suitable for the businesses. However, craft producers might have to continue producing
products to keep at the warehouse, especially standardised products that customers might want without delay. Since
some customer require more products than craft producers have available to supply, producing to keep at the
warehouse might help them keep the customers. Collaborating with other craft producers would mean that they are
able to share the order with other craft producers. Hence they will be able to supply enough stock when required by
the customer.

With regard to the distribution system followed, craft producers deliver to customers and customers can
also collect the stock at the exhibition or the factory. They also deliver to international customers. Craft producers
should continue practicing this system due to resource contains. However, they could improve the use of email as an
order placement system.

Craft producers produce products to keep at the warehouse; however they incur high costs of keeping the
stock. They could try to keep a balance the stock they keep at the warehouse with designing as and when there is an
order. This implies they will keep the stock at a minimum level yet enough to supply customers when they need the
stock.

CONCLUSIONS

Craft producers do not have an effective and efficient SCM. They face major challenges with transportation
and availability of factory space. They adopt various production strategies by producing products to keep at the
warehouse and also produce as and when there is an order. This implies they produce standardized products and also
design products according to customer specifications. Although transportation poses a major challenge, craft
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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6

producers explore other transportation methods such as use of public transportation to deliver products to customers.
Craft producers use various order placement systems, however, they could improve the use of email and internet,
which would enable them to target customers outside the provinces as well as those outside the country. Although
some craft producers have their own factory space, this still pose a major challenge due to unavailability of space
and the fact that available space is unaffordable. Craft producers produce products to keep at the warehouse,
however, inventory keeping costs are high. They also avoid keeping stock at the warehouse by producing as and
when there is an order.

Ethical Considerations

A structured questionnaire was distributed among craft producers in SA to investigate the supply chain
practices and challenges in the craft industry. There were no questions of a personal and private nature. The
questionnaire cover letter was attached, which requested craft producers to voluntarily take part into the research by
completing the questionnaire. Data were treated with confidentiality.

Limitations of the Study

The study only targeted craft producers in Gauteng, South Africa and cannot be generalised to practices of
craft producers in other provinces. It could also not be generalized to craft producers in other countries. Another
study could investigate SCM practices of craft producers and small business in all provinces in South Africa as well
as those in other countries. Furthermore other studies could investigate consumer behavior when buying crafts since
no such studies exists in South Africa. The nature of the buyer supplier relationships in the craft industry supply
chain could also be investigated.

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