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An Analysis of Logistic System for the Development of SMEs Print E-mail

and Community Enterprises in Upper Northern Thailand (Lanna Provinces)

Komsan Suriya, Siriporn Srichoochart and Kansinee Guntawongwan
Faculty of Economics, Chiang Mai University and Social Research Institute, Chiang Mai University
July 2008

The study emphasized on the analysis of supply chain and logistic system of both manufacturing industry and service industry operated by small and medium enterprises (SMEs) and community enterprises in Upper-Northern Thailand. Wooden products in Chiang Mai and Indigo-dyed garments and hand-woven fabrics in Phrae were selected for the study on the manufacturing side. Four issues were investigated in this first part.

First: Satisfaction and the decision of modal choice in goods transportation
Second: Hedonic pricing in goods transportation
Third: Vulnerability against the oil crisis and the decrease of wood
Fourth: A survey of supply chain and logistic system of indigo-dyed garments and hand-woven fabrics in Phrae

In the second part, community-based tourism and the information flow via brochure were raised for the study in the service industry. There were 2 issues.

First: Sanitation and safety of tourists in community-based tourism
Second: Information flow to foreign tourists via brochure

 These two parts of the study covering 6 issues matched the Master Plan of Logistic Development of Thailand 2005 ? 2008. The conclusion of each issue was reported below.

Issue 1: Satisfaction and the decision of modal choice in goods transportation

 Logistic cost of a wooden furniture manufacturer was around 10 percent of its sale. The cost of a manufacturer of bamboo product was only around 4 percent of the sale. The cost of both manufacturers were around 11 ? 13 percent of their total cost.
 Door-to-door transportation service was the most wanted service for entrepreneurs. However, the service has not been available on the rail transportation. Moreover, the incapability of distribution from the Northern region to other provinces other than Bangkok made entrepreneurs reluctant in using rail transportation. In case that the rail transportation did not provide the door-to-door service, its customers would be limited just those enterprises in Sankampang district, Chiang Mai, where the location is not so far from the railway station. Enterprises located further tend not to use rail transportation. community enterprises were rarely customers of rail transportation because of two reasons. First, they were in distant area from the railway station. Second, they need to transport fewer goods which could be loaded in their own pick-ups.

Issue 2: Hedonic pricing in goods transportation

 Door-to-door service was a powerful tool for private transporters to gain popularity among SMEs and community enterprises. The service helped entrepreneurs reduce their burdens in driving to downtown. However, the driving cost was paid in the form of service charge instead. This study calculated the door-to-door service charge indirectly. The cost was around 87 Baht (approximately $2.64 or ?1.74) for a product and its package weighting together around 30 kilograms.
 An over-night express transportation was the second popular service. The third popular service went to the transportation to other provinces out of Bangkok. The fourth popularity belonged to the establishment of the transportation service point near factories.
 The hedonic pricing showed that one additional kilometer cost 0.94 Baht (around $0.03 or ?0.02). One additional kilogram cost 4.67 Baht (around $0.14 or ?0.09). Packaging service cost 144 baht per piece (around $4.36 or ?2.88). Door-to-door service cost 87 Baht (around $2.64 or ?1.74) per piece (around 30 kilograms). Combine all attributes then minus 811 Baht ($24.58 or ?16.22). The result represented a rough calculation of the transportation cost.

Issue 3: Vulnerability against the oil crisis and the decrease of wood

 Behaviors of SMEs and community enterprises determined the volatility against the oil crisis and the decrease of wood. The most important strategic behavior was making the ?differentiation? via capacity building in product design and development. Enterprises which frequently launched new products to market and conducted marketing survey showed less vulnerability against the problems.
 SMEs used internet more than community enterprises in every fields; news online, email, and searching for online information. However, the use was not much enough to help reducing the logistic cost for the enterprises.

Issue 4: A survey of supply chain and logistic system of indigo-dyed garments and hand-woven fabrics in Phrae

 A critical problem in the supply chain and logistic system was at the product design and development process. The process determined how much value added that a product could create from raw materials and time spent into the manufacturing. The ignorance in the improvement of this process caused the mismatch of products and market needs. The sales would be fall. Then price war would be occurred among manufacturers. Although transportation cost could be cut, the saving money would be spent in the price war via a further price reduction instead.

Issue 5: Sanitation and safety of tourists in community-based tourism

 Safety could be ensured in community-based tourism. Local people in tourism villages welcomed tourists with their hospitality in peaceful environment. Security volunteers in the villages guarded local people as well as tourists. Food sanitation was as good as it could be available in the mountainous and remote rural area. Toilet was clean. Mosquitoes and mosquitoes-related diseases were controlled seriously and frequently by sanitary volunteers.
 An only problem in the logistic system was at the capacity of medical care in an emergency case. The availability of medical personnel, medical instruments and medicines were not enough to handle a serious case of injury. Moreover, the exit transportation from the village could be difficult especially at night.

Issue 6: Information flow to foreign tourists via brochure

 Brochure was a production of information which was categorized in the logistic system as an information flow. Chiang Mai as seen from tourism brochures was a town suitable for relaxation both in physical and mental health. The surrounding of nature and beautiful scenery with the harmonization of the Northern (Lanna) culture was served with modern facilities.
 Although the informational production was not restricted so much under regulations, it was controlled by a social mechanism, the response of local Chiang Mai people, instead. The consequent was that there was no brochure introducing negative side of the city. Besides, the cultural and social capital of the city was not be abused by the informational production.
 Whereas the social mechanism ensured that the brochures introduced only the positive side of Chiang Mai, the market mechanism launched the highest number of brochures in the advertisement of accommodations; hotels, resorts and guesthouses. However, not only commercial brochures were available but also brochures introducing Chiang Mai city as a whole. This category of brochures was not only produced by public organizations but also by private enterprises which were taking the risk in losing their money in promoting the whole tourism industry. Before the bankruptcy, the advertisement would come to support this kind of brochure on time and indeed it became a business. However, it was seen as a merit decision in taking this kind of risky investment. The consequent was a win-win solution for both the business and the tourism city.

Purchasing Full Text
(Printed report, ISBN 978-974-672-333-6, 1st ed., 2008, 289 pages, A4, in Thai, 500 Baht)
Please contact
Social Research Institute, Chiang Mai University, following this link
In case of the stock run out, the book is available at the main library, Chiang Mai University.



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