The relationships between supply chain and firm performance

Simon Templar

105 citations0/0 files storedInternational Journal of Physical Distribution & Logistics Management

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Quality and Supply Management Supply Chain and Inventory Management Working Capital and Financial Performance

Abstract

Purpose Supply chains directly influence the differentiation and cost of a firm's products and services and its exposure to risk. The purpose of this paper is to use secondary financial data to explore the relationship between supply chain and firm performance by developing a unified proxy for supply chain performance. Design/methodology/approach Established econometric techniques were used to validate the proxy using a sample frame comprising the annual reports of 117 publicly traded UK manufacturing firms from the period 1995 to 2004. Findings Increases in change in the proxy lead to an increase in change in the rate of return on capital employed and a change in the rate of cash‐to‐cash cycle length, both of which are traditional measures of improved supply chain management. Moreover, as the rate of change of the proxy increases, so does enterprise value at a level that is statistically significant, indicating that improving supply chain management practices has a positive impact upon improved firm performance. Research limitations/implications As annual financial results were used the analysis is at a high level so there is a lack of resolution in identifying discrete causes. The use of annual financial results also means that the research can only take yearly snapshots of firm performance. Practical implications The paper indicates that the supply chain is an enabler, not an impediment, to superior organisational performance. Originality/value The originality and value of this paper is that it develops a proxy to explain the relationships between supply chain and an organisation's financial performance taking into account the three imperatives of profitability, liquidity, and productivity.

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References

2001DEFINING SUPPLY CHAIN MANAGEMENT 1991Refinement and reassessment of the SERVQUAL scale.2000Issues in Supply Chain Management 2001Arcs of integration: an international study of supply chain strategies 2003Capabilities, business processes, and competitive advantage: choosing the dependent variable in empirical tests of the resource‐based view 1994Logistics and Supply Chain Management: Strategies for Reducing Costs and Improving Services.1997HOW MUCH DOES INDUSTRY MATTER, REALLY?2005An Empirical Analysis of the Effect of Supply Chain Disruptions on Long‐Run Stock Price Performance and Equity Risk of the Firm

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