See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/256090470

Impact of Strategic Supply Chain Management on Organizational Performance

Conference Paper · April 2011

CITATIONS READS
0 6,408

3 authors:

Muhammad Shakeel Sadiq Jajja Shaukat Ali Brah

Lahore University of Management Sciences 46 PUBLICATIONS   1,734 CITATIONS   
40 PUBLICATIONS   567 CITATIONS   
SEE PROFILE
SEE PROFILE

Syed Zahoor Hassan

Lahore University of Management Sciences
26 PUBLICATIONS   331 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Exploring the Role of Buyer-Supplier Relationship and Organizational Culture in Supplier Social Compliance View project

FSMP Scheduling View project

All content following this page was uploaded by Shaukat Ali Brah on 28 December 2015.

The user has requested enhancement of the downloaded file.

Impact of Strategic Supply Chain Management on Organizational Performance

ABSTRACT

The supply chain management is gaining strategic importance for the business
firms. This is apparent from the increased coverage of strategic supply chain issues in
the management research. The interest in the strategic issues stems from the
organizational needs to look at the bigger picture as local optimum is no longer
sufficient for an organization. In a similar way, this research sets out to develop a
comprehensive research model to investigate the supply chain management as a
dimension of business strategy. The research focuses on highlighting the role of supply
chain management in business strategy. The research seeks to investigate if the supply
chain management adoption as a business strategy leads to positive outcomes.

The paper develops the construct of strategic supply chain management and
seeks to investigate its impact on internal operations of the firm and supplier
functioning. Further, the paper seeks to explore if the enhanced internal operations and
supplier functioning leads to improved organizational performance. The paper draws
upon previous management literature in order to develop the constructs on
management and suppliers. In addition, the paper uses operations management
literature on performance, including the SCOR model, for developing comprehensive
measure of organizational performance. The questionnaire and interviews with the top
decision makers in supply chain management provide the basis for testing of the
research framework. Finally, the paper outlines analysis and recommendation through
appropriate data analysis and hypotheses testing though the use of SPSS and
structural equation modeling technique using AMOS.

1. INTRODUCTION

Firms are enhancing their organizational performance to be successful in the

new markets that are more competitive and evolving rapidly over time. In order to
succeed in these markets, vigilant firms are trying to be more agile, responsive,
customer oriented and flexible to meet new objectives. The organizations have realized
the strategic importance of supply chain management and the functioning of partner
firms.

The objective of this is study is to investigate the relationship between strategic

supply chain management, internal functioning of the organization, organization’s
influence on the functioning of its partners, and organizational performance. Previous
literature on supply chain management, interviews from practitioners and academia,
and responses on questionnaire provide basis for developing valid and reliable
measures. The paper uses survey based research based upon data collected from top
manager in the industry. Furthermore, the paper uses SPSS and Analysis of moment
structures (AMOS) for data compilation, analysis and hypotheses testing.

Page 1 of 9
 2. RESEARCH FRAMEWORK

Supply chain management deals with managing the complete chain starting from
raw material to the delivery of the final product. Clearly, the importance of functioning of
partner firms in the business model cannot be overstated. This study develops a
comprehensive research model built upon extensive literature review. The study adapts
some constructs from the existing literature and adds a new dimension of business
strategy to present a comprehensive supply chain management model. The current
research presents a framework to partially fill the gap in theory of supply chain
management.

The model presented in figure 1 proposes that if achieving supply chain

management objectives is part of firm’s strategy then top management, which is
responsible for achieving strategic objective, strives for supply chain management
objectives. The model proposes that supply chain management objectives can be
achieved by influencing organization’s internal functions and external partners, such as
suppliers. The model further proposes that achieving supply chain objectives impact
positively on organizational performance.

The following sub-sections present the construct used for quantitatively testing
the model.
Strategic Supply Chain
Management

Internal Functions Supply Chain External Functions

Operational Focus Management Objectives Supplier Functioning

Organizational
Performance

Figure 1 Macro model for strategic supply chain management

Strategic Supply Chain Management (SSCM)

Supply chain management as part of business strategy has not been widely
discussed in the literature and there are limited studies that tangentially deal with
strategic supply chain management. However, there is realization that supply chain
management is growing as a strategic tool for improving on quality, cost, and customer
responsiveness for competing in twenty first century’s business markets (Tan et al.,
2002). Using survey research they show that good supply chain management practices
have positive correlation with performance. However, their study uses smaller number
Page 2 of 9
of supply chain management constructs. Yeung (2008) argues for including supplier
focus as part of business strategy and finds a positive relationship between strategic
supply management and both time based efficiency and cost based efficiency. Although
Yeung use supplier focus at strategic level but we think that scope of strategic supply
chain management should be more comprehensive than that is argued in the previous
research. Therefore, the current research includes strategic focus, customer
responsiveness, and supplier focus in strategic supply chain management.

Strategic Focus: Research shows that better service at lower cost is a source for
gaining competitive advantage over competing firms (Christofer, 1998). Moreover,
quality of product/service has positive impact on customer satisfaction, retention, market
performance, and financial performance (Kaynak, 2008). Therefore, the current
research includes focus on reducing cost and improving quality in strategic focus.

Customer Responsiveness Focus: Customer responsiveness focus is a strategic

commitment that is reflected in internal functions of the organization to improve on their
flexibility, agility, new product development time, and lead time. Sa´nchez and Pe´rez
(2005) state that supply chain flexibility has two dimensions: product flexibility and
process flexibility. According to Swafford et al. (2006), supply chain flexibility is internally
focused competency that enables firms to develop externally focused supply chain
agility. The presentation of difference between supply chain agility and supply chain
flexibility in literature is consistent with the model presented in this study. Visionary
people such as Stalk (1988) also see time as the competitive dimension in the
contemporary markets. The two dimensions of time are new product development time
and lead time.

Supplier Focus: Recent research highlights that supplier base reduction has many
benefits, such as cost effectiveness due to increased economies of scale (Hahn et al.,
1986), enhanced performance (Shin et al., 2000), and reduced transportation costs
(Bozarth et al., 1998). Due to reduction in number of suppliers, cross functional teams
are becoming common in supply chains and are significantly enhancing supplier
involvement (Santos, 2000). Hoegl and Wagner (2005) highlight the benefits of
integrating suppliers in the new product development process, and business and
strategic planning.

Operational Focus

For measuring the construct of operational focus, four second level constructs
presented below are used.

Product or Service Design: Thoroughness in review, quality and cost decisions,

interdepartmental communication, and attention towards manufacturability are critical in
its product or service performance (Brah et al., 2000).

Page 3 of 9
Process Management: Product or service design and process management go hand in
hand and the latter also has impact on business performance, quality performance, and
cost reduction through the use of statistical process control (Koufteros et al. 2005).

Use of information technology (IT): Research shows that interaction of information

technology with supply chain management influences the latter in many ways. For
example, Hendricks et al. (2007) find evidence that use of enterprise resource planning
(ERP) helps organization to improve their profitability. Lee et al. (2000) suggest that
importance of demand information sharing is vital in managing supply chain. Lack of
information sharing leads to bullwhip effect and the latter is considered as contributor in
increased cost (Levi et al., 2003).

Use of manufacturing technology (MT): The benefits of investment in computer aided

manufacturing (CAM), flexible manufacturing systems (FMS), and robotics leads to
enhanced quality with flexibility, cost reduction, and increased reliability (Kotha and
Swamidas, 2000).

Suppliers Functioning

There is broad consensus among researchers that collaboration between firm

and its supplier is important in supply chain management. The current study suggests
for achieving strategic supply chain objectives, firms should have suppliers who
demonstrate strong emphasis on (1) reduction of cost, (2) improvement in quality, (3)
process flexibility, (4) delivery reliability, (5) use of technology (IT and MT), and (6)
commitment towards achieving supply chain objectives.

Suppliers’ commitment: As mentioned earlier, commitment of top management is

necessary for success or failure of a strategic action (O'Reillya et al., 2010). Therefore,
it is argued here that commitment of top management of suppliers for achieving supply
chain objectives is essential.

Use of IT: Use of IT is important for increasing flexibility and agility (Heinrich and Betts,
2003) in supply chain operations by information sharing and collaboration (Simatupang
et al., 2008). IT helps the partner organizations to collaborate and research shows that
the latter is related to higher quality product in new product design process (Fynes et
al., 2005).

Quality practices: There is broad consensus that quality practices of suppliers have
positive relationship with buyers’ product/service design, reduction in inventory, process
improvement (Kaynak et al. 2008; Sila et al., 2005).

Cost effectiveness: Supplier cost has direct contribution on the price of final
product/service. Firms collaborate with their suppliers for cost reduction efforts and cost
is one of the primary determinants in supplier selection process (Smytka et al. 1993).
Those firms, which have cost effective suppliers can outperform in achieving supply

Page 4 of 9
chain objectives. However, literature also argues that quality should be preferred in the
supplier selection process (Kaynak et al. 2008).

Supply flexibility: The construct of flexibility is much visible in manufacturing research,

but relatively lesser attention has been paid to supply chain flexibility (Barad et al.,
2003). In an empirical study by Sánchez and Pérez (2005) they find that flexibility
capabilities are positively related with firm performance.

Delivery: An organization’s ability to deliver on time and with minimum lead time plays
important role in satisfaction of its customer (Christopher, 1992). Research has argues
that improvement in these areas can lead to reduced inventory levels in supply chain
(Novich, 1990).

Organizational Performance

Generally, performance measurement is defined as the practice of quantifying

the effectiveness and efficiency of an action (Craig Shepherd et al, 2006). Researchers
have used balance scorecard approach for this purpose (Brah and Chong, 2004). Their
argument is that use of one measure of performance, while ignoring others, can betray
managers’ attention from the remaining performance measures. Agreeing with balance
scorecard approach the current research proposes a comprehensive construct for
organizational performance measurement, which includes operational performance,
quality performance, market performance, and financial performance. The constructs of
operational performance, and financial performance (Brah et al. 2000), quality
performance, and market performance (kayank et al., 2008) have been used separately
in previous studies. We also benefit from supply chain operations reference model
(SCOR) for making organizational performance. Our items for organizational
performance cover generally all aspects of SCOR model.

3. RESEARCH METHODOLOGY

Item Generation for Questionnaire

Previous literature on operations management, interviews from practitioners and

academia, and sufficient number of responses on questionnaire provide basis for
developing valid and reliable measures. Some of the measures have been developed
and used in the previous studies. However, further effort is put in to make them more
comprehensive for the current research. The items for remaining variables, that were
not used previously, were developed after reviewing the relevant literature.

There are five sections (A-E) of the questionnaire. Section A asks general
information about the respondents and sections B-E contain items relating to the
constructs being investigated in the study.

Page 5 of 9
Sample and Data Collection
Potential respondents are selected from the membership list of Supply Chain
Association of Pakistan (SCAP), and from Jalal’s yellow pages. SCAP is a visible
association among supply chain related professionals in Pakistan. The second source,
which is Jalal’s yellow pages, is the most comprehensive and widely used inventory of
addresses of business organizations of Pakistan. The target respondents are
professionals holding designations such as supply chain managers, operations
manager, and manufacturing plant managers. It is intended to select the organizations
of respondents from all around Pakistan.

Survey instrument is distributed by postal mail/email with cover letter explaining

research purpose and recommendation by a professor from Lahore University of
Management Sciences (LUMS). An analysis of non-response bias is carried out and
significant differences among the profiles (seniority, industry, local/foreign, and so on) of
respondents of received questionnaires is estimated. Minimum number of return
surveys should not be less than prescribed for factor analysis (Hair et al., 1992, p. 239).

For increasing generalizability of research we intend to collect data from a

developed country. The second idea is to collaborate with the organizations conducting
events related to supply chain management in developed countries. The questionnaire
can be distributed at the beginning of the event and the responses can be collected at
the end of the event.

Validity, Reliability and Data Analysis

The data is managed in statistical analysis software namely SPSS. SPSS is

widely used software for data analysis in scholarly and non-scholarly research. The
following two sub-sections show how validity and reliabilities of constructs are ensured.
Content and Face Validity: Content validity is a non-statistical form of validity that entails
“the systematic examination of the test content to determine whether it covers a
representative sample of the behavior domain to be measured” (Anastasi & Urbina,
1997 p. 114). Face validity of the constructs is ensured by taking opinions of expert
(practitioners and academia) of the fields about the validity of the instrument.

Convergent Validity: Convergent validity is ensured by the convergence of the

measures of the same construct. This validity is assessed by significant correlation of
the items of the same construct.

Discriminant Validity: Discriminant validity is ensured by showing that measures of

different constructs do not show significant positive correlation with each other.

Nomological Validity: Nomological validity shows that logical relationship between the
constructs is also reflected in the correlations of their measures. Our study satisfies this
validity by showing respective expected correlations among items of different
constructs.

Page 6 of 9
Reliability: Confirmatory factor analysis is carried out on the data to examine the
dimensions of the constructs. Coefficient alpha measure is used for confirming the
internal consistency of the constructs and quality of instrument. A low value of
Cronbach’s alpha indicates that the items poorly capture the construct (low level of
reliability) and high value of alpha indicates that the construct is reliable (Cronbach,
1951; Nunnaly, 1978).

Data Analysis: Once the constructs are established to be valid and reliable, the data is
further analyzed to find out insights. The research model of this study is developed on
analysis of moment structures (AMOS). AMOS is widely used software for structural
equation modeling and is used for the same purpose in scholarly research. Hypothesis
testing is carried out by testing the structural equation model on AMOS.

4. RESEARCH SIGNIFICANCE

Theory of Supply chain management is not too old and there is wider space for
theorizing in the area. This research contributes in the theory of supply chain
management, which is relevant for academics. Value for practitioners also lies in the
model presented in this study. Managers can use the model for improving
organizational performance through strategic supply chain management.

Moreover, comparison of results from data two countries, one developing and
one developed, can make research more insightful. The results in this study may
confirm western findings and may also challenge the existing understanding of the
theoretical relationships.

5. REFERENCES

Anastasi, A. and S. Urbina (1997). Psychological testing, Prentice-Hall International.

Barad, M., Sapir, D. (2003). "Flexibility in logistic systems-modeling and performance
evaluation." International Journal of Production Economics, Vol. 85 No.3, pp.155-70.
Bozartha C., M. C. (1998). "Configurations in manufacturing strategy: a review and
directions for future research." Journal of Operations Management Volume 16, Issue 4,
Pages 427-439.
Brah, S. A. and S. S. L. Tee (2002). "Relationship between TQM and performance of
Singapore companies." International Journal of Quality & Reliability Management
Vol.19, No. 4, pp 356-79
Brah, S. A., Chong, W.K. (2004). "Relationship between total productive maintenance
and performance” International Journal of Production Research, Volume 42, pp. 2383-
2401(19).
Christopher, M. (1992). Logistics and Supply Chain Management, Pitman Publishing,
London.
Page 7 of 9
Christopher, M. (1998). Logistics and Supply Chain Management: Strategies for
Reducing Cost and Improving Service (Second Edition), Financial Times: Pitman
Publishing. London, 1998.
Craig Shepherd, H. G. n. (2006). "Measuring supply chain performance: current
research and future directions." International Journal of Productivity and Performance
Management Vol. 55 No. 3/4, pp. 242-258.
Cronbach, L. J. (1951). "Coefficient alpha and the internal structure of tests."
Psychometrika 16, 297–334.
Fynes, B., Voss, C., de Burca, S. (2005). "The impact of supply chain relationship
quality on quality performance." International Journal of Production Economics 96,339–
354.
Hair, J. F., Anderson, R.E., Tatham, R.L., Black, W.C. (1992). Multivariate Data
Analysis. New York, NY, Macmillan.
Hendrick, T. E. (1994). "Purchasing’s contributions to time-based strategies." Center for
Advanced Purchasing Studies, Tempe, AZ.
Heinrich, C., Betts, B. (2003). Adapt or Die: Transforming Your Supply Chain into an
Adaptive Business Network, Wiley, New York, NY.
Hill, T. (2000). Manufacturing Strategy: Text and Cases, McGraw Hill Higher Education.
Hoegl, M., Wagner, S.M. (2005). "Buyer–supplier collaboration in product development
projects." Journal of Management 31, 530–548.
Kaynak, J. L. H. (2008). "A replication and extension of quality management into the
supply chain” Journal of Operations Management Volume 26, Issue 4, July 2008, Pages
468-489.
Koufteros, X., Vonderembse, M., Jayaram, J. (2005). "Internal and external integration
for product development: the contingency effects of uncertainty, equivocality, and
platform strategy." Decision Sciences 36, 97–133.
Kotha, S. and P. M. Swamidass (2000). "Strategy, advanced manufacturing technology
and performance: empirical evidence from U.S. manufacturing firms." Journal of
Operations Management 18, 257–277.
Novich, N. (1990). "Distribution strategy: Are you thinking small enough?" Sloan
Management Review 32 (1), 71–77.
Nunnally, J. C. (1978). Psychometric Theory, McGraw-Hill, New York.
O'Reillya C. A., D. F. C., Jennifer A. Chatmanc, Margaret Lapizd and William Selfc
(2010). "How leadership matters: The effects of leaders' alignment on strategy
implementation." The Leadership Quarterly Volume 21, Issue 1, Pages 104-113.
Page 8 of 9
 Sanchez A. M., P. M. P. (2005). "Supply chain flexibility and firm performance."
International Journal of Operations & Production Management, Volume: 25, Number: 7,
pp: 681-700.
Santos, F. C. A. (2000). "Integration of human resource management and competitive
priorities of manufacturing strategy." Journal: International Journal of Operations &
Production Management Volume: 20 Issue: 5 Page: 610 - 628.
Shin, H., Collier, D.A., Wilson, D.D. (2000). "Supply management orientation and
supplier/buyer performance." Journal of Operations Management 18 (3), 317–333.
Sila, I., Ebrahimpour, M. (2005). "Critical linkages among TQM factors and business
results." International Journal of Operations and Production Management 24, 1123–
1155.
Simatupang, T. M. and S. Ramaswami (2008). "Design for supply chain collaboration."
Business Process Management Journal (10:1), pp.16-26. Volume: 14, Issue: 3, Page:
401 - 418.
Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the
Supply Chain: Concepts, Strategies, and Case Studies. New York, NY, McGraw-Hill.
Smytka, D. L. and M. W. Clemens (1993). "Total Cost Supplier Selection Model: A Case
Study." The Journal of Supply Chain Management, Volume 29, Issue 1, Pages: 42-49.
Stalk, G. (1988). "Time—the next source of competitive advantage." Harvard Business
Review 66 (4): 41–51.
Swafford P. M., S. G., Nagesh M. (2006). "The antecedents of supply chain agility of a
firm: Scale development and model testing." Journal of Operations Management,
Volume 24, Issue 2, Pages 170-188
Tan, K. C. (2001). "A framework of supply chain management literature." European
Journal of Purchasing & Supply Management 7, 39-48.
Yeung, A. C. L. (2008). "Strategic supply management, quality initiatives, and
organizational performance." Journal of Operations Management 26 (2008) 490–502.

Page 9 of 9

View publication stats