Management practices on organizational performance


Individual practices of supply chain cannot improve their own efficiency, because the possible way of achievable efficiency is the interaction of various supply chain practices. If firm want to achieve the effective supply chain management they should emphasize the comprehensive efforts for improvement of all the functions of supply chain throughout the organization, and, mostly important is the focus of supply chain practices should shift into the general and integrative from the functional and independent practices, Dawe (1994). This implies that each practices of supply chain performance should be evaluated by the effectiveness i.e. how significant effect of this individual performance in entire efficient supply chain process throughout the organization. More clearly, how this individual performance helps to improve the efficiency entire supply chain process. And thus the systematic utilization of various supply chain practices will leads to achieve the successful integration of supply chain in the organization. The observation of Ballou (1992) is also support Dawe's (1994) vision. As he asserted that supply chains main activity are generated in all of supply chain processes, which is vital for effective linkage and adjustment among the functions of supply chain practices.

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Bowersox (1989) asserts that the integration of supply chain process should progress from internal process to external such as suppliers and customers. Automation and standardization of every internal function like logistic support, introducing new technology and continuous performance control formulated by the organizational structure are the internal functions. On the other hand external functions carried out strategic linkage with the supplier and customer, sharing information and the standardization of firm's logistic process. Above arguments makes the following hypothesis.

H1.The level of Supply chain integration has been influenced positively by the level of supply chain management practices.

There is a significance relationship between supply chain integration and competition capability. Firms can increase its competition capability by adopting three generic strategies such as cost leadership, product differentiation and control enhancement. Building a sustainable position of power in an industry among customer, competitors and suppliers is one of the most dominant paradigms of competition concern (Porter, 1985). Cost minimization strategies implemented by the firms emphasize on internal structure centralization with the concentrated decision making. And this centralization helps to coordinate efforts of cross-functions and common direction of a firm to achieve maximum cost control. Moreover, to decrease uncertainty and risk firms value-adding strategy assuring the product quality and product differentiation by establishing ongoing relationship with the selected trading partners. Also, emphasized flexibility and close coordination between trading partners and tailoring of product and services or precise customization can enhanced by firms control/adaptability. As the strategic or extended alliances and maximum responsiveness are encourage. In this strategically perspective firms seek to establish a cooperative relationship with the channel partners which obviously a long term relation.

The above discussion of Bowersox and Daugherty (1995) implies that the supply chain integration and strategic strength of alliance may be different which defends on the characterestics and the level of competition capabilities.

And the argument has been supported by Simchi- Levi et al. (2003). They assert that improving market access, adding technological strength, adding value to products, strengthening operations, enhancing organizational skill, enhancing strategic growth and building financial strength can lead by those strategic alliance. The benefits of strategic alliances can be defined as the key competition capabilities by considering that (Bowersox and Daugherty; Simchi-Levi et al., 2003) and the most intensive level of strategic alliances can be regarded as the supply chain integration (Stevens, 1989, 1990; Simchi-Levi et al 2003), and this sort of assertation emphasizes on Supply chain integration which may have the significant relationship with the intensification of competition capabilities. Representing this view following hypothesis can take.

H2. Competition capability has the positive effect by the level of supply chain integration.

Generally firms can gain the different competition capabilities by adopting the generic strategies of competing on quality, time, cost, flexibility and product differentiation. Depending of the nature of the business and the competitive environment supply chain practices may vary ( Narasimhan and Carter, 1998). But the question that can arises from this context is which competition capability of the firm should be supported by which supply chain practices. A meaningful clue suggested by Goh et al (1999, pp 15,20) and watts et al. (1992, p.5) regarding this question:

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''With an overall cost leadership strategy requiring tight cost control, one can also expect the supply chain function to emphasize cost minimization. Meanwhile, if the competitive strategy is centred around providing customers with high quality products, the supply chain strategy and practices must also focus on quality''.

Miles and snow (1978) has implied the comparison of two types of strategy which lead to more specific implications. Identifying the success possibility of daring investment on new technology and facilities, development of new products, diversification, differentiation, flexibility and innovation, and pioneering new market opportunities are representing the organizations prospects. Therefore decentralized management system and extensive marketing plan because promotion is on the focus rather than putting the restrictions on the organizations activity. On the other hand, integration and progressiveness, efficiency, cost leadership, precaution measures on the changes in environment, defending from market infiltration by competitors with a narrow range of products, focusing on the organizational stability are representing the organizational defending activities. Hence, centralized control system and a small-scale of plan are preferable where limited analysis of environment are carried out. Miles and Snow's (1978) theory implies that differentiation priority can be connected with highly specialized infrastructural and technological activity while highly centralized and formalized organizational activities of the supply chain can linked with cost leadership priority. Considering all the arguments following hypothesis can expect.

H3. Competition capability has the positive influence by the level of supply chain management practices.

It has been showed by the several studies that performance outcome always has the positive influence by the level of supply chain integration. Armistead and Mapes (1993) indicates that a field study in UK of 38 firm's manager has been proved that the operating performance and quality of the product and services improves by the level of supply chain integration. Manufacturing performance and the customer responsiveness are the impacts of supply chain integration via the key linkage between manufacturing goal achievement and sourcing (Narasimhan and Jayaram (1998). Enhanced economic reward of the firm is the result of strategic integration that has been revealed by the survey of industrial equipment distributor (Johnson 1999). Stevens (1990) also condents that barriers between functions and organization can remove by the integration, specially on the development of supply chain integration, thus leading to efficient linkage in supply chain and the strengthening of supply chain competitiveness. A similar view with stevens (1990) has been adopted by Best and Seger (1989). Cost reduction efforts in the reactive stage and for balanced performance improvemnt in the integrative stage in their study emphasized on four logistical development stages. Following hypothosis leads from the above argument.

H4. Supply chain integration level has the positive effect on firm performance.

Narasimhan and Carter (1998) suggest that firm's performance has significantly depends on the efficient supply chain management and purchasing practices. Their study showed that purchasing factors has the effective influence on market share, sales and marketposition along with competiton level, product pricing and positioning, advertising and degree of innovation in product lines, thus the impact of purchasing strategy on the firm has been emphasized. This means that the improving efficiency of a firm and fullfilling various customer demand which is the purpose and performance of a firm can be different depending on the utilization focus and the characterestics of supply chain practices. Lambert and Stocks (1993) also assert that to satisfy the customer by fullfill their demands about the product supply chain practices are needed. Also, the existing possibility of significant casual relationship between the firm performance and the utilization characterestics of supply chain practices has been proved successfully in real world. Dell computer, Toyota, and Tesco are the best example of this succession. Following hypothosis exist by the connection of those such possibility.

H5. There is a positive influence of the level of supply chain management practices on firms performance.

To offer a price that comparable to the competition the cost structure of a company must be low enough or the products that offered should be higher in value than the competition which support the offered premium price. Variety of product line and the quality of product must meet or exceed the customer expectations. Accurate order and shipping information, frequent deliveries, high order fill rates and short order cycle times, are the neccessary feature that a company have to have. To achieve high customer satisfaction and further market performance firms should enable these competitive capabilities (Tracey et al.,1999). Innis and LaLonde (1994) and Koufteros (1995) assert that customer satisfaction are linked with all the feature of competition capabilities like order fill rate, product quality, product line breadth, price offered, order cycle time, order and shipment information and the frequency of delivery. Miles and snow (1978) also note that superior competition capability of a corporation's competitive status carries the significant meaning of corporation's performance. Following hypothosis are suggested by these arguments.

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H6. A firms performance has the positive effect of its competition capability.