THE IMPACT OF SUPPLY CHAIN MANAGEMENT PRACTICES

ON PERFORMANCE OF ORGANIZATION

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Contents
CHAPTER 1: INTRODUCTION..............................................................................................................3
1.1 Introduction of the project....................................................................................................3
1.2 Background..............................................................................................................................4
1.3 Objectives.................................................................................................................................5
1.4 Significance..............................................................................................................................5
Chapter 2: METHODOLOGY.................................................................................................................7
2.1 Type of research.....................................................................................................................7
2.2 Data Collection Sources........................................................................................................7
2.3 Data Collection Tools/ Instruments....................................................................................7
2.4 Subject/ Participants..............................................................................................................7
2.5 Fieldwork/ Data Collection....................................................................................................8
2.6 Data Processing & Analysis.................................................................................................8
References...............................................................................................................................................9

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 CHAPTER 1: INTRODUCTION

1.1 Introduction
Today in the world of Globalization, organizations need to be forward looking with their
major focus on collaboration with suppliers, customers and even with competitors. This
entails formulation of a collaborative Supply chain that shares information and
knowledge for gaining competitiveness. Hence the concept of such a supply chain
promotes a value chain network where individual functional entities are committed to
providing resources and information thereby ensuring efficient management of suppliers
as well as the flow of parts (Lau and Lee, 2000). Supply chain management (SCM) is
basically a combination of approaches and practices that results in effective integration
of suppliers, manufacturers, distributors and customers with an aim to enhance the
long-term performance of the individual firms and the supply chain as a whole (Chopra
and Meindl, 2001). Council of Supply Chain Management Professionals (CSCMP)
defines SCM as the planning and management of all activities involved in sourcing and
procurement, conversion and all logistics management activities as well as coordination
and collaboration with channel partners. While procurement and supplier selection have
an important role in the SCM (Hartley and Choi, 1996; Degraeve et al., 2000), Lean
practices for aligning internal processes of an organization with the just in time (JIT)
supply principles are also highly recognized practices (Burgess et al., 2006; Cigolini et
al., 2004). Integration with the suppliers and customers has become easier with use of
web based systems in different domains such as inventory management, demand
forecasting, customer and supplier relationship management (Frohlich and Westbrook,
2002).

1.2 Background

SCM practices (SCMPs) encompasses a set of activities that any organization

accomplishes to pursue effective management of its supply chain. Literature on the
subject elaborates dimensions of SCMPs from variety of perspectives. SCMPs is a set
of practices that integrate suppliers, manufacturers, distributors and customers to

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improve Supply Chain Performance (SCP) as well as Organization Performance (OP)
(Barros, 2006; Koh et al., 2007). In view of Organisation-level consequences of SCM, it
is imperative to measure the effect of SCMPs on OP (Green et al., 2013 ). SCM
construct previously developed focuses on buyer-supplier relationship on long term
basis through continuous communication, organizing cross-functional teams and
supplier involvement in planning and forecasting (Chen and Paulraj, 2004). This created
pronounced interest in SCM construct and its relationship with SCP and OP. Li et al.
(2005) developed and validated a measurement instrument for studying SCMPs with six
dimensions, that is, strategic supplier partnership, customer relationship, IS, information
quality, internal lean practices and postponement. Chow et al. (2008) listed SCMPs
such as customer and supplier management, supply chain features, communication and
speed, IS, integration and customer service management, quality and service,
distribution and design effectiveness. Singh et al. (2010) furnished supply chain
practices bearing impact on organizational performance like use of technology, supply
chain speed, customer satisfaction, supply chain integration and inventory
management. Gharakhani et al. (2012) listed that SCMPs like strategic supplier
partnership, customer relationship, information technology, IS and supply chain
integration have an impact on innovation performance and organizational performance.
Focusing on supply chain profitability domain, Gawankar et al. (2013) forwarded
SCMPs like customer relationship, strategic supplier partnership, IS, information quality
and lean retailing practices. With the power shift toward the demand side, it has become
important to appreciate SCM from an organized retail perspective. On top of it, the
majority of the research in SCM arena is focused on manufacturing companies with very
little attention on SCM in organized retail (Defee et al., 2009). Literature review
suggests that academic literature ignores SCM issues in organized retailing, with few
studies focusing on niche areas in organized retail. This background provides further
research to determine the extent to which SCMPs has an impact on OP in organized
retail firms. In consolidating the literature, three distinctive dimensions emerged from the
literature that explain the SCMPs which drive the performance of the organisation
namely, CRM, SRM and IS.

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Customer Relationship Management CRM refers to relationship with the customers,
managing their complaints and improving overall customer satisfaction (Tan et al.,
1999). CRM adds value to an organisation as it promotes loyalty through customer
satisfaction (Cox, 2004). Responding to customer requirements enables organisation to
perform better over a period of time (Gawankar et al., 2013a). If customer relationship is
in place, then the right merchandise and assortment of products would be available to
the customer (Sundram et al., 2011). Therefore, CRM can bring significant impact in
terms of how you manage the complete value chain of a firm (Gharakhani et al., 2012).

Supplier Relationship Management (SRM ) is defined as a variable (De Toni and

Nassimbeni, 2000; Gharakhani et al., 2012; Li et al., 2005; Narasimhan and Kim, 2002),
which focuses on the relationship between the suppliers and the firm. Having upstream
logistics processes in place, it facilitates selection of right suppliers who are capable of
timely meeting the requirement of organisation thereby ensuring continuous and
flawless supply of materials to the customers (Day and Lichtenstein, 2006). Several
processes in retail like sourcing planning and execution, sourcing analytics, supplier
performance monitoring, supplier collaboration (Boddy et al., 2000), mutual planning
and problem solving (Gunasekaran and Chung, 2004) are directly influenced by SRM.
During course of turbulent scenarios, effective SRM enables the organisation to gain
competitive advantage (Raut et al., 2012).

Information Sharing (IS) SCMPs are well employed if a two way IS exists among the
supply chain partners. The main economic benefit from IS comes from coordinated
decision making (Funda and Robinson, 2005). Prajogo and Olhager (2012) state that
information technology and IS have significant effects on logistics integration. Nyaga et
al. (2010) professes that IS leads to trust and commitment, resulting in improved
satisfaction and OP. As per Cao and Zhang, 2011; Gharakhani et al., 2012, there is a
positive relationship between successful IS among the supply chain partners and OP.

As per the literature , Performance of any organization can be widely assessed from
operational and SCM related perspective of organization . In case of SME, same is
measured at two levels and as such six operational (OPER) and five SCM-related
organizational performance (ORG) measures were identified.

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Operational Performance SCM endeavors to gain competitive advantage for the
organization by operating at a lower cost and hence at a greater profit (Christopher,
1992). Gunasekaran et al. (2004) developed SCM performance measures through
empirical literature and consolidated various dimensions of operational performance.
Flexibility i.e firms ability to adapt to changing environment may be improved by use of
SCM practices of “many suppliers”, long term partnership relations with suppliers and
customers , holding safety stock and sub-contracting, Outsourcing and 3PL etc.
Reduced lead time in production may be achieved through e-procurement, delivery
from stock, single sourcing, forecasting and JIT delivery practices. Forecasting
accuracy can be improved through closer partnerships with suppliers and customers
and information sharing for enabling faster delivery orders. Resource planning and
cost saving is possible to achieve through SCM practices of appropriate strategic
planning and use of an e-procurement tool. Reduced inventory levels can be
materialized through following practice of JIT supply.

SCM-related organizational performance of any organisation is measured from

viewpoint of both financial and non-financial aspects as being equally important
(Demirbag et al., 2006). While SCM in short term may enhance productivity and reduce
inventory and lead time, long-term gains may be in form of market share and integration
of supply chain for all members of the supply chain (Li et al., 2006; Lyons et al., 2004;
Tan et al., 1998). A few areas are selected to measure SCM-related organizational
performance in this study. Increase in sales is doable if the organisation is competing
with a lower product cost, better product quality and faster response. Practice of supply
chain benchmarking if truly implemented can furnish a firm to acquire increased sales.
More accurate costing can be put forward if real time evaluation and updated
information is available by utilizing an e-procurement tool (Rao, 2006). While “few
suppliers” strategy reduces the number of transactions for procurement, practice of “JIT
supply” reduces the holding cost. Increase in coordination between departments is
achieveable through Strategic planning as it reduces the departmental barriers and
generate an organization-wide plan. Dividends of JIT philosophy and close relationship
with suppliers/ customers can be best seen in a tightly collaborated organization.

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Increase in coordination with suppliers can be attained by use of few suppliers,
forming close partnerships with suppliers and practice of e-procurement (Helo and
Szekely, 2005). Streamlined ordering process and centrally managed transactions are
possible with an e-procurement practice (Rahman, 2004). Increase in coordination
with customers requires close partnerships with customers and results in improved
delivery performance catering uncalled- for delays (Wu et al., 2004).

For sake of this research and to cater for time constraint , two SCMPs have been
chosen that is CRM and IS whereas the performance measure of organization (SME)
would be preferably chosen from operational side instead of SCM related one, which in
this case would be Resource planning & Cost saving and Reduced inventory
levels.

1.3 Objectives
The study would be conducted with the following two main objectives :

1.3.1 To establish impact of Customer Relationship Management (CRM) on

Organizational performance measure in the domain of Resource planning & Cost
saving and Reduced inventory levels.

1.3.2 To determine the effect of Information Sharing (IS) on performance of

organisation from perspective of Resource planning & Cost saving and Reduced
inventory levels.

1.4 Significance
Though researchers have done an appreciable amount of work on supply chain
management practices and its impact on the performance of organization, CRM and IS
being the major drivers in the SME still needs to be understood and researched more so
that their corresponding impact on organizational performance can be evaluated
especially from very important aspect of Reduced inventory levels and Resource
planning & Cost savings. This is important for any SME to stay in the market amid
competitive environment.

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The findings of this study will be used as a reference point by other researchers for
further research on the same field. They can also use the findings as a secondary
source of information.

Chapter 2: Methodology

2.1 Type of research

Causal research would be conducted to facilitate in establishing a relationship between

SME related & selected Supply Chain Management Practices (SCMPs) and shortlisted
measures of Organizational performance. As indicated earlier, for sake of this research
and to cater for time constraint , two SCMPs would be chosen that is CRM and IS
whereas the operational performance measure of organization (SME) would be
preferably chosen which in this case would be Resource planning & Cost saving and
Reduced inventory levels.

2.2 Data Collection Sources

Data would be collected from various Small and Medium Enterprises as many SMEs
despite having SCMPs in place are not accruing the true dividends and still keeping
some fields empty as if these are insignificant from their performance viewpoint

2.3 Data Collection Tools/ Instruments

Research would be undertaken by using quantitative approach where questionnaire

would be distributed to the concerned. Questionnaire would be formulated in a way to
adequately cover both the requisite aspects of independent and dependent variables. It
would be stressed that replies are gathered from concerned management personnel
preferably top individuals so that authenticity and quality of data is ensured.

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2.4 Subject/ Participants

This research would focus on SMEs, hence it would be ensured that data from
organisation falling under this category is taken into account. Adequate measures would
also be applied for participants found not relevant at a later research stage.

2.5 Fieldwork/ Data Collection

The questionnaire would be floated on Google dock whereby only applicable replies
would be accepted after thorough scrutiny.

2.6 Data Processing & Analysis

Possible editing and coding would be done as required and finally different data
analytical approaches would be applied as applicable while establishing relationships
between independent and dependent variable.
.

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