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IJOPM
22,6 Supply chain management:
a strategic perspective
Keah Choon Tan
614 University of Nevada Las Vegas, Las Vegas, Nevada, USA
Steven B. Lyman
Eastern Michigan University, Ypsilanti, Michigan, USA, and
Joel D. Wisner
University of Nevada Las Vegas, Las Vegas, Nevada, USA
Keywords Company performance, Supplier evaluation, Management attitudes,
Supply-chain management
Abstract Many leading firms in the USA have adopted an integrated strategic approach to
purchasing and logistics management known as supply chain management. As the twenty-first
century begins, supply chain management has become a significant strategic tool for firms
striving to improve quality, customer service and competitive success. This article surveyed senior
managers in various industries to study the prevalent supply chain management and supplier
evaluation practices. The study reduced these practices to a smaller set of constructs and related
the constructs to firm performance. The results show that many constructs were correlated with
firm performance and that some constructs were found to adversely affect performance.

Introduction
As product life cycles shrank and global competition intensified in the 1990s,
many manufacturers collaborated with their suppliers to improve product
quality and lead time. Correspondingly, many wholesalers and retailers also
integrated their logistics functions to enhance competitive advantage.
Eventually, these two functional areas of a corporation evolved and merged
into a holistic and strategic approach to materials and logistics management.
The literature is replete with buzzwords such as supplier integration,
partnerships, supply base management, supplier alliances, supply chain
synchronization and supply chain management to address elements or
stages of this new management philosophy (Tan et al., 1998; La Londe and
Masters, 1994). The term supply chain management (SCM) is most widely
used to describe this management philosophy. This new philosophy was
viewed as a viable initiative to enhance competitive advantage. Indeed, the
Supply-Chain Council has developed a cross-industry standard for supply
chain management, the supply-chain operations reference model. Despite its
popularity, there is no explicit description of its specific activities and practices,
and how it impacts firm performance.
This article describes a survey effort to study contemporary supply chain
management and supplier evaluation practices. This research also relates these
International Journal of Operations &
Production Management,
practices to firm performance. Survey respondents were senior purchasing and
Vol. 22 No. 6, 2002, pp. 614-631.
# MCB UP Limited, 0144-3577
materials management professionals of the National Association of Purchasing
DOI 10.1108/01443570210427659 Management (NAPM).
 The following section examines the supply chain management literature. Supply chain
Subsequent sections describe the research construct, provide demographic management
characteristics of the respondents, and describe the survey methodology,
followed by analysis of the results and finally the managerial implications of
the study.

Supply chain management defined 615

Scott and Westbrook (1991) and New and Payne (1995) described supply chain
management as the chain linking each element of the manufacturing and
supply process from raw materials through to the end user, encompassing
several organizational boundaries and treating all organizations within the
value chain as a unified virtual business entity. The scope of supply chain
management was further expanded to include re-cycling (Baatz, 1995). This
new management philosophy focuses on how firms utilize their suppliers'
processes, technology, and capability to enhance competitive advantage
(Farley, 1997), and the coordination of the manufacturing, logistics, materials,
distribution and transportation functions within an organization (Lee and
Billington, 1992). While ideally supply chain management emphasizes ``total''
integration of all the business entities within the supply chain, a practical
approach is to consider only strategic suppliers and customers since most
supply chains are too complex to achieve full integration of all the supply chain
members (Tan et al., 1998).
Many manufacturers and merchants have embraced the concept of supply
chain management to improve product development, quality and delivery
goals, and to eliminate waste. It has enabled firms to exploit supplier strengths
and technologies to support new product development efforts (Morgan
and Monczka, 1995), and seamlessly integrate logistics functions with
transportation partners to deliver directly to the point of use.
Most of the recent supply chain management literature focuses on the
purchasing function, emphasizing that it is a basic strategic business process,
rather than a specialized supporting function (Wisner and Tan, 2000; Reck
et al., 1992). It is a management philosophy that extends traditional internal
activities by embracing an inter-enterprise scope, bringing trading partners
together with the common goal of optimization and efficiency (Harwick, 1997).
Savvy manufacturers often include strategic suppliers to participate in their
new product development efforts. The result is cost-effective design choices,
often leading to innovation in process and materials and the ability to compete
effectively in the global market (Monczka et al., 1994). By involving suppliers
early in the design stage, manufacturers are able to develop alternative
conceptual solutions, select the best components and technologies, and help in
design assessment (Burt and Soukup, 1985). Supply chain management seeks
improved performance through elimination of waste and better use of internal
and external supplier capability and technology (Morgan and Monczka, 1996).
The transportation and logistics functions of the retailing industry focus on
a different aspect of supply chain management, that is, one of location and
IJOPM logistics issues more often than product transformation. Its origin can be traced
22,6 to an effort for better managing the transportation and logistics functions
(for example, Fisher, 1997; Lamb, 1995; Whiteoak, 1994; Turner, 1993;
MacDonald, 1991). In this respect, supply chain management incorporates
logistics into the strategic decisions of the business (Carter and Ferrin, 1995;
Houlihan, 1988). It enables channel members to compete as a unified logistics
616 entity instead of pushing inventory down the supply chain. Supply chain
management reaps the benefits of vertical integration by coordinating the
logistics functions of independent firms in the supply chain (La Londe and
Masters, 1994).
Where logistics once meant saturating warehouses with inventory, the new
philosophy emphasizes the integration of internal and external activities,
including inventory management, vendor relationships, transportation,
distribution, and delivery services. The goal is to replace inventory with
information to provide visibility, so that raw materials and finished goods can
be replenished quickly and arrive at the points of use in smaller lot sizes,
especially in a just-in-time system (Handfield, 1994). Therefore, short and
reliable order cycles, and the ability to fill entire orders are critical customer
service elements.
Eventually, the philosophy of supply chain management evolved and
merged into a common body of knowledge that encompassed all the value
adding activities of the manufacturers and logistics providers (Tan, 2001).
Many supply chain management strategic models have been investigated (e.g.
Frohlich et al., 1997; Watts et al., 1992; Freeman and Cavinato, 1990; Reck and
Long, 1988) to link its crucial role in overall strategic corporate planning.
Unfortunately, Ellram and Pearson (1994) discovered that despite the increased
emphasis on supply chain management, the primary function of purchasing
remained a clerical role of negotiating prices and items.
Despite the importance and theoretical development of supply chain
management, there is limited empirical research in how supply chain
management practitioners evaluate their suppliers, define and implement
supply chain management practices, and how these practices impact firm
performance. This research investigates these issues by means of empirical
data.

Research constructs
Supply chain management and supplier evaluation practices
As product life cycles shrink and global competition intensifies, manufacturers
outsource non-strategic activities to focus on core competencies. Consequently,
many firms have reduced their supply base so they can more effectively
manage relationships with strategic suppliers (Tully, 1995). The literature
indicates that buying firms are developing cooperative, mutually beneficial
relationships with suppliers and viewing suppliers as virtual extensions of
their firm (Mason, 1996; Copacino, 1996). Superior supplier capability often
leads to exceptional quality and rapid integration of the latest technological
breakthroughs into the buying firm's own products through early supplier Supply chain
involvement (Ragatz et al., 1997). Manufacturers thus include strategic management
suppliers in their product design process to render more cost-effective design
choices, develop alternative conceptual solutions, select the best components
and technologies, and help in design assessment (Monczka et al., 1994; Burt and
Soukup, 1985).
Emphasizing core competencies requires greater reliance on strategic 617
suppliers to support non-core requirements, particularly in design and
engineering support (Prahalad and Hamel, 1990). In addition to delivering
quality products on time, suppliers are increasingly expected to participate in
customers' product development and to share expertise and technology. Many
manufacturers find themselves expanding the need to effectively manage
internal competencies to include members of the supply chain. Although many
supply chain management models have been proposed, there has been a lack of
knowledge on actual industry practices for implementing effective supply
chain management, and their relationship to firm performance.
For the purpose of this study, 25 supply chain management practices were
identified (Appendix, section 1) from the literature and from discussions with
senior managers. These included practices related to supply and materials
management issues, operations, information sharing and technology sharing,
and customer service. A total of 13 supplier evaluation practices used to assess
supplier quality, price, delivery, and service performance were also identified
(Appendix, section 2).

Performance measures
Measurement of business performance has typically been based on accounting
data, such as return on investment (ROI) and return on assets (ROA). However,
the use of future cash flows of the business entity is difficult to measure.
Economists disagree about the use of accounting data to measure firm
performance because it ignores opportunity costs and the time value of money
(Chen and Lee, 1995). Given the lack of consensus regarding a valid cross-
industry measure of corporate performance, performance in this study was
operationalized by senior management's perceptions of a firm's performance in
comparison to that of major competitors. A total of six dimensions of
performance (Appendix, section 3) were considered in this study.

Survey methodology
A questionnaire was designed based on the constructs described earlier.
Respondents were asked to indicate, using a five-point Likert scale, the
importance of the 25 practices (1 ˆ low, 5 ˆ high) in their firm's supply chain
management efforts. For questions regarding supplier evaluation practices,
respondents were asked to indicate, on a similar five-point Likert scale, how
they evaluated their supplier's performance. To elicit information on
performance, respondents were asked to indicate, using a similar five-point
Likert scale, their company's performance relative to that of major industry
IJOPM competitors. Several demographic questions were also presented in the
22,6 questionnaire to provide insights of the respondents' operations.
The survey instrument was pre-tested for content validity. The revised
survey instrument was sent to 1,500 US senior managers of manufacturing
firms identified from the National Association of Purchasing Management
(NAPM) membership list. Two mailings and one follow-up reminder yielded a
618 total of 101 useable returned surveys (response rate of 6.73 percent). The low
response rate was probably a result of respondent fatigue due to the recent
upsurge in supply chain management related survey research targeting NAPM
members in the USA. The low response rate may affect the ability to generalize
the results of this study.

Respondents' profile
Table I provides the respondents' profile. Almost 60 percent of the respondents
were final product manufacturers, whereas 24 percent were component
manufacturers. ``Others'' made up 10 percent of the respondents, including
wholesalers, turnkey and contract manufacturers. The large ratio of final
product manufacturers potentially had a significant impact on the survey
results because they focused primarily on the purchasing and supply function

Respondents Mean Min Max Percent

Respondents' business function

Raw material manufacturer 6.1
Component manufacturer 24.2
Final product manufacturer 59.6
Others 10.1
Characteristics
Number of employees a 2,874 15 80,000
Annual gross sales $745m $4m $18 b
With ISO 9000 certification b 58.5
With ISO 14000 certification 3.2
With a supplier certification program c 72.4
With a supplier partnership or strategic alliance program 55.7
Reporting an increase in strategic alliance programs over the last 3 years 69.2
Reporting an increase in outsourcing activity for MRO over the last 3 years 35.2
Reporting an increase in outsourcing activity for primary materials/ 51.2
components over the last 3 years
Reporting a decrease in the supplier base for MRO over the last 3 years 31.3
Reporting a decrease in the supplier base for primary materials/components 41.9
over the last 3 years
Notes:
a
1 includes part-time and temporary employees
b
40.0% are ISO 9001 certified, 50.9% are ISO 9002 certified, and 1.8% are ISO 9003 certified
c
12.7% of the respondents with a supplier certification program certify suppliers' products,
Table I. and an equal percentage of respondents certify suppliers' processes. 74.6% of respondents
Respondents' profile certify both products and processes
of supply chain management. The firms represented by the respondents varied Supply chain
in size, employing between 15 and 80,000 employees. A total of 20 percent of management
the companies employed fewer than 150 employees while 11 percent employed
more than 5,000 employees.
Most of the respondents (67.3 percent) engaged in international operations
competing in global markets, while a few respondents (4.1 percent) competed
primarily in local markets within the USA. Annual 1998 gross sales of the 619
companies ranged from $4 million to $18 billion. The largest firm employed
80,000 workers and had the highest annual sales of $18 billion. Average
annual sales were $745 million. Approximately half the respondents reported
annual sales of less than $65 million, suggesting that many respondents were
employed at smaller firms.
More than half of the respondents were certified with one of the ISO 9000
classifications. This reflects the general buyer requirements that suppliers
must certify their quality systems. About 31 percent of the firms who were
not ISO certified intended to gain certification in the near future. Of those
certified, 40 percent were ISO 9001 (Quality Assurance in Design, Production,
Installation and Servicing) certified, 51 percent were ISO 9002 (Quality
Assurance in Production and Installation) certified, and less than 2 percent
were ISO 9003 (Quality Assurance in Final Inspection Test) certified. Some
respondents were unsure of their ISO certifications. A majority (72.2 percent) of
the ISO certified respondents engaged in global business whereas only 20
percent engaged in regional business, suggesting than ISO certification was
very important for global enterprises. A very small portion (5.6 percent) of the
ISO certified respondents engaged only in local business. Intense global
competition has evidently forced many firms to obtain ISO certification to
remain competitive.
A surprisingly small portion (3.2 percent) of the respondents were ISO 14000
(Environmental Management Standards) certified although there has been an
increase in environmental awareness among manufacturers. Slightly more
than 72 percent of the respondents maintained some form of supplier
certification program. While the literature indicates that certifying suppliers'
processes was preferred (Inman and Hubler, 1992), almost 75 percent of the
respondents certified both suppliers' products and processes. The change
toward certifying both products and processes may reflect the changing
perspective that ISO 9000 has created. For example, the Production Part
Approval Process of the QS 9000 standards requires automotive companies to
certify the products, while QS 9000 certifies the process. When averaged across
all products and processes, the median frequency of certification of suppliers'
products was four times per year. For processes, the median was once a year.
Again, this reflects the influence of ISO 9000 on manufacturers, which requires
regular reviews of their quality systems.
More than half of the respondents had supplier partnership or strategic
alliance programs. Indeed, 69 percent of the respondents reported an increase in
the number of strategic alliance programs over the last three years. The
IJOPM respondents also indicated the two most important achievements of the
22,6 partnership program were an increase in cooperation and communication
among suppliers and buyers, and lower total costs. More than half of the
respondents reported an increase in outsourcing activity for primary materials
and components, and 35 percent saw an increase in outsourcing activity for
maintenance, repairs and operating supplies (MRO) over the last three years.
620 Interestingly, although the trend seemed to be favoring outsourcing, 42 percent
of the respondents reduced their supplier base for primary materials and
components whereas a third reduced their supplier base for MRO over the last
three years. The survey seemed to indicate that firms were outsourcing more
and concentrating their business volume with a smaller pool of suppliers. This
is consistent with the concept of supply chain management that encourages
mutually beneficial long-term relationships between buyers and suppliers.
The literature revealed that supply chain management either focuses on
the purchasing and supply function, transportation and logistics function,
or the integrated materials management function. The integrated
materials management function includes purchasing, supply management,
transportation, and logistics activities. Table II shows the primary focus of the
respondents' supply chain management initiatives. Respondents were asked to
indicate the activities included as parts of their firm's supply chain
management efforts. Almost 40 percent of the respondents adopted the
purchasing and supply perspective, while slightly more than 5 percent adopted
the transportation and logistics perspective of supply chain management. The
uneven distribution could be due to the fact that the respondents were
purchasing and materials management professionals rather than logistics
managers. Interestingly, more than 55 percent of the respondents had adopted
the integrated materials management approach, suggesting that these
respondents included purchasing, supply management, transportation and
logistics activities in their supply chain management efforts. The remainder of
the study focuses on the respondents who stated that they practiced some form
of supply chain management.

Statistical analysis
Reliability analysis
The reliability of the scales for performance measures, supply chain
management practices and supplier evaluation practices were evaluated using
Cronbach's  (Cronbach, 1951). The use of third-party supply chain
management specialists (Question H, Appendix, section 1) was eliminated

Number of respondents Percent

Table II. Purchasing and supply management focus 30 39.5

Focus on supply chain Transportation and logistics focus 4 5.3
management Integrated materials management focus 42 55.2
because it correlated weakly with other supply chain management practices. A Supply chain
plausible explanation is that many of the firms represented here were small management
firms that typically relied on in-house expertise. Supply chain management
practices were reduced to 24 items. Similarly, the presence of certification or
other documentation (Question H, Appendix, section 2) was eliminated from
supplier evaluation practices. For each scale, a value of  > 0:80 was obtained
(Table III), suggesting that the scales were reliable (Nunnally, 1988). 621
Scheffe multiple range test
Mean responses for the 24 supply chain management practices ranged from
4.44 to 2.03, based on a five-point Likert scale. These practices grouped into six
homogeneous subsets. Although the Scheffe multiple comparisons did not
reveal any distinct groups of practices (Table IV), practices receiving the
highest mean scores focused on time-based issues, such as on-time deliveries
and reducing response time. Determining customers' future needs was also
ranked highly by the respondents. Geographical proximity (locating closer to
your customers and requiring suppliers to locate closer to your firm) was not
rated as very important, although closely located suppliers would make it
easier and more cost effective for frequent just-in-time deliveries in small lot
sizes. The importance of locating in close proximity depends on the volume of
business with customers or suppliers.
Statistically, the importance placed on suppliers' on-time delivery directly to
points of use (4.44) was more significant than any practices with a mean value
smaller than 3.30, that is, involving supply chain members in their product,
service and marketing plans. The importance of extending the supply chain
beyond immediate suppliers and customers was ranked almost at the bottom of
the list. It suggests that although 55 percent of the respondents (Table I)
indicated that their firms had adopted an integrated materials management
approach to supply chain management, they tended to focus on immediate
suppliers and customers. This observation supports the notion that while
supply chain management addresses all the value adding activities, from the
extraction of raw materials to the end of the useful life of a product, a realistic
approach is to focus on immediate suppliers and customers. Larger firms may
be better situated to adopt an integrated approach to supply chain management
than smaller firms.
Mean importance responses to questions on supplier evaluation practices
ranged from 4.88 to 2.68 (Table V). The Scheffe test separated the 12 practices
into six homogeneous subsets with two distinct subsets. These were the use of

No. of Standardized
Scale items questions Cronbach's  item 

Performance measures 6 0.8005 0.8021

Supply chain management practices 24 0.9036 0.9068 Table III.
Supplier evaluation practices 12 0.8421 0.8651 Reliability analysis
IJOPM Importance Homogeneous
22,6 Supply chain management practicesa means subsets
9
(s) Suppliers' on-time delivery directly to your points 4.44 >
>
>
>
of use >
>
(r) Your on-time delivery directly to customers' points 4.35 >
>
>
>
of use >
>
622 (a) Determining customers' future needs 4.35
>
>
>
>
>
>
(u) Reducing response time across the supply chain 4.30 >
>
>
> 9
(p) Creating a greater level of trust among SC 4.09 >
> >
>
> >
>
members >
> >
>
>
> >
>
(n) Communicating your future strategic needs to your 4.06 >
> >
>
>
> >
>
suppliers >
> >
>
>
> >
>
(k) Improving the integration of activities across SC 4.04 >
> >
> 9
>
= >
> >
(l) Searching for new ways to integrate SCM activities 3.91 >
> >
>
(m) Establishing more frequent contact with SC 3.89 >
> >
>
> >
> >
>
members >
> >
> >
>
>
> >
> >
>
(b) Increasing your firm's JIT capabilities 3.86 >
> >
> >
>
>
> >
> >
>
(y) Contacting the end users of your products to get 3.84 >
> >
= >
>
>
> >
>
feedback >
> >
>
>
> > >
> 9
(o) Communicating customers' future strategic needs 3.70 >
> >
> >
> >
>
> >
> >
> >
>
(x) Creating a compatible communication/information 3.62 >
> >
> >
> >
>
>
> >
> >
> >
>
system >
> >
> >
= >
>
>
> >
> >
>
(i) Use of informal information sharing 3.61 >
> >
> >
>
>
> >
> > >
>
(q) Identifying additional SC 3.59 >
> >
> >
> >
>
>
> >
> >
> >
>
(j) Use of formal information sharing agreements 3.59 >
> >
> > >
>
>
> >
> >
> >
>
(c) Aiding your suppliers to increase their JIT 3.58 ; >
> >
> >
>
>
> >
> >
=
capabilities >
> >
>
>
> >
>
(v) Involving SC members in your product/service/ 3.30 > >
>
; >
> >
>
marketing plans >
> >
> 9
>
> >
> >
(d) Participating in the sourcing decisions of your 3.06 >
> >
> >
>
suppliers >
> >
> >
>
>
> >
> >
>
(e) Participating in the marketing efforts of your 2.99 >
> >
> >
>
; >
> >
=
customers >
> 9
>
>
(w) Extending SC beyond immediate suppliers and 2.84 >
> > >
>
>
> >
> >
>
customers >
> >
> =
; >
>
(t) Creating SCM teams to include different companies 2.79 >
>
Table IV. >
; >
>
(f) Locating closer to your customers 2.31 >
>
Scheffe multiple range ;
(g) Requiring suppliers to locate closer to your firm 2.03
test ± supply chain
management practices Note: a Means for groups in homogeneous subsets are displayed, using  ˆ 5 percent

electronic data interchange (EDI, 2.68), which was statistically less significant
than the willingness to share sensitive information (3.27), which in turn was
statistically less significant than the other ten supplier evaluation practices. The
fact that EDI was not important in supplier performance evaluation could be due
to its decreased importance with the advent of the Internet. Not surprisingly,
quality level was a major issue in evaluating suppliers. It was statistically more
important than correct quantity (4.24) and price/cost of product (4.17). This
preliminary finding suggests that price/cost may not be a primary factor in
selecting suppliers for firms practicing supply chain management.
 Importance Homogeneous Supply chain
Supplier evaluation practices a means subsets management
(a) Quality level 4.88 9
>
(b) Service level 4.68 =9
>
>
(d) On-time delivery 4.66 >
>
> >
>
(k) Quick response time 4.57 ;>
> >
>
> 623
(i) The flexibility to respond to unexpected demand 4.44 =9
>
>
changes >
>
> >
> 9
(c) Correct quantity 4.24 >
> >
=
> >
>
(l) Willingness to change products/services to meet 4.19 >
> >
>
>
> >
>
changing needs >>
>
; >
>
>
>
>
=
(e) Price/cost of product 4.17 >
>
;
(m) Willingness to participate in new product 4.00 >
>
>
>
development and VA/VE >
>
>
>
(j) Communication skills/systems (phone, fax, e-mail, 3.88 ;
Internet)
(g) Willingness to share sensitive information 3.27 g Table V.
(f) Use of electronic data interchange (EDI) 2.68 g Scheffe multiple range
test ± supplier
Note: a Means for groups in homogeneous subsets are displayed, using  ˆ 5 percent evaluation practices

The first homogeneous subset also suggests that quality and service levels, on-
time delivery, quick response and volume flexibility are critical factors in
evaluating supplier performance. Therefore, firms that wish to establish
partnership relationships with their customers need to focus on these areas.
Interestingly, the willingness to participate in new product development and
value analysis/engineering (VA/VE) was not as important as the five factors
listed in the first subset. This suggests that evaluation of suppliers is easier
than undertaking initiatives like VA/VE. The grouping of evaluation practices
suggests the objectivity of the measurements used. For example, the second
and third subsets are generally subjective measures and may be evaluated on a
regular basis. The evaluation practices found in the first subset can and should
be taken on a per-shipment, daily or monthly basis and are easily quantifiable.
Mean importance responses to the six performance measures ranged from
4.36 to 3.73 (Table VI). The six comparative performance measures were

Importance Homogeneous
Firm comparative performance a means subsets
9
(d) Overall product quality 4.36 =
(f) Overall customer service levels 4.22
(e) Overall competitive position 4.06 ;9
>
>
=
(a) Market share 3.76
(b) Return on assets 3.76 > Table VI.
>
; Scheffe multiple range
(c) Average selling price 3.73
test ± comparative
a
Means for groups in homogeneous subsets are displayed, using  ˆ 5 percent performance
IJOPM separated into two homogeneous subsets, with overall competitive position
22,6 (4.06) appearing in both groups. Scheffe multiple comparisons indicated that
the supply chain management respondents rated themselves highly on overall
product quality (4.36) and overall customer service levels (4.22). Statistically,
overall product quality and overall customer service levels were rated higher
than market share, return on assets and average selling price. Once again,
624 selling price or cost does not seem to be a major issue in supply chain
management and its influence on performance.
Factor analysis
For supply chain management practices and supplier evaluation practices,
exploratory factor analysis was used to identify the latent variables based on
the practices. The goal was to identify a smaller set of factors to represent the
relationships among the variables parsimoniously (i.e. to explain the observed
correlation with fewer factors). In this part of the research, principal
components analysis with eigenvalues greater than one was used to extract
factors, and varimax rotation was used to facilitate interpretation of the factor
matrix.
The 24 supply chain management practices were reduced to six underlying
factors (Table VII). The first factor, supply chain integration, is comprised of
five strategic practices that address supply chain integration. This factor
accounts for 17.6 percent of the variance in the data. Information sharing
includes the five practices relating to the use of information technology and
sharing. Supply chain characteristics involves the operating characteristics of
the supply chain. Customer service management consists of five practices.
Geographical proximity consists of three practices, of which two are
directly related to the geographical proximity of the suppliers and buyers.
JIT capability relates directly to the buyers' and suppliers' just-in-time
capabilities. These six factors accounted for a total of 66.7 percent of the total
variance in the data.
The 12 supplier evaluation practices were reduced to three underlying
factors (Table VIII). The three factors are product and delivery assessment,
capacity assessment, and information assessment. These three factors
accounted for 61.6 percent of the total variance in the data, indicating that a
model with three factors was sufficient to represent the data.

Bivariate correlation
Bivariate correlation analysis was used to study the relations between the
factors extracted from supply chain management and supplier evaluation
practices, and performance (Table IX). Geographical proximity, although not
viewed as an important supply chain management issue (Table IV), was
positively correlated to market share at  ˆ 5 percent. Indeed, it has the second
highest correlation coefficient among the significant relationships. The
managerial implication is that locating closer to suppliers or customers has a
positive impact on market share, although our respondents did not rate
 % of Factor Supply chain
Factor variance a Scale items loadings management
Supply chain 17.6 (l) Searching for new ways to integrate SCM 0.843
integration activities
(u) Reducing response time across the supply 0.810
chain
(k) Improving integration activities across SC 0.809
625
(m) Establishing more frequent contact with SC 0.766
members
(x) Creating a compatible communication/ 0.636
information system
Information 10.5 (j) Use of formal information sharing 0.756
sharing agreements
(a) Determine customers' future needs 0.701
(i) Use of informal information sharing 0.599
(d) Participate in the sourcing decisions of your 0.566
suppliers
(o) Communicating customers' future strategic 0.500
needs
Supply chain 10.4 (q) Identifying additional SC 0.765
characteristics (s) Suppliers' on-time delivery directly to your 0.660
points of use
(n) Communicating your future strategic needs 0.593
to your suppliers
(p) Creating a greater level of trust among SC 0.578
members
Customer 10.1 (r) Your on-time delivery directly to customers' 0.740
service points of use
management (y) Contacting the end users of your products to 0.697
get feedback
(w) Extending SC beyond immediate suppliers 0.474
and customers
(v) Involving SC members in your product/ 0.471
service/marketing plans
(t) Creating SCM teams to include different 0.399
companies
Geographical 9.4 (f) Locating closer to your customers 0.835
proximity (g) Requiring suppliers to locate closer to your 0.752
firm
(e) Participate in the marketing efforts of your 0.510
customers
JIT capability 8.7 (c) Aiding your suppliers to increase their JIT 0.734
capabilities
(b) Increasing your firm's JIT capabilities 0.608
Notes: Table VII.
a
Based on rotation sums of squared loadings Factor analysis ±
Kaiser-Meyer-Olkin measure of sampling adequacy = 0.782 supply chain
Bartlett test of sphericity = 965.632, significance = 0.000 management practices
IJOPM % of Factor
22,6 Factor variance a Scale items loadings

Product and 22.8 (a) Quality level 0.757

delivery (d) On-time delivery 0.711
assesment (c) Correct quantity 0.697
(b) Service level 0.661
626 (e) Price/cost of product 0.559
Capacity 22.7 (l) Willingness to change products/services to 0.864
assessment meet changing needs
(k) Quick response time 0.811
(i) The flexibility to respond to unexpected 0.640
demand changes
(j) Communication skills/systems 0.539
Information 16.1 (g) Willingness to share sensative information 0.797
assessment (f) Use of electronic data interchange (EDI) 0.773
(m) Willingness to participate in new product 0.555
development and VA
Table VIII. Notes:
a
Factor analysis ± Based on rotation sums of squared loadings
supplier evaluation Kaiser-Meyer-Olkin measure of sampling adequacy = 0.850
practices Bartlett test of sphericity = 426.344, significance = 0.000

Overall
Average Overall Overall customer
Market Return selling product competitive service
share on assets price quality position levels

Supply chain management

factors
Supply chain integration ±0.069 ±0.088 ±0.142 0.114 ±0.002 0.102
Information sharing 0.096 0.183 0.164 0.092 0.187 0.015
Supply chain ±0.022 ±0.109 ±0.213* 0.212* 0.025 0.198*
characteristics
Customer service 0.034 ±0.031 0.084 ±0.036 ±0.060 0.108
management
Geographical proximity 0.240* 0.089 0.160 ±0.086 0.098 ±0.056
JIT capability 0.004 0.004 0.136 0.300** 0.167 0.191
Supplier evaluation factors
Product and delivery 0.114 0.089 ±0.047 0.078 0.082 0.214*
assessment
Capacity assessment ±0.225* ±0.048 0.157 0.079 ±0.045 0.150
Information assessment 0.135 0.222* 0.122 ±0.007 0.150 0.093
Notes:
Table IX. * Correlation is significant at the 0.05 level (1-tailed)
Bivariate correlation ** Correlation is significant at the 0.01 level (1-tailed)
geographical proximity as an important practice. The implication for local Supply chain
suppliers is that they can compete effectively by emphasizing quick delivery in management
small lot sizes. Thus, closely located suppliers may be able to differentiate
themselves based on delivery.
Two supply chain management factors, JIT capability and supply chain
characteristics, had a positive relationship with overall product quality. JIT
capability has the largest impact (in terms of significant coefficient) on 627
performance. The result suggests that firms should focus on JIT capabilities
and supply chain characteristics to improve overall product quality. To
improve overall customer service levels, firms should focus on supply chain
characteristics such as delivery and communications. Interestingly, supply
chain characteristics also have a significant inverse relationship with average
selling price. Firms that try to create a greater level of trust among supply
chain members, communicate future needs to suppliers, emphasize suppliers'
on-time delivery and identify additional supply chains reduce their average
selling price compared to competitors. A plausible explanation is that suppliers
with good customer relations are likely to be more efficient and will pass any
cost savings to their customers through lower prices. Customers may request
lower prices in exchange for long-term contracts. However, short-term and
temporary suppliers are more likely to charge a higher price. This is consistent
with the finding that price or cost of a product was not a primary supplier
evaluation criterion, as shown in Table V.
Correlation of supplier evaluation factors vis-aÁ-vis performance indicates
that product and delivery assessment is positively correlated to overall
customer service levels. This is not surprising since quality products delivered
on time will always improve customer service. Capacity assessment shows an
inverse relationship to market share. It suggests that if firms emphasize
capacity assessment in evaluating supplier performance, they are likely to
sacrifice market share performance. While capacity assessment is important,
the result suggests that it should not be the primary focus of supplier
evaluation. Finally, information assessment has the greatest positive impact on
return on assets.

Conclusions
A truly integrated supply chain requires a massive commitment by all
members of the chain. Buyers may have to overhaul purchasing processes and
integrate suppliers' engineering teams and product designers directly into their
own decision-making processes. Since the cost of changing a partner in the
supply chain can be huge, the purchasing firm can become captive to its
suppliers. Poor supplier performance is not the only risk; firms need to worry
about the possibility of a supplier passing trade secrets to competitors or
venturing out as a competitor.
This research revealed that supply chain management practices could be
categorized into six constructs (Table VI), addressing various aspects of supply
and materials management issues, ranging from the broad based supply chain
IJOPM integration to the more specific JIT capability. Similarly, supplier evaluation
22,6 practices could be categorized into three constructs, addressing delivery,
capacity and information issues. While theory-based researchers question the
use of exploratory factor analysis, it is a useful tool for exploring constructs
where there is a lack of theory to support a priori models. This research also
showed that some of the constructs identified in this study correlated positively
628 with firm performance, whereas others suggested an inverse relationship. By
focusing on these relationships, practitioners can better understand how
specific policies influence firm performance.
Future research is needed to extend these findings. Specifically, more work
is needed to further explore the impact of supply chain management practices
on performance by including other areas of the organization and their
perspectives. Research needs to be conducted to examine the changing focus of
supply chain management as companies expand their scope and requirements.
This study addressed supply chain management practices and supplier
evaluation practices of manufacturers. Thus, the research needs to be extended
to include service providers.
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Appendix
630
1. Supply chain management practices
On a scale of 5 (very important) to 1 (not important), how important are the following issues in
your firm's supply chain management efforts?
(a) Determining customers' future needs
(b) Increasing your firm's JIT capabilities
(c) Aiding your suppliers to increase their JIT capabilities
(d) Participating in the sourcing decisions of your suppliers
(e) Participating in the marketing efforts of your customers
(f) Locating closer to your customers
(g) Requiring suppliers to locate closer to your firm
(h) Use of a third-party supply chain management specialista
(i) Use of informal information sharing with suppliers and customers
(j) Use of formal information sharing agreements with suppliers and customers
(k) Improving the integration of activities across your supply chain
(l) Searching for new ways to integrate supply chain management activities
(m) Establishing more frequent contact with members of your supply chain
(n) Communicating your firm's future strategic needs to your suppliers
(o) Communicating customers' future strategic needs throughout the entire supply chain
(p) Creating a greater level of trust among your firm's supply chain members
(q) Identifying additional supply chains where your firm can establish a presence
(r) On-time delivery of your firm's products directly to your customers' points of use
(s) On-time delivery of your purchased materials directly to your firm's points of use
(t) Creating supply chain management teams that include members from different
companies
(u) Reducing response time across the supply chain
(v) Involving all members of your firm's supply chain in your product/service/marketing
plans
(w) Extending your supply chain to include members beyond immediate suppliers and
customers
(x) Creating a compatible communication/information system with your suppliers and
customers
(y) Contacting the end users of your products to get feedback on performance and customer
service
a
Question (h) was eliminated from subsequent analysis because it correlated weakly (0.2789)
with other supply chain management practices.
2. Supplier evaluation practices Supply chain
On a scale of 5 (very important) to 1 (not important), how important are the following issues
when evaluating your key/distinguished suppliers' performance? management
(a) Quality level
(b) Service level
(c) Correct quantity
(d) On-time delivery 631
(e) Price/cost of product
(f) Use of electronic data interchange (EDI)
(g) Willingness to share sensitive information
(h) Presence of certification or other documentation*
(i) The flexibility to respond to unexpected demand changes
(j) Communication skills/systems (phone, fax, e-mail, Internet)
(k) Quick response time in case of emergency, problem, or special request
(l) Willingness to change their products and services to meet your changing needs
(m) Willingness to participate in your firm's new product development and value analysis

3. Performance measures
On a scale of 5 (high) to 1 (low), please indicate the level of your firm's performance compared to
your major industrial competitors in terms of
(a) Market share
(b) Return on assets
(c) Average selling price
(d) Overall product quality
(e) Overall competitive position
(f) Overall customer service levels