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The Impact of Supply Chain Management

Practices on Competitive Advantage and
Organizational Performance
Article in Omega · April 2006

DOI: 10.1016/j.omega.2004.08.002 · Source: RePEc
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Omega 34 (2006) 107 – 124
www.elsevier.com/locate/omega
The impact of supply chain management practices on competitive

advantage and organizational performance
Suhong Lia,∗ , Bhanu Ragu-Nathanb , T.S. Ragu-Nathanb , S. Subba Raob
a Computer Information Systems Department, Bryant University, 1150 Douglas Pike, Smithfield, RI 02917-1284, USA
b College of Business Administration, The University of Toledo, Toledo, OH 43606, USA
Received 20 March 2004; accepted 16 August 2004

Available online 29 September 2004
Abstract
Effective supply chain management (SCM) has become a potentially valuable way of securing competitive advantage and
improving organizational performance since competition is no longer between organizations, but among supply chains. This
research conceptualizes and develops five dimensions of SCM practice (strategic supplier partnership, customer relationship,
level of information sharing, quality of information sharing, and postponement) and tests the relationships between SCM
practices, competitive advantage, and organizational performance. Data for the study were collected from 196 organizations
and the relationships proposed in the framework were tested using structural equation modeling. The results indicate that
higher levels of SCM practice can lead to enhanced competitive advantage and improved organizational performance. Also,
competitive advantage can have a direct, positive impact on organizational performance.
! 2004 Elsevier Ltd. All rights reserved.
Keywords: Supply chain management; Competitive advantage; Organizational performance; Structural equation modeling
1. Introduction
traditional business functions and tactics across these busi-
As competition in the 1990s intensified and markets be- nesses functions within a particular organization and across
came global, so did the challenges associated with getting businesses within the supply chain for the purposes of im-
a product and service to the right place at the right time proving the long-term performance of the individual orga-
at the lowest cost. Organizations began to realize that it is nizations and the supply chain as a whole. SCM has been
not enough to improve efficiencies within an organization, defined to explicitly recognize the strategic nature of coor-
but their whole supply chain has to be made competitive. dination between trading partners and to explain the dual
The understanding and practicing of supply chain manage- purpose of SCM: to improve the performance of an indi-
ment (SCM) has become an essential prerequisite for staying vidual organization, and to improve the performance of the
competitive in the global race and for enhancing profitably whole supply chain. The goal of SCM is to integrate both
[1–4]. information and material flows seamlessly across the supply
Council of Logistics Management (CLM) [5] de- chain as an effective competitive weapon [1,6].
fines SCM as the systemic, strategic coordination of the The concept of SCM has received increasing attention
from academicians, consultants, and business managers
alike [4,6–8]. Many organizations have begun to recognize
∗ Corresponding author. Tel.: +1-401-232-6503; fax: +1-401- that SCM is the key to building sustainable competitive edge
232-6435. for their products and/or services in an increasingly crowded
E-mail address: [email protected] (S. Li). marketplace [9]. The concept of SCM has been considered
0305-0483/$ - see front matter ! 2004 Elsevier Ltd. All rights reserved.
doi:10.1016/j.omega.2004.08.002
108 S. Li et al. / Omega 34 (2006) 107 – 124
from different points of view in different bodies of literature of SCM have been conducted by the IT service providers
[7], such as purchasing and supply management, logistics (such as SAP, Peoplesoft, i2 and JDEdwards) and the re-
and transportation, operations management, marketing, or- search firms (such as Forrester Research and AMR Re-
ganizational theory, and management information systems. search) (http://www.supply-chain.org) and many case histo-
Various theories have offered insights on specific aspects or ries of successful implementations of SCM have been re-
perspectives of SCM, such as industrial organization and ported in the literature. Taken together, these studies are
associated transaction cost analysis [10,11], resource-based representative of efforts to address various diverse but in-
and resource-dependency theory [12], competitive strategy teresting aspects of SCM practices. However, the absence
[13], and social–political perspective [14]. of an integrated framework, incorporating all the activities
However, despite the increased attention paid to SCM, both upstream and downstream sides of the supply chain
the literature has not been able to offer much by way of and linking such activities to both competitive advantage
guidance to help the practice of SCM [15]. This has been and organizational performance, detracts from usefulness of
attributed to the interdisciplinary origin of SCM, the con- the implementation of previous results on SCM.
ceptual confusion, and the evolutionary nature of SCM con- The purpose of this study is therefore to empirically
cept. There is no generally accepted definition of SCM in test a framework identifying the relationships among SCM
the literature [6]. The concept of SCM has been involved practices, competitive advantage and organizational perfor-
from two separate paths: purchasing and supply manage- mance. SCM practices are defined as the set of activities
ment, and transportation and logistics management [16]. Ac- undertaken by an organization to promote effective man-
cording to purchasing and supply management perspective, agement of its supply chain. The practices of SCM are
SCM is synonymous with the integration of supply base proposed to be a multi-dimensional concept, including the
that evolved from the traditional purchasing and materials downstream and upstream sides of the supply chain. Opera-
functions [17,18]. In the perspective of transportation and tional measures for the constructs are developed and tested
logistics management, SCM is synonymous with integrated empirically, using data collected from respondents to a sur-
logistics systems, and hence focus on inventory reduction vey questionnaire. Structural equation modeling is used to
both within and across organizations in the supply chain test the hypothesized relationships. It is expected that the
[8,19–22]. Eventually, these two perspectives evolved into current research, by addressing SCM practices simultane-
an integrated SCM that integrates all the activities along the ously from both upstream and downstream sides of a supply
whole supply chain. chain, will help researchers better understand the scope and
The evolutionary nature and the complexity of SCM are the activities associated with SCM and allow researchers to
also reflected in the SCM research. Much of the current the- test the antecedences and consequences of SCM practice.
oretical/empirical research in SCM focuses on only the up- Further, by offering a validated instrument to measure SCM
stream or downstream side of the supply chain, or certain practices, and by providing empirical evidence of the impact
aspects/perspectives of SCM [23]. Topics such as supplier of SCM practices on an organization’s competitive advan-
selection, supplier involvement, and manufacturing perfor- tage and its performance, it is expected that this research
mance [24,25], the influence of supplier alliances on the or- will offer useful guidance for measuring and implementing
ganization [26], success factors in strategic supplier alliances SCM practices in an organization and facilitate further re-
[27,28], supplier management orientation and supplier/buyer search in this area.
performance [29], the role of relationships with suppliers in The remainder of this paper is organized as follows. Sec-
improving supplier responsiveness [30], and the antecedence tion 2 presents the research framework, provides the defini-
and consequences of buyer–supplier relationship [31] have tions and theory underlying each dimension of SCM prac-
been researched on the supplier side. Studies such as those tices, discusses the concepts of competitive advantage and
by Clark and Lee [32], and Alvarado and Kotzab [19], fo- organizational performance, and develops the hypothesized
cus on the downstream linkages between manufacturers and relationships. The research methodology and analysis of re-
retailers. A few recent studies have considered both the up- sults are then presented, followed by the implications of the
stream and downstream sides of the supply chain simulta- study.
neously. Tan et al. [16] explore the relationships between
supplier management practices, customer relations practices
and organizational performance; Frohlich and Westbrook 2. Research framework
[33] investigate the effects of supplier–customer integra-
tion on organizational performance, Tan et al. [4] study Fig. 1 presents the SCM framework developed in this re-
SCM and supplier evaluation practices and relate the con- search. The framework proposes that SCM practices will
structs to firm performance, Min and Mentzer [34] develop have an impact on organizational performance both directly
an instrument to measure the supply chain orientation and and also indirectly through competitive advantage. SCM
SCM at conceptual levels. Cigolini et al. [15] develop a set practice is conceptualized as a five-dimensional construct.
of supply chain techniques and tools for examining SCM The five dimensions are strategic supplier partnership, cus-
strategies. Extensive case studies about the implementation tomer relationship, level of information sharing, quality of
S. Li et al. / Omega 34 (2006) 107 – 124 109
Organizational customer relationship, level of information sharing, qual-

SCM Practices
Strategic Supplier
Performance ity of information sharing and postponement, are selected
Market performance
Partnership H1
Financial performance for measuring SCM practice. The five constructs cover
Customer Relationship
Level of Information Sharing
upstream (strategic supplier partnership) and downstream
Quality of Information Sharing (customer relationship) sides of a supply chain, information
Postponement H3 flow across a supply chain (level of information sharing and
quality of information sharing), and internal supply chain
Competitive Advantage
process (postponement). It should be pointed out that even
Price/cost though the above dimensions capture the major aspects of
H2 Quality SCM practice, they cannot be considered complete. Other
Delivery Dependability
Product Innovation factors, such as geographical proximity, JIT/lean capabil-
Time to Market ity [4], cross-functional teams, logistics integration [31],
agreed vision and goals, and agreed supply chain leader-
Fig. 1. Research framework. ship [34] are also identified in the literature. Though these
factors are of great interest, they are not included due to
the concerns regarding the length of the survey and the
information sharing, and postponement. A detailed descrip- parsimony of measurement instruments.
tion of the development of the SCM practices construct is The present study, therefore, proposes SCM practices as
provided in the following paragraphs. Competitive advan- a multi-dimensional concept. Table 1 lists these dimensions
tage and organizational performance are concepts that have along with their definitions and supporting literature. A more
been operationalized in the existing literature [35,36]. Using detailed discussion of these dimensions is provided below.
literature support, the expected relationships among SCM Strategic supplier partnership: Is defined as the long-
practices, competitive advantage, and organizational perfor- term relationship between the organization and its suppli-
mance are discussed, and hypotheses relating these variables ers. It is designed to leverage the strategic and operational
are developed. capabilities of individual participating organizations to help
them achieve significant ongoing benefits [26,38,40,41,45].
2.1. SCM practices A strategic partnership emphasizes direct, long-term associ-
ation and encourages mutual planning and problem solving
SCM practices have been defined as a set of activities efforts [39]. Such strategic partnerships are entered into to
undertaken in an organization to promote effective manage- promote shared benefits among the parties and ongoing par-
ment of its supply chain. Donlon [37] describes the latest ticipation in one or more key strategic areas such as technol-
evolution of SCM practices, which include supplier part- ogy, products, and markets [70]. Strategic partnerships with
nership, outsourcing, cycle time compression, continuous suppliers enable organizations to work more effectively with
process flow, and information technology sharing. Tan et a few important suppliers who are willing to share respon-
al. [16] use purchasing, quality, and customer relations to sibility for the success of the products. Suppliers participat-
represent SCM practices, in their empirical study. Alvarado ing early in the product-design process can offer more cost-
and Kotzab [19] include in their list of SCM practices con- effective design choices, help select the best components
centration on core competencies, use of inter-organizational and technologies, and help in design assessment [4]. Strate-
systems such as EDI, and elimination of excess inventory gically aligned organizations can work closely together and
levels by postponing customization toward the end of the eliminate wasteful time and effort [38]. An effective sup-
supply chain. Tan et al. [4] identify six aspects of SCM plier partnership can be a critical component of a leading
practice through factor analysis: supply chain integration, edge supply chain [45].
information sharing, supply chain characteristics, customer Customer relationship: Comprises the entire array of
service management, geographical proximity and JIT capa- practices that are employed for the purpose of managing
bility. Chen and Paulraj [31] use supplier base reduction, customer complaints, building long-term relationships with
long-term relationship, communication, cross-functional customers, and improving customer satisfaction [42,16].
teams and supplier involvement to measure buyer–supplier Noble [45] and Tan et al. [16] consider customer rela-
relationships. Min and Mentzer [34] identify the concept tionship management as an important component of SCM
SCM as including agreed vision and goals, information practices. As pointed out by Day [43], committed rela-
sharing, risk and award sharing, cooperation, process in- tionships are the most sustainable advantage because of
tegration, long-term relationship and agreed supply chain their inherent barriers to competition. The growth of mass
leadership. Thus the literature portrays SCM practices customization and personalized service is leading to an
from a variety of different perspectives with a common era in which relationship management with customers is
goal of ultimately improving organizational performance. becoming crucial for corporate survival [46]. Good relation-
In reviewing and consolidating the literature, five distinc- ships with supply chain members, including customers, are
tive dimensions, including strategic supplier partnership, needed for successful implementation of SCM programs
110 S. Li et al. / Omega 34 (2006) 107 – 124
Table 1
List of sub-constructs for SCM practice
Sub-constructs Definitions Literature
Strategic supplier partnership The long-term relationship between the organization and its suppliers. It is [4,18,26,38–41]
designed to leverage the strategic and operational capabilities of individ-
ual participating organizations to help them achieve significant ongoing
benefits.
Customer relationship The entire array of practices that are employed for the purpose of managing [2,4,42–46]
customer complaints, building long-term relationships with customers, and
improving customer satisfaction.
Level of information sharing The extent to which critical and proprietary information is communicated [1,9,38,40,47–51]
to one’s supply chain partner.
Quality of information sharing Refers to the accuracy, timeliness, adequacy, and credibility of information [2,6,40,52–59]
exchanged.
Postponement The practice of moving forward one or more operations or activities [8,60–69]
(making, sourcing and delivering) to a much later point in the supply chain.
[2]. Close customer relationship allows an organization to what information is shared, when and how it is shared, and
differentiate its product from competitors, sustain customer with whom [53,54].
loyalty, and dramatically extend the value it provides to its Literature is replete with example of the dysfunctional
customers [44]. effects of inaccurate/delayed information, as information
Level of information sharing: Information sharing has two moves along the supply chain [56–59]. Divergent interests
aspects: quantity and quality. Both aspects are important for and opportunistic behavior of supply chain partners, and
the practices of SCM and have been treated as indepen- informational asymmetries across supply chain affect the
dent constructs in the past SCM studies [2,40]. Level (quan- quality of information [6]. It has been suggested that orga-
tity aspect) of information sharing refers to the extent to nizations will deliberately distort information that can po-
which critical and proprietary information is communicated tentially reach not only their competitors, but also their own
to one’s supply chain partner [40]. Shared information can suppliers and customers [57]. It appears that there is a built-
vary from strategic to tactical in nature and from informa- in reluctance within organizations to give away more than
tion about logistics activities to general market and customer minimal information [52] since information disclosure is
information [48]. Many researchers have suggested that the perceived as a loss of power. Given these predispositions,
key to the seamless supply chain is making available undis- ensuring the quality of the shared information becomes a
torted and up-to-date marketing data at every node within critical aspect of effective SCM [6]. Organizations need to
the supply chain [1,38,51,71]. By taking the data available view their information as a strategic asset and ensure that it
and sharing it with other parties within the supply chain, flows with minimum delay and distortion.
information can be used as a source of competitive advan- Postponement is defined as the practice of moving for-
tage [9,49]. Lalonde [47] considers sharing of information ward one or more operations or activities (making, sourcing
as one of five building blocks that characterize a solid sup- and delivering) to a much later point in the supply chain
ply chain relationship. According to Stein and Sweat [50], [8,60,64,66,68]. Two primary considerations in developing a
supply chain partners who exchange information regularly postponement strategy are: (1) determining how many steps
are able to work as a single entity. Together, they can un- to postpone, and (2) determining which steps to postpone
derstand the needs of the end customer better and hence can [60]. Postponement allows an organization to be flexible in
respond to market change quicker. Moreover, Tompkins and developing different versions of the product in order to meet
Ang [72] consider the effective use of relevant and timely changing customer needs, and to differentiate a product or
information by all functional elements within the supply to modify a demand function [69]. Keeping materials undif-
chain as a key competitive and distinguishing factor. The ferentiated for as long as possible will increase an organi-
empirical findings of Childhouse and Towill [1] reveal that zation’s flexibility in responding to changes in customer de-
simplified material flow, including streamlining and making mand. In addition, an organization can reduce supply chain
highly visible all information flow throughout the chain, is cost by keeping undifferentiated inventories [65,68].
the key to an integrated and effective supply chain. Postponement needs to match the type of products, market
Quality of information sharing includes such aspects as demands of a company, and structure or constraints within
the accuracy, timeliness, adequacy, and credibility of infor- the manufacturing and logistics system [61–63,67]. In gen-
mation exchanged [2,40]. While information sharing is im- eral, the adoption of postponement may be appropriate in
portant, the significance of its impact on SCM depends on the following conditions: innovative products [61,62]; prod-
S. Li et al. / Omega 34 (2006) 107 – 124 111
ucts with high monetary density, high specialization and nancial and marketing performance of an organization
wide range; markets characterized by long delivery time, [29,87]. SCM practice is expected to increase an organi-
low delivery frequency and high demand uncertainty; and zation’s market share, return on investment [29,87], and
manufacturing or logistics systems with small economies of improve overall competitive position [88,89]. For example,
scales and no need for special knowledge [67]. strategic supplier partnership has been reported to yield
organization-specific benefits in terms of financial perfor-
2.2. Competitive advantage mance [16,26,88–91]. Advanced design and logistic links
with suppliers are related to better-performing plants [92].
Competitive advantage is the extent to which an organi- Customer relation practices have also been shown to lead
zation is able to create a defensible position over its com- to significant improvement in organizational performance
petitors [73,13]. It comprises capabilities that allow an or- [16]. The higher level of information sharing is associated
ganization to differentiate itself from its competitors and with the lower total cost, the higher-order fulfillment rate
is an outcome of critical management decisions [74]. The and the shorter-order cycle time [93].
empirical literature has been quite consistent in identifying The bottom-line impacts of SCM practices have been con-
price/cost, quality, delivery, and flexibility as important com- firmed by real-world examples. A recent survey finds that
petitive capabilities [74–76]. In addition, recent studies have organizations that are best at SCM hold a 40% to 65% ad-
included time-based competition as an important competi- vantage in their cash-to-cash cycle time over average orga-
tive priority. Research by Stalk [77], Vesey [78], Handfield nizations and the top organizations carry 50% to 85% less
and Pannesi [79], Kessler and Chakrabarti [80], Zhang [36] inventory than their competitors [41]. Based on the above it
identifies time as the next source of competitive advantage. is hypothesized that:
On the basis of prior literature, Koufteros et al. [35] describe Hypothesis 1. Firms with high levels of SCM practices
a research framework for competitive capabilities and de- will have high levels of organizational performance.
fine the following five dimensions: competitive pricing, pre- SCM practices impact not only overall organizational
mium pricing, value-to-customer quality, dependable deliv- performance, but also competitive advantage of an orga-
ery, and production innovation. These dimensions are also nization. They are expected to improve an organization’s
described by [74,75,81–84]. Based on the above, the dimen- competitive advantage through price/cost, quality, deliv-
sions of the competitive advantage constructs used in this ery dependability, time to market, and product innovation.
study are price/cost, quality, delivery dependability, product Prior studies have indicated that the various components
innovation, and time to market. of SCM practices (such as strategic supplier partnership)
have an impact on various aspects of competitive advan-
2.3. Organizational performance tage (such as price/cost). For example, strategic supplier
partnership can improve supplier performance, reduce
Organizational performance refers to how well an orga- time to market [94], and increase the level of customer
nization achieves its market-oriented goals as well as its fi- responsiveness and satisfaction [3]. Information sharing
nancial goals [85]. The short-term objectives of SCM are leads to high levels of supply chain integration [55] by
primarily to increase productivity and reduce inventory and enabling organizations to make dependable delivery and
cycle time, while long-term objectives are to increase mar- introduce products to the market quickly. Information
ket share and profits for all members of the supply chain sharing and information quality contribute positively to
[16]. Financial metrics have served as a tool for compar- customer satisfaction [95] and partnership quality [96,97].
ing organizations and evaluating an organization’s behavior Postponement strategy not only increases the flexibility
over time [54]. Any organizational initiative, including sup- in the supply chain, but also balances global efficiency
ply chain management, should ultimately lead to enhanced and customer responsiveness [68]. The above arguments
organizational performance. lead to
A number of prior studies have measured organizational Hypothesis 2. Firms with high levels of SCM practices
performance using both financial and market criteria, includ- will have high levels of competitive advantage.
ing return on investment (ROI), market share, profit mar- Having a competitive advantage generally suggests that
gin on sales, the growth of ROI, the growth of sales, the an organization can have one or more of the following ca-
growth of market share, and overall competitive position pabilities when compared to its competitors: lower prices,
[84,86,36]. In line with the above literature, the same items higher quality, higher dependability, and shorter delivery
will be adopted to measure organizational performance in time. These capabilities will, in turn, enhance the organiza-
this study. tion’s overall performance [48]. Competitive advantage can
lead to high levels of economic performance, customer sat-
2.4. Research hypotheses isfaction and loyalty, and relationship effectiveness. Brands
with higher consumer loyalty face less competitive switch-
The SCM framework developed in this study proposes ing in their target segments thereby increasing sales and
that SCM practice has a direct impact on the overall fi- profitability [98].
112 S. Li et al. / Omega 34 (2006) 107 – 124
An organization offering high quality products can charge agreements. Item placement ratios were calculated by count-
premium prices and thus increase its profit margin on sales ing all the items that were correctly sorted into the target
and return on investment. An organization having a short category by each of the judges and dividing them by twice
time-to-market and rapid product innovation can be the first the total number of items.
in the market thus enjoying a higher market share and sales In the first round, the inter-judge raw agreement scores av-
volume. Therefore, a positive relationship between com- eraged .89, the initial overall placement ratio of items within
petitive advantage and organizational performance can be the target constructs was .95, and the Cohen’s Kappa score
proposed. averaged .86. Following the guidelines of Landis and Koch
Hypothesis 3. The higher the level of competitive advan- [102] for interpreting the Kappa coefficient, the value of
tage, the higher the level of organizational performance. .86 was considered an excellent level of agreement (beyond
The above three hypotheses, taken together, support the chance) for the judges in the first round. In order to improve
SCM framework presented in Fig. 1. the Cohen’s Kappa measure of agreement, an examination
of the off-diagonal entries in the placement matrix was con-
ducted. Items classified in a construct different from their
3. Research methodology target construct were identified and dropped or reworded.
Also, feedback from both judges was obtained on each item
Instrument development methods for SCM practices in- and incorporated into the modification of the items.
clude four phases: (1) item generation, (2) pre-pilot study, The reworded items were then entered into a second sort-
(3) pilot study, and (4) large-scale data analysis. Instruments ing round. In the second round, the inter-judge raw agree-
that measure competitive advantage and organizational per- ment scores averaged .92, the initial overall placement ratio
formance were adopted from Zhang [36]. The items for these of items within the target constructs was .97, and the Cohen’s
instruments are listed in Appendix A. In phase four, rigor- Kappa score averaged .90. Since the second round achieved
ous statistical analysis was used to determine the validity an excellent overall placement ratio of items within the tar-
and reliability of the SCM practice, competitive advantage, get constructs (.97), it was decided to keep all the items for
and organizational performance instruments. The research the third sorting round.
framework in Fig. 1 and the associated hypotheses were then The third sorting round was used to re-validate the con-
tested using structural equation modeling. structs. The third round achieved the same agreement scores
as the second round, thereby indicating an excellent level of
3.1. Item generation, pre-pilot study, and pilot study agreement between the judges in the third round and con-
sistency of results between the second and third rounds. At
The basic requirement for a good measurement is content this stage the statistics suggested an excellent level of inter-
validity, which means that the measurement items in an in- judge agreement indicating a high level of reliability and
strument cover the major content of a construct [99]. Content construct validity.
validity is usually achieved through a comprehensive litera-
ture review and interviews with practitioners and academi- 3.2. Large-scale methods
cians. The items for SCM practice were generated based on
previous SCM literature [16,25,26,29,40,42,96,97,100]. This study sought to choose respondents who can be ex-
In the pre-pilot study, these items were reviewed by six pected to have the best knowledge about the operation and
academicians and re-evaluated through structured interviews management of the supply chain in his/her organization.
with three practitioners who were asked to comment on Based on literature and recommendations from practition-
the appropriateness of the research constructs. Based on the ers, it was decided to choose managers who are at higher
feedback from the academicians and practitioners, redundant managerial levels as respondents for the current study. The
and ambiguous items were either modified or eliminated. respondents were asked to refer to their major suppliers or
New items were added wherever deemed necessary. customers for relevant questions.
In the pilot study stage, the Q-sort method was used to pre- Mailing lists were obtained from two sources: the Society
assess the convergent and discriminant validity of the scales. of Manufacturing Engineers (SME) in USA and the atten-
Purchasing/production managers were requested to act as dees at the Council of Logistics Management (CLM) con-
judges and sort the items into the five dimensions of SCM ference in 2000, New Orleans, USA. Six SIC codes were
practice, based on similarities and differences among items. covered in the study: 25 “Furniture and Fixtures”, 30 “Rub-
To assess the reliability of the sorting conducted by the ber and Plastics”, 34 “Fabricated Metal Products”, 35 “In-
judges, three different measures were used: the inter-judge dustrial and Commercial Machinery”, 36 “Electronic and
raw agreement scores, Cohen’s Kappa, and item placement Other Electric Equipment”, 37 “Transportation Equipment”.
ratios. Raw agreement scores were calculated by counting The final version of the questionnaire, measuring all the
the number of items both judges placed in the same cate- items on a five point scale, was administrated to 3137 tar-
gory. Cohen’s Kappa [101] was used to evaluate the true get respondents. The survey was sent in three waves. The
agreement score between two judges by eliminating chance questionnaires with a cover letter indicating the purpose and
S. Li et al. / Omega 34 (2006) 107 – 124 113
significance of the study were mailed to the target respon- items loaded on their respective factors with most loadings
dents. In the cover letter, a web-address of the online ver- above .70 as shown in Table 2a. The cumulative variance
sion of the survey was also provided in case the respondents explained by the five factors is 63.27%.
wished to fill it in electronically. There were 196 complete The competitive advantage (CA) construct was initially
and usable responses, representing a response rate of ap- represented by 5 dimensions and 16 items. An initial fac-
proximately 6.3% tor analysis indicated that CA/DD1 had a cross-loading of
A significant problem with organizational-level research .46 with CA/PI and CA/TM1 had a cross-loading of .51
is that senior and executive-level managers receive many re- with CA/DD. After removing these two items, the remain-
quests to participate and have very limited time. Because ing items were factor analyzed and the results are shown in
this interdisciplinary research collects information from sev- Table 2b. It can be seen that all items loaded on their re-
eral functional areas, the size and scope of the research in- spective factors, with most of loadings greater than .80. The
struments must be large and time consuming to complete. cumulative variance explained by the five factors is 77.61%.
This further contributes to the low response rate. While When the organizational performance (OP) was factor
the response rate was less than desired, the makeup of re- analyzed, two factors emerged with one significant cross-
spondent pool was considered excellent (See Appendix B). loading (FP7 had loadings of .65 and .56 respectively on
Among the respondents, almost 20% of the respondents are each factor). FP7 was removed and factor analysis was per-
CEO/President/Vice President/Director. About half of the formed on the remaining items, and the results are shown in
respondents are managers, some identified them as supply Table 2c. After an examination of the descriptions of items,
chain manager, plant manager, logistics manager or IT man- the two factors were named as market performance made of
ager in the questionnaire. The areas of expertise were 30% OP1, OP4, and OP7 (coded as OP/MP) and financial per-
purchasing, 47% manufacturing production, and 30% distri- formance made of OP2, OP5, and OP6 (coded as OP/FP).
bution/transportation/sales. It can be seen that respondents
have covered all the functions across a supply chain from
4.2. Assessing reliability
purchasing, to manufacturing, to distribution and transporta-
tion, and to sales. Moreover, about 30% of the respondents
The reliabilities of SCM practice, competitive advantage,
are responsible for more than one job function, and they
and organizational performance were assessed with Cron-
are expected to have a broad view of SCM practice in their
bach’s Alpha. Tables 3a–c report means, standard deviations,
organization.
correlations, and reliability values for each of constructs.
This research did not investigate nonresponse bias directly
The reliability values for all constructs are all greater than
because the mailing list had only name and addresses of
.70, which are considered acceptable [109].
the individuals and not any organizational details. Hence,
a comparison was made between those subjects who re-
sponded after the initial mailing and those who responded to 4.3. Validation of second-order constructs
the second/third wave [103,104]. Similar methodology has
been used in prior empirical studies [2,30,31,105–107]. Us- SCM practice was conceptualized as a second-order
ing the Chi-square statistic and P < .05, it was found that model composed of five dimensions. Structural equation
there were no significant differences between the two groups modeling (using LISREL 8.30 by Scientific Software Inter-
in employment size, sales volume, and respondent’s job ti- national, Inc.) was used to determine whether a higher-order
tle. An absence of non-response bias is therefore inferred. factor model is appropriate for SCM practice. The fit statis-
tics for the second-order model were GFI=.85, AGFI=.82,
and the RMSR = .05, representing a reasonable model-data
4. Results for the measurement model fit. The ! coefficients were all significant at P < .01. The
target coefficient, which is the ratio of the chi-square value
Instrument that measures SCM practices were developed for the first-order model to the chi-square value for the
by Li et al. [108]. Instruments that measure competitive ad- higher-order model, was calculated [110]. It indicates the
vantage and organizational performance were adopted from percentage of variation in the first-order factors that can
Zhang [36]. Appendix A presents the multiple items repre- be explained by the second-order construct. In this case,
senting each of the constructs. The following section will chi-square of the first model was 386.80 and of the second
discuss statistical analysis used to determine the validity and model was 417.63. The target coefficient index is 92.6%,
reliability of each construct. which is strong evidence of existence of a higher-order
SCM practice construct.
4.1. Convergent and discriminant validity For competitive advantage, the fit indexes for the second-
order model were GFI =.88, AGFI =.82, and RMSR =.06,
For SCM practices (SCMP), a factor analysis was con- indicating a moderate model-data fit. The ! coefficients were
ducted using the 25 items that measure the five dimensions. all significant at P < .01. Chi-square of the first model was
For simplicity, only loadings above .40 are displayed. All 161.34 and of the second model was 186.21. The target
114 S. Li et al. / Omega 34 (2006) 107 – 124
Table 2
Factor analysis result for (a) SCM practice, (b) competitive advantage and (c) organizational performance
Item F1-IS F2-IQ F3-SSP F4-CRP F5-POS
(a) SCM practice

SCMP/IS1 .51
SCMP/IS2 .69
SCMP/IS3 .67
SCMP/IS4 .78
SCMP/IS5 .70
SCMP/IS6 .76
SCMP/IQ1 .66
SCMP/IQ2 .81
SCMP/IQ3 .76
SCMP/IQ4 .72
SCMP/IQ5 .81
SCMP/SSP1 .59
SCMP/SSP2 .73
SCMP/SSP3 .83
SCMP/SSP4 .76
SCMP/SSP5 .73
SCMP/SSP6 .51
SCMP/CRP1 .69
SCMP/CRP2 .79
SCMP/CRP3 .80
SCMP/CRP4 .73
SCMP/CRP5 .68
SCMP/POS1 .72
SCMP/POS2 .85
SCMP/POS3 .83
Eigenvalue 3.55 3.51 3.50 3.26 2.01
% of variance 14.18 14.02 13.99 13.03 8.05
Cumulative % of variance 14.18 28.20 42.19 55.22 63.27
Item F1-QL F2-PI F3-TM F4-DD F5-PC

(b) Competitive advantage
CA/QL1 .80
CA/QL2 .86
CA/QL3 .81
CA/QL4 .86
CA/PI1 .87
CA/PI2 .82
CA/PI3 .74
CA/TM2 .76
CA/TM3 .79
CA/TM4 .81
CA/DD2 .94
CA/DD3 .92
CA/PC1 .87
CA/PC2 .87
Eigenvalue 3.13 2.14 2.06 1.92 1.62
% of variance 22.38 15.27 14.70 13.69 11.57
Cumulative % of variance 22.38 37.65 52.35 66.04 77.61
Item F1-MP F2-FP

(c) Organizational performance
OP1 .88
OP3 .89
S. Li et al. / Omega 34 (2006) 107 – 124 115
Table 2 (continued)
Item F1-MP F2-FP
OP4 .80
OP2 .43 .81
OP5 .40 .82
OP6 .89
Eigenvalue 2.60 2.42
% of variance 43.28 40.32
Cumulative % of variance 43.28 83.60
Table 3
Means, standard deviations, correlations and reliability of (a) SCM practice, (b) competitive advantage and (c) organizational performance
Variables Mean SD 1 2 3 4 5 Reliability
(a) SCM practice

1. Strategic supplier partnership 3.70 .73 — .86
2. Customer relationship 3.96 .69 .52** — .84
3. Level of information sharing 3.34 .64 .56** .39** — .86
4. Quality of information sharing 3.33 .63 .39** .33** .59** — .86
5. Postponement 3.24 .88 .18* .12 .08 .15* — .73
(b) Competitive advantage

1. Price/cost 3.47 .78 — .73
2. Quality 4.18 .68 .12 — .87
3. Delivery dependability 4.03 .83 .20** .05 — .93
4. Product innovation 4.48 .55 .07 .40** .28** — .80
5. Time to market 3.19 .74 .33** .28** .32** .30** — .76
Variables Mean SD 1 2 Reliability

(c) Organizational performance
1. Market performance 3.32 .75 — .90
2. Financial performance 3.35 .76 .63** — .89
∗ Correlation is significant at the .05 level (two-tailed).
∗∗ Correlation is significant at the .01 level (two-tailed).
coefficient index is 86.6%, indicating the existence of a postponement may not be a strong indicator of SCM prac-
second-order competitive advantage construct. tice compared to the other four dimensions. This can be true.
As discussed in the previous sessions, the implementation
of postponement is dependent on a firm’s market character-
5. Results for the structural model istics and the type of the products and therefore may not be
applicable in all the situations. The results also show that
The theoretical framework illustrated in Fig. 1 has three the " values of price/cost, product innovation, and delivery
hypothesized relationships among the variables SCM Prac- dependability are not as high as those of quality and time
tices, Competitive Advantage, and Organizational Perfor- to market. This may indicate that quality and time to mar-
mance. Fig. 2 a displays the path diagram resulting from ket are stronger indicators of competitive advantage than the
the structural modeling analysis using LISREL. The results other three dimensions.
exhibit that all the measurements have significant loadings To determine whether the model in Fig. 2a has the best
to their corresponding second-order construct. Overall, the fit, alternate models were evaluated by dropping one of the
model has a satisfactory fit with GFI = .90, AGFI = .84, links between the constructs at one time (see Fig. 2b–d).
and CFI = .84. The RMSR is only .035, which is very good. In Fig. 2b, SCM practice and competitive advantage were
It should be noted that even though all the t-values of treated as independent constructs; the LISREL path coeffi-
the measurements are significant at .05 level, their loadings cients for SCM practice on organizational performance and
("-value) to the corresponding second-order construct are competitive advantage on organizational performance are
different. Postponement has a low " of .18, indicating that both significant, indicating that SCM practice and compet-
116 S. Li et al. / Omega 34 (2006) 107 – 124
Marketing
Performance 0.33
0.82
Strategic
0.44 Supplier Organizational
Partnership Performance 0.81
Financial
0.35
Performance
Customer 0.75 0.24 t=2.21
0.63 Relationship
0.61 0.89
0.48 t=2.80 Price/cost
Supply Chain
Level of 0.75 Management
0.44 Information Practice
Sharing 0.33 Quality 0.59
0.64 0.55 t=3.33
Competitive 0.64
Quality of Delivery 0.85
0.18 Advantage
0.59 Information 0.39 Dependability
Sharing
0.41
Product
0.83
Postponement Innovation
0.59
0.97
Time to
Market 0.66
RMSR=0.035, GFI=0.90, AGFI=0.84, CFI=0.84

(a)
Marketing
Performance 0.37
0.80
Strategic
Financial
0.34
Performance
Customer 0.71 0.36 t=4.14
0.68 Relationship
0.56 0.91
Supply Chain
0.30 Quality 0.56
Sharing
0.66
Competitive 0.67
0.17 Advantage
Sharing
0.48
Product
0.77
0.55
0.97
Time to
Market 0.70
RMSR=0.063, GFI=0.88, AGFI=0.82, CFI=0.79

(b)
Fig. 2. (a) Proposed and (b)–(d) alternative models of SCM practices, competitive advantage, and organizational performance.
itive advantage have independent affects on organizational To further test whether the proposed model in Fig. 2a
performance. In Fig. 2c, the direct link between SCM should be accepted compared to the three alternative mod-
practice and organizational performance was dropped. The els, sequential Chi-square difference tests (SCDTs) were
LISREL path coefficient between competitive advantage conducted by calculating the difference between Chi-square
and organizational performance became much stronger. In statistic values for the proposed model (Fig. 2a) and each
Fig. 2d, the link between competitive advantage and or- of the alternate models (Fig. 2b–d), with degrees of free-
ganizational performance was removed, the LISREL path dom equal to the difference in degrees of freedom for the
coefficient for SCM practice on competitive advantage and two selected models [111]. The results are presented in
SCM practice on organizational performance are both sig- Table 4. A significant result would indicate that the addi-
nificant, indicating that SCMP has direct impact on both tional estimated link (parameter) in the proposed model in-
competitive advantage and organizational performance. The crementally contribute to the explanation given by the alter-
fit statistics for the models in Fig. 2b and d were not as native model, the proposed model will be accepted. Other-
good as the fit statistics for the model in Fig. 2a and c. wise, the alternative model will be accepted with parsimony
Fig. 2a and c had almost the same fit indices. preferred when given no difference in explanation of the
S. Li et al. / Omega 34 (2006) 107 – 124 117
Marketing
Performance 0.30
0.84
Strategic
Financial
0.37
Performance
Customer 0.75
0.63 Relationship
0.61 0.89
Supply Chain
0.33 Quality 0.63
Sharing
0.64 0.61 t=3.56
Competitive 0.61
0.18 Advantage
Sharing
0.37
Product
0.86
0.59
0.97
Time to
Market 0.65
(c) RMSR=0.036, GFI=0.90, AGFI=0.84, CFI=0.84
Marketing
Performance 0.37
0.80
Strategic
Financial
0.31
Performance
Customer 0.74 0.55 t=5.78
0.62 Relationship
0.62 0.89
Price/cost
Supply Chain
0.33 Quality 0.60
Sharing
0.63 0.60 t=3.42
Competitive 0.63
0.18 Advantage
Sharing
0.43
Product
0.81
0.57
0.97
Time to
Market 0.67
(d) RMSR=0.040 GFI=0.89, AGFI=0.83, CFI=0.82
Fig. 2. (continued).
Table 4
Comparison of alternative models
Model Chi-square DF Chi-square difference DF difference SCDTs (# = .05)
Fig. 2a: Proposed model 134.04 51

Fig. 2b: Remove the link SCMP → CA 159.39 52 25.35 1 Significant
Fig. 2c: Remove the link SCMP → OP 138.26 52 4.22 1 Significant
Fig. 2d: Remove the link CA → OP 147.76 52 13.72 1 Significant
construct covariances. Table 4 shows that the proposed all the hypotheses. The results support Hypothesis 1, which
model in Fig. 2a is accepted compared to the alternative states that organizations with high levels of SCM practice
model in Fig. 2b–d at a significant level of .05. have high levels of organizational performance. The stan-
The results of the proposed structural equation model dardized coefficient is .24 which is statistically significant at
analysis are also presented in Table 5 indicating support for P < .05 (t = 2.21). The statistical significance of Hypoth-
118 S. Li et al. / Omega 34 (2006) 107 – 124
Table 5
Results for proposed structural equation model
Hypothesis Relationship Total effects Direct effects Indirect effects Hypothesis
H1 SCMP → OP .50** (5.59) .24* (2.21) .26** (t = 3.17) Supported

H2 SCMP → CA .55** (3.33) .55** (3.33) Supported
H3 CA → OP .48** (2.80) .48** (2.80) Supported
GFI = .90 AGFI = .84 CFI = .84 RMSR = .035
Note: *Significant at # < .05,** significant at # < .01 (one-tailed test). t-values are in parentheses.
esis 1 confirms that SCM practice can have a bottom-line ships. It is possible that enhanced competitive advantage and
influence on the organizational performance. The imple- increased organizational performance could have improved
mentation of SCM may directly improve an organization’s the levels of SCM practice. The increased competitiveness
financial and marketing performances in the long run. of a firm may enable a firm to implement higher level of
Hypothesis 2 is also supported which indicates that SCM SCM practice due to the need to outperform its competi-
practice have a direct impact on competitive advantage. The tors constantly and keep its competitive position in today’s
standardized coefficient is .55 which is statistically signif- dynamic business world. On the other hand, enhanced or-
icant at P < .01(t = 3.33). The implementation of various ganizational performance provides a firm increased capital
SCM practices, such as strategic supplier partnership, cus- to implement various SCM practices. Likewise, enhanced
tomer relationship building, and postponement, may provide organizational performance could have increased the com-
the organization a competitive advantage on cost, quality, petitive advantage of a firm. For example, a firm with good
dependability, flexibility, and time-to-market dimensions. financial capability can afford to offer low price, which pro-
The results also indicate that higher levels of compet- vides a cost advantage over its competitors.
itive advantage may lead to improved organizational per-
formance, thus confirming Hypothesis 3. The standardized
coefficient is .48 which is statistically significant at P < .01 6. Research implications and limitations
(t = 2.80).
Based on the standardized coefficients of the three hy- The present study validates the SCM practice construct
potheses displayed in Table 5, SCM practice may have a that has generally been poorly defined and about whose
greater direct impact on competitive advantage ($ = .55) meaning there has been a high degree of variability in peo-
than on organizational performance ($ = .24). This could ple’s understanding [27]. Although some organizations have
be true since organizational performance is usually in- realized the importance of implementing SCM, they often
fluenced by many factors and it is hard to see whether do not know exactly what to implement, due to a lack of
any one factor, such as SCM practice, will dominantly understanding of what constitutes a comprehensive set of
determine the overall performance of an organization. SCM practices. By proposing, developing, and validating a
The results also show that organizational performance multi-dimensional, operational measure of the construct of
is more influenced by competitive advantage ($ = .48) SCM practice, and by demonstrating its efficacy in enhanc-
than by SCM practice ($ = .24). This indicates that SCM ing organizational performance and competitive advantage,
practices produce competitive advantage to the organi- the present study provides SCM managers with a useful
zation in the first place, and competitive advantage will, tool for evaluating the comprehensiveness of their current
in turn, lead to improved organizational performance. In SCM practices. We have shown that SCM practice forms
literature, SCM practices, mostly, have been linked di- a second-order construct composed of the first-order con-
rectly to organizational performance. The findings of this structs of strategic supplier partnership, customer relation-
research indicate the presence of an intermediate mea- ship, level of information sharing, quality of information
sure of competitive advantage between SCM practice and sharing, and postponement—the five major components of
organizational performance. SCM practice. Through the analysis of the relationship of
The standardized coefficient of the indirect effect of SCM SCM practice construct with competitive advantage (Hy-
practice on organizational performance is .26 (t = 3.17), pothesis 2), it was demonstrated that SCM practice may di-
which is significant at .01 level. Our analysis from Table 5 rectly impact competitive advantage. The findings of this
thus shows that SCM practices can have a direct, positive research thus point to the importance of SCM practices to
influence on organizational performance as well as an indi- the organization.
rect one through competitive advantage. As today’s competition is moving from “among
The study focuses on the causal relationships between organizations” to “between supply chains”, more and more
SCM practice, competitive advantage and organizational organizations are increasingly adopting SCM practice in
performance and ignores the possible recursive relation- the hope of reducing supply chain costs and securing
S. Li et al. / Omega 34 (2006) 107 – 124 119
competitive advantage. The findings of this research suppliers, second-tier suppliers, manufacturers, carriers, cus-
port the view that SCM practices can have discernible tomers, etc.), and how the SCM practices differ across each
impact on competitive advantage and organizational participating organization. Future studies can also examine
performance. the proposed relationships by bringing some contextual vari-
It should be noted that the SCM practices may be influ- ables into the model, such as organizational size and supply
enced by contextual factors, such as the type of industry, chain structure. For example, it will be intriguing to inves-
firm size, a firm’s position in the supply chain, supply tigate how SCM practice differs across organization size.
chain length, and the type of a supply chain. For example, It will also be interesting to examine the impact of supply
the level of customer relationship practice, measured by chain structure (supply chain length, organization’s position
customer satisfactions and expectations, may be higher for in the supply chain, channel structure, and so on) on SCM
company located at the end of a supply chain (close to practice and competitive advantage.
the consumer). The larger organizations may have higher
levels of SCM practices since they usually have more com-
plex supply chain networks necessitating the need for more
effective management of supply chain. The level of infor-
7. Conclusion
mation quality may be influenced negatively by the length
of a supply chain. Information suffers from delay and
This paper provides empirical justification for a frame-
distortion as it travels along the supply chain, the shorter
work that identifies five key dimensions of SCM practices
the supply chain, the less chance it will get distorted.
and describes the relationship among SCM practices, com-
Moreover, the higher level of postponement may be asso-
petitive advantage, and organizational performance. It ex-
ciated with make-to-order versus make-to-stock production
amines three research questions: (1) do organizations with
systems.
high levels of SCM practices have high levels of competi-
Because of the limited number of observations (196), the
tive advantage; (2) do organizations with high level of SCM
revalidation of constructs was not carried out in this research.
practices have high levels of organizational performance;
Lack of systematic confirmatory research impedes general
(3) do organizations with high levels of competitive advan-
agreement on the use of instrument. Future research should
tage have a high level of organizational performance? For
revalidate measurement scales developed through this re-
the purpose of investigating these issues a comprehensive,
search. As the concept of SCM is complex and involves a
valid, and reliable instrument for assessing SCM practices
network of companies in the effort of producing and deliv-
was developed. The instrument was tested using rigorous
ering a final product, its entire domain cannot be covered
statistical tests including convergent validity, discriminant
in just one study. Future research can expand the domain of
validity, reliability, and the validation of second-order con-
SCM practice by considering additional dimensions such as
structs. This study provides empirical evidence to support
geographical proximity, JIT/lean capability, cross-functional
conceptual and prescriptive statements in the literature re-
coordination, logistics integration, and agreed supply chain
garding the impact of SCM practices.
leadership, which have been ignored from this study. The
future study can also test the relationships/dependencies
among five dimensions of SCM practices. For example, in-
formation sharing may require the establishment of a strate-
gic supplier partnership. The data for the study consisted of Appendix A. Instruments for supply chain management
responses from single respondents in an organization which practice, competitive advantage (CA) and organiza-
may be a cause for possible response bias. The results have tional performance (OP)
to be interpreted taking this limitation into account. The use
of single respondent may generate some measurement inac- With regard to SCM practice, please circle the number
curacy. Future research should seek to utilize multiple re- that accurately reflects your firm’s present conditions.
spondents from each participating organization to enhance
the research findings. It will also be of interest to use the Strategic supplier partnership (SSP)
respondents from pairs of organizations at two ends of sup- SCMP/SSP1 We consider quality as our number one
ply chains. By comparing different view of SCM practices criterion in selecting suppliers.
from organizations across the supply chain, it is possible to SCMP/SSP2 We regularly solve problems jointly
identify the strength and weakness of the supply chain and with our suppliers.
also the best common SCM practice across the supply chain. SCMP/SSP3 We have helped our suppliers to im-
Future research can study SCM issues at the supply chain prove their product quality.
level. Taking a single supply chain as an example, it is of SCMP/SSP4 We have continuous improvement pro-
interest to investigate the characteristics, policy, and mech- grams that include our key suppliers.
anism governing this supply chain, the interactions among SCMP/SSP5 We include our key suppliers in our
all the participants within the supply chain (first-tier sup- planning and goal-setting activities.
120 S. Li et al. / Omega 34 (2006) 107 – 124
SCMP/SSP6 We actively involve our key suppliers With regard to competitive advantage of your firm,
in new product development processes. please circle the appropriate number to indicate the ex-
tent to which you agree or disagree with each statement.
Customer relationship (CR) The item scales are five-point Likert type scales with
SCMP/CR1 We frequently interact with customers 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 =
to set reliability, responsiveness, and agree, 5 = strongly agree, 6 = not applicable.
other standards for us. Note: Items marked by an asterisk were removed in the
SCMP/CR2 We frequently measure and evaluate final instruments.
customer satisfaction.
SCMP/CR3 We frequently determine future cus- Price/cost: an organization is capable of compet-
tomer expectations. ing against major competitors based on
SCMP/CR4 We facilitate customers’ ability to seek low price.
assistance from us. CA/PC1 We offer competitive prices.
SCMP/CR5 We periodically evaluate the impor- CA/PC2 We are able to offer prices as low or
tance of our relationship with our lower than our competitors.
customers.
Level of information sharing (IS) Quality: an organization is capable of offering

SCMP/IS1 We inform trading partners in advance product quality and performance that
of changing needs. creates higher value for customers.
SCMP/IS2 Our trading partners share proprietary CA/QL1 We are able to compete based on qual-
information with us. ity.
SCMP/IS3 Our trading partners keep us fully in- CA/QL2 We offer products that are highly reli-
formed about issues that affect our able.
business. CA/QL3 We offer products that are very durable.
SCMP/IS4 Our trading partners share business CA/QL4 We offer high quality products to our
knowledge of core business processes customer.
with us.
SCMP/IS5 We and our trading partners exchange Delivery an organization is capable of providing
information that helps establishment of dependability: on time the type and volume of product
business planning. required by customer(s).
SCMP/IS6 We and our trading partners keep each CA/DD1* We deliver the kind of products needed.
other informed about events or changes CA/DD2 We deliver customer order on time.
that may affect the other partners. CA/DD3 We provide dependable delivery.
Level of information quality (IQ) Product an organization is capable of introduc-

SCMP/IQ1 Information exchange between our innovation: ing new products and features in the
trading partners and us is timely. market place.
SCMP/IQ2 Information exchange between our CA/PI1 We provide customized products.
trading partners and us is accurate. CA/PI2 We alter our product offerings to meet
SCMP/IQ3 Information exchange between our client needs.
trading partners and us is complete. CA/PI3 We respond well to customer demand
SCMP/IQ4 Information exchange between our for “new” features.
trading partners and us is adequate.
SCMP/IQ5 Information exchange between our Time to an organization is capable of intro-
trading partners and us is reliable. market: ducing new products faster than major
competitors.
Postponement (POS) CA/TM1* We deliver product to market quickly.
SCMP/POS1 Our products are designed for modular CA/TM2 We are first in the market in introducing
assembly. new products.
SCMP/POS2 We delay final product assembly activi- CA/TM3 We have time-to-market lower than in-
ties until customer orders have actually dustry average.
been received. CA/TM4 We have fast product development.
SCMP/POS3 We delay final product assembly ac-
tivities until the last possible position
(or nearest to customers) in the supply Please circle appropriate number which best indicate
chain. your firm’s overall performance. The item scales are
S. Li et al. / Omega 34 (2006) 107 – 124 121
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The Impact of Supply Chain Management

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The impact of supply chain management practices on competitive

Received 20 March 2004; accepted 16 August 2004

Organizational customer relationship, level of information sharing, qual-

Sub-constructs Definitions Literature

Item F1-IS F2-IQ F3-SSP F4-CRP F5-POS

(a) SCM practice

Item F1-QL F2-PI F3-TM F4-DD F5-PC

Item F1-MP F2-FP

Item F1-MP F2-FP

Variables Mean SD 1 2 3 4 5 Reliability

(a) SCM practice

(b) Competitive advantage

Variables Mean SD 1 2 Reliability

RMSR=0.035, GFI=0.90, AGFI=0.84, CFI=0.84

RMSR=0.063, GFI=0.88, AGFI=0.82, CFI=0.79

(c) RMSR=0.036, GFI=0.90, AGFI=0.84, CFI=0.84

(d) RMSR=0.040 GFI=0.89, AGFI=0.83, CFI=0.82

Model Chi-square DF Chi-square difference DF difference SCDTs (# = .05)

Fig. 2a: Proposed model 134.04 51

Hypothesis Relationship Total effects Direct effects Indirect effects Hypothesis

H1 SCMP → OP .50** (5.59) .24* (2.21) .26** (t = 3.17) Supported

Level of information sharing (IS) Quality: an organization is capable of offering

Level of information quality (IQ) Product an organization is capable of introduc-

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