The impact of supply chain management practices on performance of SMEs

Koh, Lenny C.S. and Demirbag, Mehmet and Bayraktar, Erkan and Tatoglu, Ekrem and Zaim, Selim (2007) The impact of supply chain management practices on performance of SMEs. Industrial Management and Data Systems, 107 (1). pp. 103-124.

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Abstract

The purpose of this study is to determine the underlying dimensions of supply chain management (SCM) practices and to empirically test a framework identifying the relationships among SCM practices, operational performance and SCM-related organizational performance with special emphasis on small and medium size enterprises (SMEs) in Turkey. Data for the study were collected from a sample of 203 manufacturing SMEs operating in the manufacture of fabricated metal products and general purpose machinery (NACE codes 28 and 29) within the city of Istanbul in Turkey. The research framework was tested using partial least squares method, which is a variance-based structural equation modeling approach. Based on exploratory factor analysis (EFA), SCM practices were grouped in two factors: outsourcing and multi-suppliers (OMS), and strategic collaboration and lean practices (SCLP). The results indicate that both factors of SCLP and OMS have direct positive and significant impact on operational performance. In contrast, both SCLP and OMS do not have a significant and direct impact on SCM-related organizational performance. Also, as the direct relationship between the two performance-constructs was found significant, both factors of SCM practices have an indirect and significant positive effect on ORG through OPER. Perhaps, the most serious limitation of this study was its narrow focus on Turkish manufacturing SMEs, thus precluding the generalization of findings to other emerging countries as well as other sectors such as service and government sectors that may benefit from a sound SCM strategy. By developing and validating a multi-dimensional construct of SCM practices and by exhibiting its value in improving operational performance of SMEs, it provides SCM managers with useful tool for evaluating the efficiency of their current SCM practices. Second, the analysis of the relationship between SCM practices and operational performance indicates that SCM practices might directly influence operational performance of SMEs. This paper adds to the body of knowledge by providing new data and empirical insights into the relationship between SCM practices and performance of SMEs operating in Turkey.