Enhancing the Company's Financial Performance of Supply Chain Operations: A Case Study of an Egyptian Manufacturing Company

A limited number of studies have been conducted to demonstrate the potential impact of managing supply chain (SC) day-to-day practices on improving a company's financial performance. Previous research in this area has often failed to develop a fully integrated performance measurement framework which captures the critical link between SC performance and overall business performance. The inability to describe the applied methodology in detail, to cover all business dimensions and to incorporate different levels of decision making were factors found to limit the impact of these frameworks on enhancing organisations performance. This research proposes a procedure to align SC operational strategy to a company's financial strategy in the manufacturing sector through developing a framework linking SC operations' performance to the company's strategic financial objectives.

A SCOR FAHP technique is proposed combining the Supply Chain Operation Reference (SCOR) model and the fuzzy analytic hierarchy process (FAHP)technique to analyse, assess and improve the performance of SC operations. Based on the SCOR model, SC processes were mapped and their corresponding performance measures were identified. The relative weights (W) of SC performance measures were calculated using the FAHP technique, then a performance rate (R) was assigned for each measure with respect to a performance rating scale. Finally, the weighted rates (WR) of all measures were aggregated to calculate a supply chain index (SCI) which revealed the overall SC operations' performance.

To align SC operations' performance with a company's strategic financial objectives, a performance measurement method is developed linking SC performance metrics (SCOR FAHP technique) to a company’s financial performance metrics. The Du Pont ratio was incorporated in the financial performance metrics. The analysis of this ratio illustrated the priorities of financial performance factors (revenue, cost and assets) through assessing the contribution of each factor to the improvement of the company’s profitability and operating efficiency. The Dempster Shafer/Analytical Hierarchy Processes(DS/AHP) model was employed to determine the relative importance weights of the five main SC performance measures with respect to the priorities of financial performance factors.

The appropriate SC operational strategy was formulated with respect to the relative weights of SC performance measures and the priorities of financial performance factors. To evaluate the impact of SC operations’ performance on enhancing the overall financial performance, a supply chain financial link index (SCFLI) was introduced and calculated before and after implementing the formulated SC operational strategy. A scenario approach was undertaken to illustrate how the developed method can be applied according to various possible financial results. A software application system was designed based on Structured Query Language (SQL) database to enable the real application of the developed research procedure. To demonstrate the applicability of the research procedure, a case study of a manufacturing company was conducted.

The research provides an original contribution to knowledge by creating a framework linking SC operations' performance to the company's strategic financial objectives for better alignment with the company’s financial strategy. This research is also a contribution in that it proposes two indexes (SCI and SCFLI) to evaluate, monitor and control SC operations’ performance. The analysis of these indexes provides continuous feedback on SC performance and allows tracing SC processes that need improvement resulting in more control over daily SC operations. Moreover, the developed research procedure helps companies to formulate the appropriate SC operational strategy by considering the targeted financial outcome and proposing the subsequent plans of action to enhance and control the performance of the relevant SC operations.