The impact of supply chain strategy on the financial performance: a case study of a manufacturing company

Purpose of this paper: The aim of this paper is to propose a systems view to link supply chain (SC) strategy to a company’s financial performance by developing a scenario approach. The paper applies five scenarios under differing financial performance contexts to analyse the relationship between supply chain performance and the overall financial performance.
Design/methodology/approach: An integrated supply chain performance measurement system was created and implemented to demonstrate and utilise the relationship between SC performance metrics and the financial performance metrics. A scenario analysis approach was undertaken using five main alternative scenarios in order to explore how this procedure could be applied with regard to various possible financial results. A case study of a manufacturing company was conducted and analysed to illustrate the applicability of the research procedure.
Findings: The results reflected the improvement in the efficiency and the effectiveness of SC strategy in connection with the company’s short-term strategic financial objectives. The analysis showed that any improvement in the SC operations’ performance will lead to better supply chain management (SCM), and consequently enhance the company’s overall financial performance. An improvement in SC performance as well as financial performance has been shown for the three conditions (optimistic, normal and pessimistic) following the proposed procedure.
Value: A systems view is introduced to integrate SC strategy and the company's overall financial strategy under different possible scenarios based on the systems view problem-solving model. Five main alternative scenarios are defined given the related targeted financial outcomes and their corresponding present paths (managing SC costs, increasing SC agility, improving SC reliability, increasing SC responsiveness and managing SC assets).
The system can be operated in two directions given two possible loops. A company can formulate SC strategy to achieve targeted strategic financial objectives or it can start with an unsatisfactory financial performance and then formulate the corresponding SC strategy to enhance it.
Research limitations/implications: The research study makes an original contribution in the direction of linking SC strategy to a company's financial strategy through focusing on studying the relationships between SCM practices and financial performance improvements. Further research should investigate and compare the results from several companies in different sectors of manufacturers in different locations.
Practical implications: The paper follows a systems view which can help in determining the most appropriate SC strategy with regard to targeted financial objectives. This paper benefits from data extracted from a manufacturing company by evaluating the applicability of the model developed under a different set of scenarios.