An investigation on the direct and indirect effect of supply chain integration on firm performance

Abstract

The purpose of this research is to examine the causal linkages among supply chain management (SCM) practice, competition capability, the level of supply chain (SC) integration, and firm performance. This is helpful in developing a framework for linking a firm's SC integration strategy to its competitive strategy, and in identifying how such linkage can be connected to the improvement of organizational performance. Such effort should enable us to derive a set of advisable utilization strategies of supply chain practices for SC integration. From the results of LISREL analysis on Korean and Japanese manufacturing firms and subsequent equality test for multi-group, this paper finds that, in case of Korean firms, efficient supply chain integration may play more critical role for sustainable SCM competitiveness, while, in Japanese firms, the close interrelationship between the level of SCM practices and competition capability may have more significant effect on SCM competitiveness. This finding derives a strategic framework that, in early stage, the emphasis on systemic supply chain integration may be more crucial, and, in the stage after setting supply chain integration on its way somewhat, the movement of strategy focus into the pursuit of high level of consistency between SCM strategy and competitive strategy may be advisable.