SUPPLY CHAIN MANAGEMENT, SUPPLY CHAIN FLEXIBILITY AND BUSINESS PERFORMANCE

Abstract

Supply chain performance and effective management of supply chain have been increasingly recognized as critical factors in enhancing bottom-line performances. More and more firms are beginning to adopt supply chain management (SCM) to improve performances of their organizations. This study examines the importance of incorporating supply chain management in Malaysian manufacturing companies. The study measures senior production or SCM managers’ perceptions regarding SCM practices and performances of their companies. The paper specifically investigates relationship between SCM, supply chain flexibility and business performance and these associations are analyzed through statistical methods such as Pearson’s correlation and structural equation modeling (SEM). The overall result suggests that supply chain management has significant correlations with supply chain flexibility and business performance. Specifically, supply chain flexibility and business performance have high correlations with SCM comprising programs such as ‘strategic supplier partnership’, ‘lean production’, ‘postponement concept’ and ‘technology and innovation’. In addition, the SEM result also demonstrates that two supply chain management proxies specifically ‘new technology and innovation’ and ‘lean production’ appear to be of primary importance and exhibit most significant impact on supply chain flexibility and business performance. Findings of the study provide striking demonstrations of the importance of SCM programs in enhancing performances of Malaysian manufacturing companies. The result indicates that manufacturing companies should emphasize greater attention to the technology aspects of SCM as well as waste reduction program through lean production and a greater degree of management support for SCM enhancement initiatives.