THE ROLE OF SUPPLY CHAIN CAPABILITIES IN ENHANCING OPERATIONAL AND FINANCIAL PERFORMANCE

Abstract

Organizational success and performance depend on high performance in increasingly competitive and dynamic business environments, and one of the tools available to organizations is effective supply chain management. This paper discusses how the supply chain capabilities contribute to improving the operational and financial performance. Based on a capability-based lens, the study examines the promotion of efficiency, responsiveness, and economic performance of the firm through the development and implementation of supply chain capabilities. The cross-sectional data obtained in the organizations that are actively involved in supply chain activities are used to employ quantitative research design. The information is collected using a structured questionnaire directed to managers who have a direct responsibility in making decisions related to supply chain and operations. The proposed relationships are evaluated using the empirical analysis that employs descriptive statistics, reliability testing, correlation analysis, and regression. The findings show that the supply chain capability is significantly and positively related to the operational performance which proves the importance of the supply chain capabilities in enhancing cost effectiveness, reliability of the delivery process, effectiveness of the processes and the flexibility. The results also indicate that there exists a substantial positive association between supply chain capabilities and financial performance but the impact is a bit lower than in the case of operational performance. This is an indication that operational performance is a functional process where supply chain capabilities can affect financial performance. The study adds value to the literature on supply chain management through the empirical evidence that the supply chain capabilities are strategically valuable in spearheading organizational performance. Practically, the findings are also important in the sense that long-term investment in integration, information management, flexibility, and collaboration is important to attain sustained operational excellence and financial sustainability.