The influence of supply chain management competency on customer satisfaction and shareholder value

Abstract

Purpose

The relationship between supply chain management (SCM) competency and firm performance is not well established empirically. This is largely because proven metrics for quantifying the effects of SCM are scarce. Drawing on the strategic managerial concept of supply chain orientation as a source of competitive advantage, this paper aims to apply three independent sources of secondary data to examine the influence of SCM competency on two important firm performance metrics: customer satisfaction and shareholder value.

Design/methodology/approach

SCM competency is assessed with data from the expert opinion element of Gartner Supply Chain Group's (formerly AMR Research) supply chain top 25 rankings; the American Customer Satisfaction Index (ACSI) database and the recently developed Economic Value Added (EVA) Momentum financial metric are utilized as outcome measures.

Findings

Firms recognized by peers and experts for superior SCM competency exhibit higher levels of customer satisfaction and shareholder value than their respective industry averages.

Research limitations/implications

Further evidence is required to prove causality does exist between these variables. Limitations associated with the use of secondary data restricted the number of top performer firms available for this analysis. Nevertheless, the strong correlations found between SCM competency and two critical firm performance metrics may help senior managers and managers from other functional areas to better understand potential advantages associated with developing greater SCM competency.

Practical implications

The assessment of two metrics that differentiate top SCM performers from their industry competitors may also help SCM professionals to better convey the impact of SCM competency to non‐supply chain managers and external participants in the supply chain whose support and cooperation are critical to the success of process improvement initiatives.

Originality/value

In addition to the study findings, blending qualitative expert opinion, formal customer satisfaction and quantitative financial performance secondary data represents a relatively novel and informative method that responds to contentions that different approaches should be employed to develop a more holistic understanding of SCM.

Citation

Ellinger, A., Shin, H., Magnus Northington, W., Adams, F.G., Hofman, D. and O'Marah, K. (2012), "The influence of supply chain management competency on customer satisfaction and shareholder value", Supply Chain Management, Vol. 17 No. 3, pp. 249-262. https://doi.org/10.1108/13598541211227090