Supply-chain management important

In a recent article titled, "An Empirical Analysis of the Financial Impact of Supply Chain Management on Small Firms," published in the Journal of Entrepreneurial Finance and Business Ventures (Vol. 12, Issue 1, 2007, pp. 55-82), Stan Fawcett, Ladd Morgan and I test the value-added potential of supply-chain management in small firms.

Using a survey from a sample of 570 managers, we documented two important findings. First, we discovered that large firms use supply-chain management initiatives much more than small firms. Second, through a host of statistical tests, we documented that supply-chain initiatives lead to major improvements in asset utilization, revenue generation and competitive performance, regardless of firm size. Taken together, we concluded in the article that small firms that are not currently using supply-chain management initiatives may want to re-evaluate this decision as they may be losing an opportunity to create value.

My good friend and co-author Stan Fawcett once shared a quotation with me from Harold Sirkin, vice president of the Boston Consulting Group: "As the economy changes, as competition becomes more global, it's no longer company versus company but supply chain versus supply chain." This quote made me think of super successful companies such as Wal-Mart and Dell, whose major value-added business strategy is their effective use of the supply chain.

While working on a writing project, I asked Stan if he had any further supply-chain quotes that might be relevant to my chapter on the various business disciplines. He shared this quotation from Ohio State University professor Roger Blackman in his book, "From Mind to Market": "Great firms will fight the war for dominance in the marketplace not against individual competitors in their field, but fortified by alliances with wholesalers, manufacturers and suppliers all along the supply chain. In essence, competitive dominance will be achieved by an entire supply chain, with battles fought supply chain versus supply chain."

So what supply-chain initiatives should entrepreneurial firm managers focus on? Our study determined six supply-chain initiatives that added significant value. These factors are:

1. Integration Strategy: This includes cross-functional process integration within the firm, forward integration with valued first-tier customers, backward integration with important first-tier suppliers and complete forward and backward supply-chain integration.

2. Internal Integration Support: This includes support in logistics management, marketing management, manufacturing management, purchasing management, information systems and top management.