Supply Chain Management Practices and Firm Performance: An Empirical Study of the Electronics Industry in Malaysia

Supply Chain Management Practices and Firm Performance: An Empirical Study of the Electronics Industry in Malaysia

Abdul Razak Ibrahim, Ali Hussein Zolait, Veera Pandiyan Sundram
DOI: 10.4018/978-1-4666-1752-0.ch015
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Supply chain management (SCM) is the integration and strategic alliance involving all the value-creating elements in the supply, manufacturing, and distribution processes from raw material extraction, the transformation process, and end user consumption. This paper explores the SCM activities carried out by electronic manufacturing organizations in Malaysia and determines the correlation between SCM practices and firm performance. A self-administrated questionnaire based survey technique was employed to ascertain the status of SCM adoption and the practices in SCM that are significant for Malaysian electronics manufacturers. The findings suggest that the adoption of SCM activities is reasonably moderate.
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Supply chain management (SCM) is the term used to describe the management of the flow of materials, information, and funds across the entire supply chain; from suppliers to component producers to final assemblers to distribution (warehouses and retailers), and ultimately to the consumer. In fact, it often includes after-sales service and returns or recycling (Silver, Pyke, & Peterson, 1998; Johnson & Pyke, 2000). Supply chain management has generated much interest in recent years for a number of reasons. Many managers now realize that actions taken by one member of the chain can influence the profitability of all others.

Objective of Study

The primary objective described in this paper is to explore SCM practices and the relationship with firm performance in the manufacturing sector in Malaysia. The research questions are “How widely are these SCM concepts implemented in practice?” and “How well do SCM practices correlate with firm performance?” For the purpose of this study, twenty-five commonly cited SCM practices from the literature were identified (Table 1) to describe the construct of SCM practices. These included practices relating to supply and materials management issues, operations, information technology and sharing, and customer service. In terms of the firm performance measurement, we examine whether the aggregate performance of a firm, as assessed by operations excellence, revenue growth, and customer relationships, is influenced by supply chain practices. Moreover the uniqueness of this study to our understanding and knowledge is implicit as there are no published studies on supply chain management practices in Malaysia.

Table 1.
Descriptive analysis and reliability of SCM practices items
No     Scale ItemsMean     SDItem–total correlationAlpha if item deleted     Coeff.
Supply Chain Management Practices0.81
1     Improving the integration of activities across the supply chain.     4.66     0.48     0.45     0.79
2     On-time delivery of own purchased materials directly to the firm’s points of use.     4.62     0.49     -0.020.82
3     On-time delivery of own firm’s products directly to the customers’ points of use.     4.50     0.51     0.01     0.82
4     Increasing the firm’s Just-In-Time (JIT) capabilities.     4.50     0.51     0.26     0.80
5     Searching for new ways to integrate supply chain management activities.     4.50     0.51     0.02     0.82
6     Determining customers’ future needs.     4.34     0.48     0.35     0.80
7     Contacting the end users of the products to get feedback on performance and customer service.     4.20     0.37     0.37     0.80
8     Use of informal information sharing with suppliers and customers.     3.75     0.44     0.38     0.80
9     Establishing more frequent contact with members of the supply chain.     3.75     0.44     0.38     0.797
10     Communicating own firm’s future strategic needs to the suppliers.     3.75     0.44     0.38     0.80
11Reducing response time across the supply chain.     3.72     0.46     0.31     0.80
12     Creating a greater level of trust among the supply chain members.     3.53     0.51     0.26     0.80
13     Participating in the marketing efforts of the customers.     3.38     0.49     -0.09     0.82
14     Communicating customers’ future strategic needs along the entire supply chain.     3.25     0.44     0.02     0.81
15     Creating a compatible communication /information system with the suppliers and customers.     3.20     0.37     0.47     0.80
16     Use of formal information sharing agreements with suppliers & customers.     3.20     0.37     0.47     0.80
17Aiding the suppliers to increase their JIT capabilities.     3.10     0.30     0.15     0.81
18Finding additional supply chains where the firm can establish a presence.     2.90     0.40     0.37     0.80
19     Involving all members of the firm’s supply chain in the product /service/ marketing plans.     2.75     0.44     0.53     0.79
20     Participating in the sourcing decisions of the suppliers.     2.63     0.49     0.54     0.79
21     Creating supply chain management teams that include members from different companies.     2.41     0.50     0.78     0.78
22Extending the supply chain to include members beyond immediate suppliers and customers.     2.34     0.48     0.68     0.78
23     Locating closer to the customers.     2.34     0.48     0.68     0.78
24     Use of a third-party supply chain management specialist.     2.19     0.59     0.61     0.78
25     Requiring suppliers to locate closer to the firm.     1.84     0.68     0.35     0.80

Source: Survey Result

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