The financial performance effects of IT‐based supply chain management systems in manufacturing firms

TLDR

The study investigates the financial benefits of IT‑based supply chain management systems adopted by 123 manufacturing firms between 1994 and 2000. The authors develop value‑chain‑based hypotheses and a model linking supply‑chain process improvements to overall financial performance. Results show that SCM adoption raises gross margin, inventory turnover, market share, return on sales, and lowers SG&A, with stronger effects for high‑tech firms and broader implementation scopes.

Abstract

Abstract This paper examines the financial benefits of information technology investments around newly adopted IT‐based supply chain management (SCM) systems by 123 manufacturing firms over the period 1994–2000. We form hypotheses using the value chain to specify the expected financial impact of SCM systems. By examining the change in financial performance pre‐ and post‐adoption controlling for industry median changes in performance, we find that SCM systems increase gross margin, inventory turnover, market share, return on sales, and reduce selling, general, and administrative expenses. We also provide a model showing how process improvements around supply chain initiatives combine to improve overall performance. Finally, we show that contextual effects such as firms in the high‐tech industry and the scope of the supply chain implementation have dramatic effects on the overall financial performance resulting from supply chain implementations.