Supply chain management and financial performance: literature review and future directions

Purpose - The purpose of this paper is to review a sample of the literature relating to the financial impacts of supply chain management (SCM) and suggest future research directions. Design/methodology/approach - 49 research articles between 1990 and 2011 are collected from various academic databases and online sources. By conducting content analysis, empirical findings on the relationship between SCM and firm-level financial performance are summarized and classified. Performance drivers are identified from the literature to guide future SC practices. Findings - Both accounting- and market-based financial performances are closely related to the effectiveness of SCM. As important performance drivers, sourcing strategy, information technology (IT), SC integration, and external relationships play critical roles to improve firm-level financial performance. In particular, optimal levels of outsourceability, SC alignment and integration with IT infrastructure, and SC relationship management are essential to realize full financial advantages of effective SCM. Practical implications - A better understanding and demonstration on how SCM makes positive contributions to financial performance help SCM managers to better communicate with top management and substantiate their roles in the organization. Originality/value - To the authors' best knowledge, this paper is the first and the most comprehensive literature review in a much-needed research area. A number of performance drivers are identified to provide practical guidance. Some promising research areas are suggested for further investigation: