"Our results suggest that inventory turnover improves and overall profitability increases when firms use these IT-based systems," said Vernon Richardson, professor of accounting in the Sam M. Walton College of Business. "This was especially true for high-tech companies. They had correspondingly higher return on sales, which confirmed our prediction that, because of the competitive nature of high-tech industries, companies in this category would enjoy greater financial performance by implementing IT-based systems that coordinate and integrate the flow of materials, information and finances from suppliers to manufacturers, manufacturers to wholesalers, wholesalers to retailers and retailers to consumers."

The results were based on a study of 123 manufacturing firms, both high tech & non high tech.

The researchers studied four "processes," each a critical link in the supply chain:

Inbound Processes — procurement or purchasing
Operational Processes — manufacturing assembly and packaging
Outbound Processes — distribution, delivery, marketing, sales and service
Support Processes — technology development, human resources and firm infrastructure.

Moreover, the study found that SCM:

• reduced general, sales and administrative expenses, which increased firms' return on assets (ROA)
• increased gross margin, market share and return on sales

Source: 1, 2

Prashanth Rai

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