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

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. (c) 2006 Elsevier B.V. All rights reserved.