Information technology is an enabling factor affecting supply chain performance in Indian SMEs : A structural equation modelling approach

Purpose – The purpose of this paper is to identify the success factors for supply chain in Indian small- and medium-scale enterprises (SMEs) and establish a causal relationship among them. In the present scenario, the SMEs are under huge pressure to achieve the supply chain competitive advantage and to improve operation and logistic effectiveness and, at the same time, remain tractable to the demand uncertainty and volatility in the market. To enhance the performance of supply chain in SMEs, the managers need to identify the internal as well as the external factors that affect the supply chain performance of SMEs in India. They need to understand the causal relationship of these factors. Design/methodology/approach – There may be a number of factors that are critical for achieving acceptable supply chain performance, and these factors have been identified by principal component analysis (PCA). In all, 29 factors have been identified by using PCA and the dominating 29 factors are categorized into 6 constructs, and finally, the structural equation modelling (SEM) methodology using the AMOS 4.0 program has been adopted as the primary methodology for this paper to assess the causal relationship among six constructs. Findings – In this paper, the authors analyzed the structural relations among information technology (IT), logistic effectiveness, operational effectiveness, customer relationship, supplier relationship and SCM competitive advantage. Results indicate that IT holds the key to achieve the SCM competitive advantage in SCM practices of SMEs in India. Research limitations/implications – The proposed models for enabling factors are tested in firms with a limited numbers of factors in highly competitive environment. More factors may be incorporated, which will help for a clear understanding and establishing the causal relationship among the various enabling factors. Practical implications – Although managers of Indian SMEs are aware of various enabling factors, a systematic approach is required for identifying enabling factors, and as these factors may have complex interrelation between them for analyzing supply chain performance in SMEs, it is essential that such an approach is in place. The paper presented here will help the SMEs managers in identifying the areas in which they need to focus their attention to improve SCM practices. A structural equation modelling is developed to show the complex relationship between the factors that affect the performance. In addition to that, the proposed structural equation model acts as a good guideline to improve the performance of the supply chain in India. Originality/value – The paper provides a structural equation model to develop a map of the causal relationships and magnitude among identified enabling factors.