IIMB Management Review (2015) 27, 92e104

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Critical success factors for implementation

of supply chain management in Indian small
and medium enterprises and their impact on
performance
Ravinder Kumar a,*, Rajesh K. Singh b, Ravi Shankar c

a
Maharaja Agarsen Institute of Technology, Rohini, New Delhi, India
b
Mechanical & Production Engineering Department, Delhi Technological University, New Delhi, India
c
Department of Management Studies, Indian Institute of Technology Delhi, New Delhi, India

Available online 4 April 2015

KEYWORDS Abstract Globalization of the economy, e-business, and introduction of new technologies
Supply chain pose new challenges to all organizations especially for small and medium enterprises (SMEs).
management; In this scenario, successful implementation of supply chain management (SCM) can give SMEs
Performance; an edge over their competitors. However, SMEs in India and other developing countries face
Critical success factors; problems in SCM implementation due to lack of resources and direction. Against this backdrop,
Small and medium this paper identified 13 critical success factors (CSFs) for implementation of SCM in SMEs and
enterprises studied their impact on performance of Indian SMEs. Top management commitment, long-
eterm vision, focus on core strengths, devoted resources for supply chain, and development
of effective SCM strategy emerged as the most pertinent CSFs. To measure improvement in
performance, the authors considered different measures related to customer service and satis-
faction, innovation and growth, financial performance, and internal business. Results are ana-
lysed by testing research propositions using standard statistical tools.
ª 2015 Indian Institute of Management Bangalore. Production and hosting by Elsevier Ltd.
All rights reserved.

Introduction

To effectively compete in the global market, small scale

organizations should focus on improving the effectiveness of
* Corresponding author. Tel.: þ91 9868387251. operational functions with effective supply chain manage-
E-mail address: ravi_1_kumar@[Link] (R. Kumar).
ment (Singh, Garg, & Deshmukh, 2010). Prior to the 1990s,
Peer-review under responsibility of Indian Institute of Management
Indian organizations operated in a protected environment.
Bangalore.
[Link]
0970-3896 ª 2015 Indian Institute of Management Bangalore. Production and hosting by Elsevier Ltd. All rights reserved.
Impact of CSFs for SCM 93

There was little competition even among domestic players. supply chain strategy. Critical success factors (CSFs) of SCM
Business was driven by almost monopolistic strategies. represent a wide variety of strategies devoted to improving
However the deregulation of the Indian economy in the operational efficiency and competitiveness of SMEs. In this
1990s has attracted global players in every industrial sector paper, the authors have identified 13 CSFs for SCM from
and has unleashed a new competitive spirit in Indian orga- literature (Table 1). The authors have further attempted to
nizations (Saxena & Sahay, 2000). Statistics reveal that study the effects of the SCM initiatives taken by Indian SMEs
India, the fifth largest country in terms of gross national on their performance. For this study, issues of performance
product (GNP) and purchasing power parity (PPP) (World have been considered based on the balanced score card
Bank, 1999) and a consumer base of over a billion (CMIE, method. The performance measures included are customer
2000), constitutes one of the fastest growing markets in service and satisfaction, innovation and growth, financial
the world. India is also counted among the richest with re- performance, and internal business. Previous studies have
gard to cheap skilled labour, scientific and technological not analysed the impact of CSFs on different performance
resources and entrepreneurial talents. However, Indian measures in a holistic manner like the present study does.
small and medium enterprises (SMEs) find global competi- This paper has been organised as follows: The second sec-
tion very challenging (Singh, Garg, & Deshmukh, 2008a) To tion discusses the literature review and identification of
face competition in global markets, SMEs should have CSFs. The third section discusses research objectives and
effective collaboration with their customers and suppliers, methodology. The fourth section discusses the findings from
and should be competitive in terms of cost, quality, inno- the questionnaire-based survey. The fifth section discusses
vation, and delivery. Successful implementation of supply correlation and regression analysis for testing of research
chain management (SCM) can play a significant role in propositions. Finally, the sixth section discusses concluding
meeting these challenges and SMEs should have an effective remarks.

Table 1 Assessment of critical success factors in literature.

[Link]. Critical success factors (CSFs) References
1. Top management commitment Fisher (1997), Shin, Collier, and Wilson (2000), Arshinder,
Kanda, and Deshmukh (2008), Singh et al. (2008c), Stanley
et al. (2009), Sandberg and Abrahamsson (2010), Singh (2011),
Singh (2013)
2. Development of effective SCM strategy Lee (2000), Cao, Zhang, To, and Ng (2008), Soroor, Tarokh, and
Shemshadi (2009), Singh et al. (2010), Singh et al. (2012),
Kumar, Singh, and Shankar (2014)
3. Devoted resources for supply chain Shin et al. (2000), Gunasekaran, Mcneil, Mcgaughey, and Ajasa
(2001), Singh et al. (2010), Singh (2013)
4. Logistics synchronization Bowersox (1990), Simatupang, Wright, and Sridharan (2002),
Thakkar, Kanda, and Deshmukh (2008), Singh et al. (2012),
Kumar, Singh, and Shankar (2013), Kumar, Singh, and Shankar
(2015)
5. Use of modern technologies Lee, Padmanabhan, and Whang (1997), Arshinder et al. (2008),
Thakkar et al. (2008), Singh (2013)
6. Information sharing with SC members Ramdas and Spekman (2000), Ozer (2003), Stanley et al.
(2009), Singh et al. (2012)
7. Forecasting of demand on point of sale (POS) Francesca et al. (2008), Arshinder et al. (2008), Marek and
Malyszek (2008)
8. Trust development in SC partners Anderson and Narus (1990), Morgan and Hunt (1994), Sahay
(2003), Bianchi and Saleh (2010), Singh (2013), Tejpal, Garg,
and Sachdeva (2013)
9. Developing just in time (JIT) capabilities in system Grittel and Weiss (2004), Arshinder, Kanda, and Deshmukh
(2007), Othman and Ghani (2008), Singh (2013)
10. Development of reliable suppliers Olorunniwo and Hartfield (2001), Petersen, Handfield, and
Ragatz (2005), Othman and Ghani (2008), Singh, Garg, and
Deshmukh (2008c), He, Zhao, Zhao, and He (2009), Kumar
et al. (2013), Kumar et al. (2015)
11. Higher flexibility in production system Das (2001), Olhager and West (2002), Arshinder et al. (2007),
Singh (2013)
12. Focus on core strengths Singh, Garg, and Deshmukh (2008b), Thakkar et al. (2008),
Kumar, Singh, and Shankar (2012), Kumar et al. (2014)
13. Long-term vision for survival and growth Ganesan (1994), Morgan and hunt (1994), Thakkar et al. (2008),
Singh et al. (2012), Kumar et al. (2013)
94 R. Kumar et al.

Literature review and identification of CSFs involved. Use of information technology such as internet,
intranet, software applications packages and decision
To effectively compete in the global market, SMEs must support systems can be applied to facilitate the information
have effective supply chain management. Conflicting ob- flow within the supply chain, between the members
jectives and lack of coordination between supply chain (Stanley, Cynthia, Chad, & Gregory, 2009).
partners may cause uncertainties in supply and demand. Trust among supply chain partners is another important
Therefore effective SCM is required to streamline the sup- aspect for improving coordination between the partners.
ply chain of SMEs. A number of studies have attempted to Anderson and Narus (1990) stated that trust is a favourable
identify the CSFs of SCM, Electronic Data Interchange (EDI), attitude that exists when one supply chain member has
and Enterprise Resource Planning (ERP) systems. Bauer confidence in other supply chain members. Trust is required
(2000) suggested that there are four CSFs in e-business for for flow of information in the supply chain. Risk and reward
the automotive industry – understanding and working with sharing influence an individual supply chain member’s
diverse social and business cultures around the globe, behaviour and his interaction with other supply chain
physical internet infrastructure, understanding the state of members. Conflicts of interest are likely to occur when one
the physical infrastructure of the suppliers, and the supply chain member gets more benefits when compared to
changing internal management processes and points of other members from an existing risk and reward sharing
view. Power, Sohal, and Rahman (2001) examined the process (Cachon & Lariviere, 2005). Bianchi and Saleh
critical factors that influence the agility of organizations in (2010) stated that trust and commitment are essential for
managing their supply chains; in their study, the authors enhancing importer performance in developing countries.
determined seven CSFs in agile SCM using factor analysis. Arshinder, Kanda, and Deshmukh (2006) posit that conflicts
Umble, Haft, and Umble (2003) identified the CSFs for the in vision and goals of supply chain members result in the
implementation of ERP systems. Angeles, Corritore, Choton individual’s profit maximization in place of profit maximi-
Basu, and Nath (2001) reported 13 EDI implementation zation of all the supply chain members.
success factors that are considered relevant in imple- Mehrjerdi (2009) stressed long-term orientation which
menting an inter-organizational system. was expected to have three specific outcomes i.e. increased
The importance of effective strategy for improving relational behaviour, decreased conflicts, and increased
competitiveness of SMEs has been stressed in the literature satisfaction. Collaborative decision making by supply chain
(Singh et al. 2008a). Singh et al. (2008a) further observed members results in better forecasting of demand, trust
that SMEs in general are not able to implement SCM to its between the supply chain members, and flow of informa-
full extent, mainly because they depend on bigger cus- tion. According to Francesca, Bianco, and Mauro (2008)
tomers and follow the norms stipulated by them. Arend and availability of point of sales (POS) data is important for a
Winser (2005) stated that larger companies consider SMEs responsive supply chain. Since SMEs are under intense
as being easy to replace and buyers are reluctant to form pressure to reduce cost, an appropriate inventory manage-
partnerships with them. There are significant differences ment system at every node of the supply chain minimizes
between SMEs and large companies in terms of systems, the inventory at supply chain nodes (Marek & Malyszek,
tools, supply chain and methods of electronic interface 2008). Singh, Kumar, and Shankar (2012) observed that
adoption. Wagner, Fillis, and Johansson (2003) observed effectiveness of Indian construction SMEs can be improved if
that larger companies have the resources and technical they focus on product customization, waste reduction,
budgets to implement e-business and e-supply strategies housekeeping, and IT applications to reduce time lag in
but SMEs continue to be challenged by resource limitations. various processes. Ozer (2003) observed that information
In SMEs, decisions are generally centrally governed by sharing is sharing of the inventory data, demand data, and
top management. Resources such as money, time, tech- product quality data. Periodic ordering in large batches
nology, manpower, and material are controlled and between the manufacturer and retailer could distort orig-
managed by top management. According to Ganesan and inal demand information due to large variance (Ozer, 2003).
Saumen (2005) top management support is very much Information technology (IT) has gained a lot of impor-
necessary for cross-functional training, integration of de- tance in SCM implementation in recent years. Increasingly,
partments within the organization and vendor development supply chain operations are changing from electronic data
for a responsive supply chain. interchange systems and enterprise resource planning sys-
Studies have observed the importance of top manage- tems to internet/intranet to support SCM (Pant, Sethi, &
ment commitment in areas such as the successful imple- Bhandari, 2003). Lancioni, Smith, and Oliva (2000)
mentation of EDI (Angeles et al. 2001), information systems observed that use of modern technologies in SCM can lead
(IS) (Bruwer, 1984) and ERP systems (Umble et al. 2003). to advantages such as cost saving, quality improvement,
The primary responsibility of the top management is to delivery and support, and greater competitive advantage.
provide sufficient financial support and adequate resources Ngai, Cheng, and Ho (2004) observed that the successful
for building a successful system. Further, the support of the implementation of web-based SCM system often requires a
top management will ensure that SCM implementation has substantial amount of investment and intensive research.
high priority within the organization and that it will receive The need for such research to support a supply chain has
the required resources and attention. Apart from such not been fully recognized by industry practitioners. This
primary support, psychological or behavioural support is may be due to a lack of awareness of the technologies and
also important for the smooth implementation of SCM, their benefits, and of the kind of support that a web based
especially if there is significant resistance from the staff SCM system can provide.
Impact of CSFs for SCM 95

Research objectives and methodology engineering and electronics sectors from December 2010 to
December 2012. Most of the SMEs were located in semi-
This paper is an empirical study for identification of CSFs urban areas. All of them had investments in plant and
for implementation of SCM and focusses on their effects on machinery as per the definition of SMEs in India. Out of the
the performance of Indian SMEs. Thirteen CSFs are identi- total responding SMEs, 76% were located in urban areas,
fied from extensive literature review and experts’ opinions, 14% in semi-urban areas and 10% in rural areas. Sector wise
(see Table 1) and their effect has been studied on different distribution shows that out of the total responding SMEs,
categories of performance measures; these categories are 34% were from the auto-sector, 40% were from light engi-
customer service and satisfaction, innovation and growth, neering/others sector, 17% from the plastic sector and 9%
financial performance, and internal business of Indian from the electronic/electrical sector. The authors con-
SMEs. Based on this, the study has attempted to test the ducted a pilot survey of 40 SMEs from different sectors to
following four research propositions: finalize the questionnaire; of the SMEs, in, 20 were from the
auto component sector, 5 from the plastic sector, 10 from
P1: There is a significant relationship between CSFs and light engineering, and 5 from the electronics sector.
SME performance in terms of customer service and Although the questionnaire was sent by post or e-mail for
satisfaction. the final survey, most of the SMEs for the pilot survey were
P2: There is a significant relationship between CSFs and contacted on a personal basis for interview (through office
SME performance in terms of innovation and growth. meeting and plant visit) by making an appointment with the
P3: There is a significant relationship between CSFs and management. Most of the responses to the detailed survey
SME performance in terms of financial performance. were collected by the authors on personal visits to the SME
P4: There is a significant relationship between CSFs and plants since all the SMEs did not respond within the speci-
SME performance in terms of internal business fied time limit,. An annexure was given at the end of
parameters. questionnaire which contained guidelines for responses and
terminology to avoid unknown biases. Most of the re-
To study the effect of different CSFs on performance of spondents were at the level of production manager or
Indian SMEs, the authors studied different frameworks from business head. At the end of the survey questionnaire, re-
literature but found none that were perfectly related. So spondents were requested to fill their profile details, but it
the authors developed the following framework and tried to was optional.
validate it in the current study. As the balanced score card The questionnaire contained two sections: Section A
(BSC) approach is the most prevalent, in this study the BSC focussed on CSFs for implementation of SCM in Indian SMEs
model was taken as the base while developing the frame- and Section B focussed on performance improvement (on
work (Fig. 1). According to this framework, CSFs of SCM criteria of balanced score card approach) in the past three
implementation leads to performance improvement of In- years on the basis of different initiatives taken towards SCM
dian SMEs on different categories based on the BSC implementation by Indian SMEs.
approach. In this study, executives were asked to rate the intensity
In order to test research propositions and for analysis of of each attribute for their respective organization on a five-
different issues related to SCM and performance, a survey point Likert scale (1 e lowest, 5 e highest). About 1500
instrument was developed. The survey was conducted SMEs from all parts of India were contacted for collecting
among Indian SMEs from the auto component, plastic, light responses. These organizations were selected from di-
rectories available at Confederation of Indian Industries

Figure 1 Framework for the study.

96 R. Kumar et al.

(CII), Auto Component Manufacturers Association, Federa- and for the manager’s goals to be attained. On the basis of
tion of Indian Chambers of Commerce and Industries and a literature review and a pilot survey, 13 CSFs were iden-
Directorate of Industries (Government of NCT Delhi). For tified for Indian SMEs to focus on during implementation of
this study, respondents were selected based on criteria for SCM. These are top management commitment, develop-
SMEs and those belonging to manufacturing and engineering ment of effective SCM strategy, devoted resources for
sectors. A total of 251 complete responses were obtained. supply chain, logistics synchronization, use of modern
SPSS 17 software has been used to analyse the collected technologies, information sharing with supply chain mem-
responses. Of the 251 responding SMEs, 80% did not have a bers, forecasting of demand based on point of sales (POS),
separate SCM department. Issues related to SCM were trust development in supply chain partners, developing just
handled by top management in collaboration with the in time (JIT) capabilities in the system, development of
purchase and the marketing departments. Ten percent of reliable suppliers, higher flexibility in production system,
SMEs had a separate SCM department and dedicated team focus on core strengths, and long-term vision for survival
to handle different supply chain issues. The remaining 10% and growth. The results of this study for various CSFs for
of SMEs had little awareness of SCM,. About 30e40% of the SCM implementation by Indian SMEs on a Likert scale of five
SMEs were aware of the micro, small and medium enter- (1 e lowest, 5 e highest) are shown in Table 2. It is
prises development Act (MSMED Act, 2006) and. they were observed that the most important factor is top manage-
availing the benefits of all Government policies and ment commitment with mean values of (4.2430), followed
schemes for MSME. Responses from the rest of the SMEs by long term vision for survival and growth (4.1355), focus
revealed very little knowledge about the act. The authors on core strengths (3.9960) and devoted resources for supply
observed that either they were not aware of the MSMED Act chain (3.9402). These results suggest that in Indian SMEs
and the policies and schemes intended for them or they major decisions are taken by the top management.
were not in a situation to take advantage of them in the Sandberg and Abrahamsson (2010) also stated that top
current market situation. management commitment is a key enabler for effective
supply chain management. Implementation of SCM proves
to be very useful for long term survival. But SCM imple-
Findings from questionnaire-based survey mentation requires committed management and devoted
resources. Usually it is observed that SMEs do not have the
Inter-item analysis was used to check the scales for internal time, knowledge or resources to conduct detailed analysis
consistency or reliability. Cronbach’s coefficient was for implementing SCM. In the absence of a plan for long
calculated for each scale, as recommended for empirical term growth, SMEs often do not understand the full impli-
research in operations management (Flynn, Sakakibara, cations of SCM to the organization. The other important
Schroeder, Bates, & Flynn, 1990). The coefficients of CSFs that emerged are development of effective SCM
Cronbach’s a for all constructs were in the range of strategy (3.8606), development of reliable suppliers
0.854e0.896. These values exceed the minimum re- (3.6414), information sharing with supply chain members
quirements of 0.5 for an exploratory study such as this one (3.4343) and logistics synchronisation (3.3745). Usually
(Nunnally, 1978). Data acquired from the survey of Indian SMEs work in isolation and involve middlemen in their
SMEs were analysed by statistical tests such as one sample supply chain, often losing benefits to them. . By establish-
t-test, correlation and regression analysis. ing close partnerships with their suppliers and customers,
SMEs could better achieve product, process and technology
CSFs for SCM implementation innovations. To improve coordination and responsiveness of
the supply chain, information sharing with all members of
Bullen and Rockart (1986) observed that CSFs are few key the chain is very important. Supply chain coordination re-
areas where things must go right for the business to flourish lies on the availability of prompt and accurate information

Table 2 Critical success factors for SCM implementation by Indian SMEs.

[Link] Critical success factors Mean Rank S.D. t-values p-values Cronbach’s Alpha
1. Top management commitment 4.2430 1 .90813 21.685 .000 .896
2. Long-term vision for survival and growth 4.1355 2 .72497 24.814 .000
3. Focus on core strengths 3.9960 3 .80746 19.543 .000
4. Devoted resources for supply chain 3.9402 4 .79020 18.851 .000
5. Development of effective SCM strategy 3.8606 5 .83455 16.337 .000
6. Development of reliable suppliers 3.6414 6 .75823 13.403 .000
7. Information sharing with SC members 3.4343 7 .74744 9.205 .000
8. Logistics synchronization 3.3745 8 .79195 7.492 .000
9. Use of modern technologies 3.3108 9 .71487 6.887 .000
10. Higher flexibility in production system 3.2789 10 .82092 5.382 .000
11. Forecasting of demand on point of sale (POS) 3.1520 11 .65315 3.680 .000
12. Trust development in SC partners 3.1275 12 .66909 3.019 .003
13. Developing JIT capabilities in system 3.1116 13 .71239 2.481 .014
Impact of CSFs for SCM 97

that is visible to all actors in the supply chain. Coordination utilization of resources or helps in reducing waste in
improves by close partnership with customers and suppliers different forms.
and helps in joint development of new products, joint
effort in reducing purchase lead-time, and cross training of CSFs for SCM implementation (sector wise observations)
workforces. Coordination also helps in reducing late change During the study, the authors observed that in the auto and
of design and orders, which subsequently affects the de- light engineering sectors, the most preferred CSF while
livery/logistics performance of the companies. Coordina- implementing SCM was top management commitment with
tion and responsiveness will not only benefit the suppliers a mean of (4.52) and (4.28) respectively. On the other
and the customers, but will improve the profits of the hand, the plastic sector stressed on devoted resources for
overall supply chain. supply chain (4.00), and the electronic sector on long term
Logistics synchronisation will help SMEs in optimising vision for survival and growth (4.00). These results imply
their transportation and warehousing costs. Customers’ that while implementing SCM, different SME sectors have
orders and the services of the organization can be effec- different preferences. . Results of the study show that In-
tively connected by a good logistics system. dian SMEs in the plastic sector are more concerned with
The other CSFs that emerged in the study are use of resources for supply chain while making policies for SCM,
modern technologies (3.3108), higher flexibility in produc- while SMEs of the electronic/electrical sector pay more
tion system (3.2789), forecasting of demand based on point attention to long term vision for survival and growth. In the
of sales data (3.1520), trust development in supply chain auto and light engineering sectors, top management
partners (3.1275) and developing JIT capabilities in the commitment assumes more importance. The top five CSFs
system (3.1116). Use of modern technologies such as of each sector are shown in Table 3.
internet, electronic data interchanges, web sites, radio Further, the authors observed that in the auto sector the
frequency identification (RFID) technologies and ERP helps other significant CSFs are long-term vision for survival and
in better management of information. Accurate, timely, growth (4.01), devoted resources for supply chain (3.88),
and easily accessible information can improve decision and development of effective SCM strategy (3.81). The
making and forecasting in supply chain. Forecasting of de- least preferred CSF for auto sector is forecasting of demand
mand based on point of sales data helps in making more on point of sale (3.22). This implies that SMEs should
accurate forecasts of customer requirements. In the consider the actual demand of customers according to sale
context of SCM, a supplier is able to better match inventory data while doing forecasting of demand.
with demand when accurate information is available about In the plastic sector, the authors observed that other
the buyer’s inventory status. Flexibility in production sys- important CSFs are development of effective SCM strategy
tem (3.2789) helps in dealing with changing product design (3.96), development of reliable suppliers, and focus on core
and demand of customers. From the coordination point of strength. The least preferred CSF for the plastic sector is
view, trust development in supply chain partners (3.1275) is trust development in supply chain partners (3.15). This
also very important. Due to a perceived lack of security, a implies that Indian SMEs in the plastic sector should focus
trust deficit exists between SMEs and their partners. on trust development among its customers and suppliers to
Developing JIT capabilities in the system ensures better excel in the current scenario.

Table 3 Sector wise list of top five critical success factors for SCM implementation by Indian SMEs.
Sectors [Link]. Top five CSFs Mean
Auto sector 1. Top management commitment 4.52
2. Long-term vision for survival and growth 4.01
3. Devoted resources for supply chain 3.88
4. Development of effective SCM strategy 3.81
5. Information sharing with SC members/Development of reliable suppliers 3.75
Plastic 1. Devoted resources for supply chain 4.00
2. Development of effective SCM strategy 3.96
3. Top management commitment 3.93
4. Long-term vision for survival and growth 3.87
5. Logistics synchronization 3.75
Electronic/Electrical 1. Long-term vision for survival and growth 4.00
2. Focus on core strengths 3.90
3. Development of effective SCM strategy/Devoted resources for supply chain 3.75
4. Development of reliable suppliers 3.45
5. Information sharing with SC members 3.30
Light engineering/Other 1. Top management commitments 4.28
2. Development of effective SCM strategy 4.07
3. Devoted resources for supply chain 4.05
4. Long-term vision for survival and growth/Focus on core strengths 4.00
5. Logistics synchronization 3.41
98 R. Kumar et al.

In the electronic and electrical sector, other important mention the level of improvement on performance mea-
CSFs are focus on core strengths and top management sures related to customer service and satisfaction in the
commitment (3.90). The authors opine that this sector last three years for Indian SMEs on a Likert scale of five (1 e
should pay more attention towards the development of JIT lowest, 5 e highest). Results are shown in Fig. 2. From the
capabilities in the system and forecasting of demand on analysis of surveyed data it is observed that in the past
point of sale (POS). three years highest improvement has been observed in
In the light engineering sector, the other CSFs are ability to resolve customer complaints (with mean value of
development of effective SCM strategy and long term vision 3.7052). This is followed by ability to deliver product on
for survival and growth. The authors opine that SMEs of time (3.6295), ability to follow up customer enquiries
light engineering sector should pay more attention toward (3.6016), and ability to determine future expectations of
developing JIT capabilities in the system. customer (3.4382). The market is now more customer ori-
ented and in order to satisfy customers, it is important to
Performance measures resolve their complaints, follow enquiries, and predict
future demands. Further analysis yielded improvement in
Performance measurement can be defined as the process of order fill rate (3.4343), ability to reduce customer response
quantifying the effectiveness of various processes being time (3.3386), ability to reduce shipping error (3.1155),
followed by the organization. Performance measurement ability to reduce cost continuously (3.0916), ability to
provides the information necessary for decision makers to customise the product (3.0797) and application of ethical
plan, control, and direct the activities of the organization. standards (2.7769). To make a supply chain responsive it is
Performance measures allow managers to measure perfor- advisable for SMEs to have a higher order fill rate with
mance, to signal and educate employees (and suppliers) on quicker response to customer orders. Delivery of the right
the important dimensions of performance, and to direct product to the right customer at the right time is very
improvement activities by identifying deviations from important for achieving coordination and responsiveness in
standards. Based on the balanced score card approach, this the supply chain. Small and medium enterprises have to
study has selected the performance measures customer reduce shipping error for smooth functioning of supply
service and satisfaction, innovation and growth, financial chain processes. For customization of products, the pro-
performance, and internal business parameters for assess- duction system of the organization should be adequately
ment of performance. flexible. On the other hand there is continuous pressure for
Average improvement in performance in the past three cost reduction on SMEs by other members of the supply
years was measured on a Likert scale of five (1 e lowest, 5 e chain. So, SMEs need to develop expertise in which a bal-
highest). This scale took care of decreasing, constant, as well ance can be maintained between customer service and
as increasing percentage changes (Singh, Garg, & Deshmukh, cost.
2006).
Performance improvement in terms of innovation and
Performance improvement in terms of customer service growth parameters
and satisfaction In the present study, eight innovation and growth parame-
On the basis of extensive literature review and expert ters have been identified. Respondents were asked to
opinion, 10 parameters of customer service and satisfaction mention the level of improvement of performance in the
are identified. These parameters are: ability to resolve past three years in their organization on a Likert scale of
customer complaints, ability to deliver product on time, five (1 e very low, 5every high). Results are shown in Fig. 3.
ability to follow up customer enquiries, ability to determine It is observed that ability to implement new technologies
future expectations of customer, improvement of order fill (4.2430) has highest improvement, followed by ability to
rate, ability to reduce customer response time, ability to respond well to customer demand for new features (3.9402)
reduce shipping error, ability to reduce cost continuously, and ability to compete based on quality (3.8606). To beat
ability to customize the product, and application of ethical the intense competition from global competitors, Indian
standards. In this section, respondents were asked to SMEs have to implement new technology in all fields; they

Figure 2 Performance improvement in terms of customer service and satisfaction.

Impact of CSFs for SCM 99

Figure 3 Performance improvement in terms of innovation and growth parameters.

have to improve quality and cut costs. This is also borne out newly industrializing economies such as Singapore, Hong
by our study. The authors further observed improvement in Kong, South Korea, Taiwan, Mexico and Malaysia. These
ability to offer lower prices than competitors (3.4343), challenges have forced a majority of the SMEs to focus on
ability to offer reliable products (3.3745), reduce product local markets and have rendered them unable to compete
design and development cycle time (3.3108), identify new successfully in the global market. Therefore, a major
customers (3.1520) and ability to introduce new facilities challenge for Indian SMEs is to broaden their product range
(3.1275). Changing facilities with time and adopting new and work towards world class quality.
technology will help SMEs adapt to changing business en-
vironments. Offering new products with improved design at Performance improvement in terms of internal business
cheaper cost will also help them to sustain amidst global parameters
competition. On the basis of literature review and pilot survey of the
market, eight internal business parameters have been
Performance improvement in terms of financial identified. These parameters were measured in terms of
parameters average percentage change in the past three years on a
Financial parameters were measured in terms of average Likert scale of five (1 e lowest, 5 e highest). The parameters
percentage change in the past three years on market share, are: level of teamwork and coordination among internal
sales turnover, reduction of inventory cost, export, and departments, use of modern quality control techniques,
return on investment on a Likert scale of five (1 e lowest, 5 development of cross functional team, ability to reduce the
e highest). In this study, nine financial parameters have product cycle time, improvement in labour productivity,
been identified. Results are shown in Fig. 4. ability to reduce wastage, ability to reduce inventory, and
Net profit (3.9004) has the highest improvement fol- reduction in breakdown of machines. Results are shown in
lowed by return on investment (3.8845) and revenue growth Fig. 5. To face challenges of global competition, SMEs should
(3.8765). Export share (3.1037) of Indian SMEs has improved have internally and externally coordinated supply chains.
least among all measures. These findings imply that per- This study observed that teamwork and coordination among
formance of Indian SMEs has improved least in term of ex- departments (with mean value of 3.4781) have highest
ports. This may be due to various constraints mentioned in improvement followed by modern quality control tech-
the literature, and which also emerge in this study. The niques (3.3386) and development of cross functional team
authors observed that without sufficient resources, trained (3.3068). Forming cross functional teams with members
and qualified manpower, and state-of-the-art technology, from different departments and different fields makes
Indian SMEs could not compete with their counterparts in problem solving easy and more effective. Further in this
developed countries, or, especially, with emerging and study it is observed that performance of Indian SMEs has not

Figure 4 Performance improvement in terms of financial performance measures.

100 R. Kumar et al.

Figure 5 Performance improvement in terms of internal business parameters.

improved significantly on the parameters ability to reduce  Critical success factors for supply chain implementation
product cycle time (3.1833), improvement in labour pro- have significant correlation with performance in terms
ductivity (3.1673), reducing wastage (3.1673), reducing in- of customer service and satisfaction, thereby support-
ventory (3.1514) and reduction in breakdown of machines ing the first proposition. This implies that CSFs for
(3.0199). These findings imply that SMEs have to make supply chain, if taken into consideration while imple-
concerted efforts for improvement in areas of inventory menting SCM, can significantly improve performance of
management, maintenance, and productivity. Indian SMEs.
 Critical success factors for supply chain implementation
Correlation and regression analysis for testing have significant correlation with performance in terms
of research propositions of innovation and growth, thereby supporting the sec-
ond proposition. It means CSFs help in performance
In earlier sections, the study has tried to address issues improvement in terms of innovation and growth.
related to critical success factors and business performance  Critical success factors are significantly correlated with
of Indian SMEs. The main research propositions in the pre- financial performance, thereby supporting the third
sent study are concerned with the relationship between proposition. It means CSFs play an important role in
CSFs and improvement in performance on different cate- improving financial performance of SMEs.
gories. For testing of research propositions made in this  Critical success factors for supply chain implementation
study, correlation and regression analysis has been carried have significant correlation with performance in terms
out in this section. The results are given in Table 4. Some of of internal business, thereby supporting the fourth
the observations on the basis of this analysis are as follows: proposition.

Table 4 Correlation and regression analysis of CSFs with performance issues.

[Link]. CSFs Correlation Correlation Correlation Correlation
coefficient coefficient coefficient coefficient
for Perfm.1 for Perfm.2 for Perfm.3 for Perfm.
1 Top management commitment .353** .483** .607** .264**
2 Development of effective SCM strategy .296** .461** .564** .051
3 Devoted resources for supply chain .294** .490** .591** .113
4 Logistics synchronization .326** .536** .579** .184**
5 Use of modern technologies .419** .441** .456** .480**
6 Information sharing with SC members .484** .418** .395** .363**
7 Forecasting of demand on point of sale (POS) .544** .380** .320** .429**
8 Trust development in SC partners .480** .363** .253** .453**
9 Developing JIT capabilities in system .455** .415** .279** .454**
10 Development of reliable suppliers .389** .343** .231** .265**
11 Higher flexibility in production system .402** .428** .414** .304**
12 Focus on core strengths .298** .597** .556** .173**
13 Long-term vision for survival and growth .460** .617** .543** .195**
14 Average/overall value of CSFs 0.591** .693** .680** .418**
(R2 Z 0.349) (R2 Z 0.480) (R2 Z 0.462) (R2 Z 0.174)
Notes: Correlation is significant at the 0.01 level (2-tailed); CSFs-Critical success factors; Perfm.1-Performance in terms of customer
service and satisfaction; Perfm.2- Performance in terms of innovation and growth criterion; Perfm.3- Performance in terms of financial
performance; Perfm.4- Performance in terms of internal business parameters.
Significance levels show you how likely a pattern in your data is due to chance. For example, a value of “.01” means that there is a 99%
(1.01 Z .99) chance of it being true.
Impact of CSFs for SCM 101

 Detailed analysis of correlation of different CSFs with electrical, and light engineering. Some of the observations
different performance issues is shown in Table 4. Top on the basis of this analysis are as follows:
management commitment has significant correlation
with all issues related to performance, while CSFs such  During sector wise correlation and regression analysis of
as development of effective SCM strategy and devoted CSFs with performance, the authors observed that
resources for supply chain do not have significant cor- different factors have different effect on performance in
relation with performance parameters of internal different sectors. For instance, in the auto sector top
business. It implies that performance of Indian SMEs can management commitment shows a significant correla-
be improved on all issues such as customer service and tion for performance improvement in terms of innovation
satisfaction, innovation and growth, and financial and and growth criterion, financial performance and internal
internal business parameters if the management com- business parameters, but is not significant in terms of
mits to implement SCM. On the other hand, manage- customer service and satisfaction (Table 5). This implies
ment must pay attention to strategy development for that top management of Indian SMEs in the auto sector
SCM and enough resources should be devoted to it. should focus more on customer service and satisfaction.
 Regression analysis of CSFs as independent variable and  In the plastic sector, top management commitment
performance in terms of customer service and satis- shows significant correlation for performance improve-
faction as dependent variable (R2 Z 0.349) explains ment in terms of customer service and satisfaction,
34.9 percent of variability of performance of Indian innovation and growth and financial performance, but is
SMEs. This means that in addition to these independent not significant in terms of internal business parameters.
variables, other factors related to supply chain imple- It implies that top management of SMEs of the plastic
mentation play a significant role in performance sector should pay more attention to improving internal
improvement in terms of customer service and satis- business standards.
faction in the Indian scenario. During analysis and sur-  In the auto sector, developing JIT capabilities in system
vey, the authors observed that for Indian SMEs cost has significant correlation with all the performance
reduction, quality improvement and on time delivery of criteria (Table 5), while in the plastic sector this CSF
goods have more influence on performance. The au- has significant correlation with performance in terms of
thors opine that to utilize resources effectively and to customer service and satisfaction only. It does not show
maximize benefits of SCM, SMEs should take help from significant correlation with other criteria of perfor-
professionals and consultants. mance. This implies that SMEs of the plastic sector
 Regression analysis of CSFs as independent variable and should focus more on developing JIT capabilities to
performance in terms of innovation and growth as improve their performance.
dependent variable (R2 Z 0.480) explains 48 percent of
variability of performance of Indian SMEs. This implies Limitations of the study
that in addition to these independent variables, other
factors related to supply chain implementation play a
This research is subject to the normal limitations of survey
significant role in performance improvement of Indian
research. The study uses perceptual data provided by
SMEs in terms of innovation and growth.
production managers or quality managers and business
 Regression analysis of CSFs as independent variable and
heads, which may not provide clear measures of perfor-
performance in terms of finance as dependent variable
mance. Continued scepticism within SMEs about the impact
(R2 Z 0.462) explains 46.2 percent of variability of
of CSFs for SCM on performance is one of the fundamental
performance of Indian SMEs. This means that in addition
limitations this research faces. Indian SMEs are, therefore,
to these independent variables, other factors related to
not very willing to provide useful and timely information
supply chain implementation play a significant role in
and data, for further investigations.
improvement of performance of SMEs in terms of
finance. The authors opine that Indian SMEs should take
help of professionals and consultants for this. Concluding remarks
 Regression analysis of CSFs as independent variable and
performance in terms of internal business as dependent The objective of this study was to identify the impact of
variable (R2 Z 0.174) explains 17.4 percent of vari- CSFs for SCM on the performance of Indian SMEs in the
ability of performance of Indian SMEs. It implies that in context of emerging global market. From this study it is
addition to these independent variables, other factors observed that the critical success factors (CSFs) have pos-
related to supply chain implementation, play a signifi- itive impact on different categories of performance such as
cant role in performance improvement of Indian SMEs, customer service and satisfaction, innovation and growth,
in terms of internal parameters. financial performance, and internal business of Indian
SMEs. Further, when analysed sector wise, different CSFs
show different impacts on different performance criteria in
Sector wise correlation and regression analysis different sectors. It is also observed that to face the chal-
lenges of a global market, SMEs in India are now recognizing
In this section, the authors have tried to analyse the rela- the importance of SCM implementation on a larger scale.
tionship between different CSFs and performance of Indian On the basis of this study, some of the concluding
SMEs of different sectors such as auto, plastic, electronic/ observations are as follows:
102 R. Kumar et al.

Table 5 Sector wise correlation and regression analysis of CSFs with performance.
[Link]. CSFs Sectors Correlation Correlation Correlation Correlation
coefficient coefficient coefficient coefficient
for Perfm.1 for Perfm.2 for Perfm.3 for Perfm.4
1 Top management commitment Auto .140 .458** .586** .326*
Plastic .490** .600** .619** .150
Electronic/Electrical .116 .627** .612** .196
Light engg./Others .126 .439** .588** .339*
2 Development of effective SCM strategy Auto .221 .444** .595** .150
Plastic .186 .463** .521** .274
Electronic/Electrical .176 .572** .734** .289
Light engg./Others .140 .431** .589** .231
3 Devoted resources for supply chain Auto .104 .425** .634** .175
Plastic .082 .286 .401* .258
Electronic/Electrical .106 .604** .734** .319
Light engg./Others .042 .381** .530** .202
4 Logistics synchronization Auto .193 .484** .630** .255
Plastic .183 .968** .860** .070
Electronic/Electrical .269 .325 .555* .545*
Light engg./Others .463** .529** .630** .681**
5 Use of modern technologies Auto .146 .525** .568** .500**
Plastic .408* .121 .105 .009
Electronic/Electrical .547* .555* .699** .789**
Light engg./Others .370** .315* .338* .646**
6 Information sharing with SC members Auto .203 .517** .489** .413**
Plastic .541** .199 .282 .035
Electronic/Electrical .603** .386 .544* .753**
Light engg./Others .290* .262 .345* .386**
7 Forecasting of demand on point of sale Auto .579** .499** .273* .521**
(POS) Plastic .832** .062 .035 .348
Electronic/Electrical .613** .595** .660** .507*
Light engg./Others .740** .305* .383** .701**
8 Trust development in SC partners Auto .413** .594** .296* .584**
Plastic .661** .394* .315 .058
Electronic/Electrical .410 .168 .296 .505*
Light engg./Others .576** .101 .284* .459**
9 Developing JIT capabilities in system Auto .656** .437** .289* .612**
Plastic .391* .093 .034 .093
Electronic/Electrical .057 .307 .022 .268
Light engg./Others .619** .261 .316* .562**
10 Development of reliable suppliers Auto .311* .517** .292* .325*
Plastic .186 .463** .521** .274
Electronic/Electrical .117 .261 .195 .198
Light engg./Others .628** .065 .298* .600**
11 Higher flexibility in production system Auto .295* .400** .354** .356**
Plastic .407* .224 .255 .093
Electronic/Electrical .234 .363 .227 .068
Light engg./Others .379** .277* .467** .576**
12 Focus on core strengths Auto .296* .580** .264 .195
Plastic .496** .559** .602** .208
Electronic/Electrical .273 .663** .772** .164
Light engg./Others .306* .758** .792** .531**
13 Long-term vision for survival and growth Auto .232 .506** .368** .284*
Plastic .394* .802** .740** .090
Electronic/Electrical .297 .554* .428 .148
Light engg./Others .529** .639** .655** .562**
Notes: **. Correlation is significant at the 0.01 level (2-tailed), *. Correlation is significant at the 0.05 level (2-tailed); CSFs-Critical
success factors; Perfm.1-Performance improvement in terms of customer service and satisfaction; Perfm.2- Performance improve-
ment in terms of innovation and growth criterion; Perfm.3- Performance improvement in terms of financial performance; Perfm.4-
Performance improvement in terms of internal business parameters.
Impact of CSFs for SCM 103

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