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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.17 No.3 pp.562-569

The Impact of Supply Chain Management on Organizational Performance and Customer Satisfaction

Hamid Babaei Meybodi, Seyed Hamid Emadi*, Tina Roostapisheh, Haniyeh Ghiyasvand Mohammadkhani
Department of Management, Meybod University, Meybod, Iran
Department of Industrial Management, Yazd Branch, Islamic Azad University, Yazd, Iran
Corresponding Author, E-mail:
April 15, 2018 June 22, 2018 July 2, 2018


The present study has been conducted with the purpose of investigating the impact of supply chain management (SCM) on organizational performance and customer satisfaction in two factories in Shiraz Industrial Estate. Therefore, according to the research subject, the variables of supply chain management, organizational performance and also customer satisfaction have been defined. In terms of objective, this is an applied study and in terms of nature and method, this is a descriptive-correlational study. The statistical population consists of 100 people and the sample consists of 80 people. The reliability and validity of research have firstly been examined and then the results were analyzed using SPSS and LISREL. The obtained results indicate the impact of supply chain management on organizational performance and customer satisfaction.



    Today, companies in the world are faced with in-tense competition. In the new economy, customers need commercial companies with the provision of better and cheaper products, short answer time, more production lines and higher service levels. Managers and modern executive directors believe that the final success of any organization is not related to the ability and capacity of the company, but it is associated with the ability and capacity of supply chain. To answer these challenges, the processes of supply chain and voice of the customer are integrated (Chow et al., 2008). With the increased global competition, manufacturing companies are obliged to have more communications with their suppliers and customers in order to make progress in their business. On the other hand, to survive in today’s competitive world, companies should be able to integrate the inter-nal and external performances and communicate effec-tively with the members of supply chain (Agus, 2011).

    Thus, the competition between factories and com-panies for the production of qualified products in line with customer preferences has created a need for a new perspective among all makers and manufacturers. In the past, each manufacturing center paid attention to the number of products in order to increase its share in the market. After a few decades, manufacturing centers took steps to offer qualified product in order to attract customers and enhance their satisfaction. Over recent decades, pioneers in the industry know that meeting the needs of customers is the main condition to gain more market share (Alcaraz et al., 2014). Considering the importance of the en-hancement of customer satisfaction and performance for answering this challenge, in the present study we have investigated the effect of supply chain manage-ment as a contributing factor to the improvement of organizational performance and customer satisfaction. In what follows, we describe the research literature, the method of data analysis and also some conducted stud-ies in the past.


    Several studies have been conducted regarding the relationship between organizational performance, sup-ply chain management and customer satisfaction. we mention some of them. Agus (2011) has conducted a study entitled “Supply chain management, product quality and business performance in Malaysia.” Supply chain management (SCM) has increasingly been recog-nized as a critical factor in the improvement of low per-formances. In addition, more and more companies use increasingly SCM in order to enhance their performance. The objective of this study was to identify and deter-mine the important variables of SCM that can improve the quality of products and business performance in manufacturing companies. In this study, the relation-ship between SCM, product quality and business per-formance in companies has been evaluated by analyz-ing 250 gathered questionnaires and by using SPSS software and structural equation modeling (SEM). The findings of this study indicate that SCM has a signifi-cant impact on the quality and performance of the company.

    Palandeng et al. (2018) performed a study entitled “Analysis of the impact of supply chain management and supply chain flexibility on competitive advantages and its effect on the performance of fish exporting companies in the city of Bitung.” This research has been conducted in 21 fish exporting companies. The data has been collected by questionnaires and interviews; the results were then analyzed by the method of partial least squares (PLS). The results of this study have shown that the enhancement of the company perfor-mance is strongly dependent on supply chain manage-ment practices, supply chain flexibility and competitive methods.

    Chow et al. (2008) conducted a research entitled “Supply chain management in the United States and Taiwan: Empirical research.” In this study, the impact of supply chain management on company perfor-mance was investigated and the data analysis by struc-tural equation modeling showed that supply chain has a positive impact on organizational performance. Tan (2002) conducted a study entitled “Supply chain man-agement: methods, concerns and issues related to the performance.” This reresearcher states in this study that the objective of sup-ply chain in the short term is to increase the productivity and reduce the inventory and its objective in the long run is the increase of customer satisfaction and profita-bility.

    Maboudi et al. (2010) performed a study entitled “Investigation of the impact of supply chain manage-ment on customer satisfaction in textile industry.” In this study, the quality of relationships in supply chain with the dimensions of communications, collaboration, commitment, dependence, conformity and trust, has been investigated as one of the main processes of sup-ply chain management and the independent variable. Also, The customer satisfaction is considered as one of the important factors for evaluating the quality and is investigated as the dependent variable of research.

    The relationship between these two variables has then been determined. In terms of the implementation method, this is a correlational study and has been con-ducted by field method. The statistical population con-sists of all suppliers of Mazandaran Textile Company with 30 samples. The measurement tool of this research was questionnaire and the relationship between the two variables was examined using Pearson’s test. The find-ings of this study indicate that the management of sup-pliers’ relationships in the textile industry has a direct relationship with customer satisfaction. The results showed that the dimension of communications has the most relationship with customer satisfaction and the dimension of dependency has the least relationship with customer satisfaction. At the end, it has been deter-mined that supply chain management in the textile in-dustry has a direct relationship with customer satisfac-tion.


    In the present study, we have determined research concepts that are: customer satisfaction, organizational performance and supply chain management. The sup-ply chain includes all sectors that are related to each other, directly or indirectly, in order to meet customers’ needs. Theses sectors can include manufacturers, sup-pliers, transporters, warehouses, retailers and customers. These sectors have activities such as new product de-velopment, marketing, executive operations, distribu-tion, financial services, customer services etc. The sup-ply chain is a dynamic set of information flow, product and capital in its different levels; the customer is only an involved and internal component in the supply chain. It can thus be said that the first objective of supply chain is to create the satisfaction for customers’ needs during supply process and also to generate profit for the supply chain itself (Kilger, 2002).

    Therefore, supply chain management is the process of integrating supply chain activities and also infor-mation flows related to them, by means of the im-provement and coordination of activities in the supply chain of production and product supply (Loudon, 2011). Performance is a word that includes the concept of ac-tivity to accomplish a task and also the result of this activity; performance is in fact the result of the action. The performance is thus a general structure that implies how the operations are done. It can be said that the performance is the conversion of learning to the obvi-ous behavior; it is the result of learning and not the pro-cess of learning itself (Green et al., 2014). The organiza-tional performance can be explored in three dimensions of financial performance, market performance and operational performance (Inman et al., 2011).Figure 1

    All existing definitions of customer satisfaction have a common point, that is, the reality that the cus-tomer makes an assessment of products and services after the purchase; this assessment leads to the sense of satisfaction. The overall satisfaction of customers is the results of all the relationships of a firm during the trans-action with each customer. Not only the product, but also the provided services with the product will also be appraised. The customer satisfaction is defined as the overall attitude of a customer to the service provider, or an emotional reaction to the difference between the expectations and perceptions, by considering the satis-faction of some needs, goals or desirability (Hasenmark, 2004). According to the aforementioned foundations, the following hypotheses were tested in order to achieve the main goal of the research:

    Main hypothesis:

    Supply chain management has a positive effect on organizational performance and customer satisfaction.

    Subsidiary hypotheses:

    Supply chain management has a positive effect on organizational performance.

    Supply chain management has a positive effect on customer satisfaction.

    Conducted studies in research background indicate that there is no investigation regarding the effect of supply chain management on the increase of customer satisfaction. According to the aforementioned issues, the conceptual model of this research is as follows:


    In terms of objective, this is an applied study and in terms of nature and method, this is a descriptive-correlational study. In this study, the statistical popula-tion consists of 100 people and the sample consists of 80 people. Customer satisfaction questionnaire (Kim, 2006), and supply chain management questionnaire (Gandhi et al., 2017) and (Li et al., 2006) have been used in the present study. Firstly, the reliability and va-lidity are discussed. For examining the validity of the questionnaire, structure-convergent validity technique has been used and for determining the reliability, com-posite reliability techniques and Cronbach’s alpha have been used. SPSS and structural equation modeling have then been used for data analysis.


    5.1. Validity and Reliability

    In the present study, for examining the validity of the questionnaire, structure-convergent validity tech-nique has been used and for determining the reliability, composite reliability techniques and Cronbach’s alpha have been used. Structure-convergent validity has been evaluated using confirmatory factor analysis technique (LISREL software). For examining structure-convergent validity, two factors should be considered: 1. The amount of factor loads for each latent variable must be greater than 0.5 and ideally, it must be greater than 0.7. 2. The average of the extracted variance for each latent variable must be greater than 0.5 (Ramin and Chardast, 2013). Also, the techniques of composite reliability and Cronbach’s alpha were calculated using SPSS and LIS-REL software. The results of the assessment of validity and reliability of questions are shown in Table 1:

    According to the Table 1, it is possible to see the load factors of each of indicators and questions of the structure of organizational performance. As can be seen in this table, all of these load factors are significant. Since load factors are more than 0.5 (and significant) and also the average of the extracted variance is greater than 0.5, the existence of a convergent validity is thus confirmed for all indicators and the main structure. Also, all coefficients of Cronbach’s alpha and composite reli-ability are greater than 0.7, and this shows an appropri-ate reliability of the questionnaires used in this study.

    5.2. Approval of Hypotheses

    After taking steps to confirm the measurement and calculating the validity of the variables, we can test the relationships between the research’s variables at this stage. At this stage, the significance mode (t-value) is firstly determined and then the standardized model is also drawn and based on this model, the level of each of the variables’ effect on each other (path coefficients or parameter coefficients: β) is evaluated. In Figure 3, in the path analysis, the relationships between concepts with the value of (t-value) are investigated. Red values have had t value less than 1.96. Also, in Figure 2, the path analysis is shown with standard values. The higher the coeffi-cient of the path between the concepts, the greater the effect of the concepts on the other. In what follows, research hypotheses have been tested using the tech-nique of structural equation modeling. Figure 2 shows the structural model in the status of estimation:

    In order to test the significance of path coefficients of the model above, the Figure 3 is the structural model in the status of significance coefficient. As can be seen in this figure, all these relationships are significant. If the absolute value of the statistical t is smaller than the val-ue of 1.96, the null hypothesis will be confirmed and in other words, the relevant variables do not have any significant effect on each other at the confidence level of 95%, and if the absolute value of the statistical t is greater than the value of 96/1, the null hypothesis will be re-jected and in other words, the relevant variables have a significant effect on each other at 95% confidence level.

    The rejection and confirmation of the hypotheses of Figure 3 and the values of the parameters of Figure 2 are shown in Table 2:

    Path analysis was used to analyze this hypothesis. Despite the fact that the various types of tests, which are generally named fitness indexes, are constantly be-ing compared, developed and evolved, there is still no general agreement on even one optimal test. The result is that various articles have provided various indicators, and even the famous scripts of SEM applications, such as EQS, Amos and LISREL also provide a large number of fitness indexes. So, following determining the model, there are several ways to estimate the goodness of the model overall fitness with the observed data. In general, several indicators are used to measure the model fitness, but three to five indicators are usually sufficient to vali-date the model.

    5.2.1. (RMSEA) index

    The indicator (RMSEA) or the root mean square er-ror of approximation is defined as the size of the error for each degree of freedom. The RMSEA value, which is in fact the same deviation test of any degree of free-dom, is less than 0.05 for models with good fitness. Val-ues above 0.08 represent a reasonable error for approx-imation in the population. Models with RMSEA of 0.1 or more have poor fitness.

    5.2.2. (NFI) index

    (NFI) index (confirmatory factor analysis) is also called Bentler-Bont index. Bentler-Bont (1980) have recommended the values equal or greater than 0.9 in-dexes compared with the zero model as a good index of the fitness of theoretical models, while some researchers apply a cut-off point of 0.8.

    5.2.3. (NNFI) index

    The index (NNFI) that also called the Tucker-Louise index is often called non-normed fit index. This index is similar to the NFI, but it is penalized because of complexity of the model. Since the scope of this model is not limited to zero and one, its interpretation is more difficult than the NFI. Based on the contract, values less than 0.9 are subject to revision in the model

    5.2.4. (CFI) index

    CFI index that are more than 0.9 is acceptable and indicates model fitness. This index also evaluates the recovery rate by comparing a so-called independent model in which there is no relation between variables and the proposed model. The CFI index is like NFI in-dex regarding meaning except that it is penalized be-cause of the size of the sample group.

    5.2.5. (AGFI) and (GFI) index

    LISREL calculates a goodness fitness index (the ratio of the sum of squares explained by the model to the total sum of squares of the estimated matrix in population). These indicators are similar to correlation coefficient in terms of desirability. Both of these criteria vary from zero to one, although they may theoretically be negative (of course, this should not happen because it implies that the model is not consistent with the data). The more the AGFI and the GFI are closer to the num-ber 1; the goodness of model fitness with observed data will be more. So, these tests answer the question of how good and fit the model is for the data research. Table 3 shows the abstract of these tests.

    In what follows, the important indicators of the evaluation of research model fitting will be cited. As can be seen in Table 4, the values of all indicators show an appropriate and acceptable fitting of research concep-tual model. Therefore, the consistence between concep-tual model and gathered data is confirmed.


    Supply chain operations require management pro-cesses that that link business partners and customers across organizational boundaries through expanding operational areas within each company. The success of a supply chain is due to its overall profitability, since focusing on the profitability of a sector leads to a reduc-tion in the profitability of the entire supply chain. The only source of income is the customer, and other finan-cial flows are related to exchanges between units and sectors. The supply chain is now in a two-way interac-tion with new technologies, including external resources, pure reverse and integrated logistics, network, anti-logistics and support. The success of supply chain man-agement is directly related to the management of the relationship between the costs of inventory of customer service. If the existing relationship between the seller and the supplier is more in terms of competition and struggle than cooperation, it can be predicted that the acceptance of such a system will not be successful. Ap-plying anywhere cannot lead to improved conditions, and decision must be made regarding whether or not to use it by reviewing the type of structure governing the supply chain, the organizational and social culture gov-erning the components of the chain, the existing rules and regulations, access to the equipment needed to be implemented.

    Supply chain management has three main pro-cesses including:

    • Information Management and Information Sys-tems: These systems can be effective on the in-ternal decision making of different supply chain segments.

    • Logistics management (inventory and material flow management): The process of efficient and effective planning, applying and controlling the flow and storage of goods, services and infor-mation from the point of origin to the point of consumption in order to meet customer needs. Logistic decisions are at three levels including strategic, tactical, and operational and the task of logistics management is creating the integrity and coordination between these activities. So that the final market is covered by the most effective cost method.

    • Relationships management in the supply chain: In many cases, the initial failure of the supply chain is due to the poor transfer of expectations and anticipations and the outcome of the behav-iors that occur between the parties involved in the chain.

    Today, customer satisfaction has become a major issue for organizations. The winner or loser of an organ-ization is determined by the percentage of customers who retained it. Customer satisfaction depends on the customer perception of the products and services pro-vided.

    The performance of individuals in a situation can be considered as the result of an interaction between the following: 1) Attempts: which comes from arousal refers to the amount of energy (physical or mental) that a person uses in his task. 2) Abilities: Personal characteris-tics used in a job. 3) Role perceptions: It refers to the paths people believe they should direct their efforts to carry out their work. Performance evaluation in facili-tating organizational effectiveness is considered as an important task of human resource management. The evaluation of performance is a process by which em-ployees are evaluated at regular intervals and formally. The performance evaluation system a) provide a specif-ic performance feedback to improve the performance of the staff; b) determines the employee’s training requirements; c) provides and facili-tates the development of staff; d) establishes a close relationship between personnel and performance; and e) Increases the motivation and productivity of employees. Performance management systems that are directly related to the reward system of the organization provide a strong incentive for employees to work annually and creatively in achieving organizational goals.

    The obtained results in this study indicate a posi-tive and significant relationship between the supply chain and organizational performance and this is in line with the research results of Palandeng et al. (2018), Agus (2011) and Chow et al. (2002). The approval of the existence of relationship between supply chain and customer satisfaction is consistent with the research results of Maboudi et al. (2010). Finally, a positive rela-tionship between supply chain management, customer satisfaction and organizational performance has been approved and no similar research is conducted with the same results.

    Suggestions Derived from the Research

    • 1. According to the results of statistical calcula-tions on the existence of a positive and signifi-cant relationship, it is recommended that the or-ganization take appropriate measures to strengthen managers and employees and man-agers use these components of growth and de-velopment help their organization to achieve their goals.

    • 2. According to the results of this research, which confirms a positive and significant relationship, it is suggested that members and staff support the organization’s future development with the optimal use of all the skills, talents and resources of the organization.

    • 3. Regarding the results of this study, it is suggested that the research in general should make more attempt to respect the feelings of others, observe the rights of the stakeholders and the participa-tion of partners in achieving organizational goals.



    Conceptual model of research.


    Research model in the status of standard estimation.


    Research model in the status of significance coefficient.


    Factor loadings, Cronbach’s α, SCR and AVE

    The result of research hypotheses test

    The summary of model fitness tests in structural equation

    indicators of fitting of research hypotheses model


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