Academic journal article International Journal of Management

Effects of Information, Material and Financial Flows on Supply Chain Performance: A Study of Manufacturing Companies in Malaysia

Academic journal article International Journal of Management

Effects of Information, Material and Financial Flows on Supply Chain Performance: A Study of Manufacturing Companies in Malaysia

Article excerpt

In a challenging business environment, organizations not only need to improve their performances to meet customers' requirements but ultimately they need to achieve customers 'satisfaction. This study aims to study the impact of three difference kind of flows on supply chain performance; information, materials and financial flows. This study is focused on manufacturing companies in the northern region of Malaysia. Data has been collected by using questionnaires that have been to 202 manufacturing companies in the northern region of Malaysia. Results from the analyses show that information flow and material flow do not have significant impacts on the performance of supply chain management, while financial flow has a significant impact on the performance of supply chain management. The implications of the findings for the effective management of the supply chain in manufacturing firms are discussed.


The business environment has evolved rapidly and is constantly changing. In the rapidly changing environment, organizations face intense pressure to compete and gain a leading edge over their rivals. According to Sundaram and Mehta (2002), economic globalization over the past two decades has led to fierce competition as organizations can operate boundary-less. Apart from ensuring quality, organizations also need to ensure speedy and inexpensive products and are continuously improving their internal operations and at the same time focusing on external operations which led to the concept of supply chain management (SCM).

Robertson, Fagerhaug, Randmoel, Schuldmaier and Prenninger (2002) claim that SCM is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. Today, goods' movements or material flows require a complex network of many providers to ensure capacity coverage. Businesses need to think about and plan much more carefully, how they are going to move products, since moving products makes up about 60 percent of logistics costs in the U.S. market (Lofgren et al., 2005). The information flow involves transmitting orders and updating the status of delivery. Lofgren et al. describe how information flow is a key component of today's supply chain; it is the mechanism that brings trading partners together. In the past, they say, businesses looked only inside their four walls for ways to reduce waste. Today, businesses have to look outside for ways to become more efficient, and many companies are turning to partnerships. "The information flow provides the opportunity to really get at the inefficiencies".

The financial flow consists of credit terms, payment schedules and consignment as well as title ownership, Lofgren et al. (2005). They explain how the funds or financial flow drives the need to efficiently move money. Fundamentally, all of the partners who come together are in business to make money and yet, how those dollars flow is not often thought about. The efficiencies of cash flows, however, can be increased. "The ability to organize and extract important information on how a product flows is critical in managing this flow, and effectiveness in this area leads to healthy cash flows." Hence, today the supply chain strategy has evolved and the integration of supply chain is the main focus so that the flows of information, materials and financial are efficient.

There are several schools of thoughts concerning the evolution of the integrated process of supply chain, as described by Cigolini, Cozzi and Perona (2004). The "traditional logistics" school (authors Scott and Westbrook, 1991) began their research on how to reduce the fluctuations in material flows among channel partners, particularly in the areas of logistics and transportation with the objective of improving supply chain efficiency by reducing inventory levels. …

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