Research paper

The impact of logistics performance on

organizational performance in a supply chain
context
Kenneth W. Green Jr
College of Business Administration, Department of Management and Marketing, Sam Houston State University, Huntsville, Texas, USA
Dwayne Whitten
Texas A&M University, Mays School of Business, Information and Operations Management Department, College Station, Texas, USA,
and
R. Anthony Inman
College of Administration and Business, Louisiana Tech University, Ruston, Louisiana, USA
Abstract
Purpose – The paper’s aim is to theorize and assess a logistics performance model incorporating logistics performance as the focal construct with
supply chain management strategy as antecedent and organizational performance, both marketing and financial, as consequences.
Design/methodology/approach – Data from a national sample of 142 plant and operations managers are analyzed using a structural equation
modeling methodology.
Findings – The results indicate that logistics performance is positively impacted by supply chain management strategy and that both logistics
performance and supply chain management strategy positively impact marketing performance, which in turn positively impacts financial performance.
Neither supply chain management strategy nor logistics performance was found to directly impact financial performance.
Research limitations/implications – To compete at the supply chain level, manufacturers must adopt a supply chain management strategy. Such a
strategy requires integration and coordination of key external processes such as purchasing, selling, and logistics with supply chain partners. In this
study the focus is limited to the impact of logistics performance on organizational performance within a supply chain context.
Practical implications – As manufacturers work to improve the logistics processes, they support their organization’s supply chain strategy, resulting
in improved performance for the overall supply chain and ultimately their manufacturing organizations.
Originality/value – Organizational managers are being asked to focus directly on supply chain functions such as logistics to bolster the
competitiveness of the supply chains in which their organizations are integral partners. Does such a supply chain focus ultimately result in improved
organizational performance? This study provides evidence that a supply chain focus will enhance logistics performance, which will ultimately result in
improved organizational performance.

Keywords Supply chain management, Organizational performance, Mathematical modelling

Paper type Research paper

Introduction chain strategies focus on how both internal and external

According to de Kluyver and Pearce (2006, p. 4), the ultimate
goal of strategy is “long-term, sustainable superior
performance.” Such superior performance now depends on
the ability of a manufacturing organization to become a fully
integrated partner within a supply chain context (Cooper
et al., 1997), thus all but requiring that manufacturing
organizations adopt a supply chain strategy. Such supply
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-8546.htm
Supply Chain Management: An International Journal
13/4 (2008) 317– 327
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598540810882206]
business processes can be integrated and coordinated
throughout the supply chain to better serve ultimate
customers and consumers while enhancing the performance
of the individual supply chain members (Cohen and Roussel,
2005). Examples of business processes that must be
integrated include manufacturing, purchasing, selling,
logistics, and the delivery of real-time, seamless information
to all supply chain partners. Managing at the supply chain
level requires a new focus and new ways of managing
(Lambert et al., 1998). Manufacturing managers must learn
to communicate, coordinate, and cooperate with supply chain
partners (Gammelgaard and Larson, 2001).
For this study, we adopt the Larson and Halldorsson
(2004) “unionist” perspective on the relationship between
supply chain management and logistics. This perspective
holds that supply chain management incorporates logistics as

317
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
a key supply chain focused function (Council of Supply Chain
Management Professionals, 2007). Organizational managers
are asked to focus attention and resources directly on supply
chain functions such as logistics to bolster the competitiveness
of the supply chains. The managers are, however, ultimately
judged on the marketing and financial performance of their
organizations.
Does a supply chain focus lead to improved logistics
performance, which, in turn, results in improved
organizational performance? It is our purpose to answer that
question. Building on the works of Schramm-Klein and
Morschett (2006), Wisner (2003), and Bowersox et al.
(2000), we theorize a logistics performance model with
logistics performance as the focal construct and supply chain
management strategy as antecedent and marketing
performance (sales and market share growth) and financial
performance (return on investment and profit growth) as
consequences. Data collected from a national sample of US
manufacturers are used to assess the model following a
structural equation methodology.
A review of the related literature and discussion of the
theorized model with incorporated hypotheses follow in the
next section. The methodology employed in the study is then
presented. The results of the scale assessment and the
structural equation modeling results follow. The conclusions
section, which incorporates discussions of the contributions of
the study, limitations of the study, suggestions for future
related research, and implications for practicing managers is
in the final section.
Literature review
Mentzer et al. (2001, p. 4) define a supply chain as “a set of
three or more entities (organizations or individuals) directly
involved in the upstream and downstream flows of products,
services, finances, and/or information from source to
customer.” Stank et al. (2005, p. 27) describe supply chain
management as a “strategic level concept.” Ho et al. (2002)
conceptualize SCM as having three core elements:
1 value creation;
2 integration of key business processes; and
3 collaboration.
Based on this conceptualization, they define supply chain
management as follows:
SCM is the philosophy of management that involves the management and
integration of a set of selected key business processes from end user through
original suppliers, that provides products, services, and information that add
value for customers and other stakeholders through the collaborative efforts
of supply chain members (Ho et al., 2002, p. 4422).
Logistics is an important component of supply chain
management (Stank et al., 2005). The Council of Supply
Chain Management Professionals (2007) defines logistics
management as “that part of Supply Chain Management that
plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services and
related information between the point of origin and the point
of consumption in order to meet customers’ requirements.”
Both Stank et al. (2002) and Lin (2006) describe the
importance of integrating the logistics processes of all supply
chain partners to better serve the needs of ultimate customers.
Rodrigues et al. (2005, p. 1) identify logistics as “one of the
largest costs involved in international trade.”
318
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
Rabinovich and Knemeyer (2006) identify a new breed of
logistics-related firms: logistics service providers that support
internet supply chains. These logistics service providers help
internet sellers integrate with the myriad of available logistics
firms to fulfill customer orders more effectively and efficiently
(Rabinovich and Knemeyer, 2006). Logistics service
providers establish relationships with both internet sellers
and third-party logistics providers and integrate the selling
and flow processes throughout the supply chain through the
provision of what Rabinovich and Knemeyer (2006, p. 90)
call “hub functionalities.” Vaidyanathan (2005) describes a
similar role for fourth-party logistics providers in more
traditional supply chain configurations such as those that link
manufacturers with ultimate customers. Lai and Cheng
(2003) discuss the importance of a supply chain focus on the
part of transport logistics service providers as they function to
link suppliers, manufacturers, sellers, and customers
throughout the supply chain. They argue that transport
logistics service providers must focus on supply chain
performance in addition to organizational performance.
Morash and Clinton (1998) investigated the creation of
customer value through the supply chain integration
alternatives of collaborative closeness and operational
excellence. They illustrated models identifying logistics as
the unifying link intra-organizationally between the
production and marketing functions and inter-
organizationally between suppliers and customers. Analyzing
data from almost 2,000 firms in the USA, Australia, Japan,
and Korea, they found that efficient supply chains exhibit
operational excellence and responsive supply chains exhibit
collaborative closeness. Japanese and Korean firms were more
likely to integrate supply chains based on operational
excellence, while US and Australian firms were more likely
to integrate supply chains on the basis of collaborative
closeness.
Srivastava (2006) investigated the state of logistics and
supply chain practices in India. He found that, while Indian
managers are well aware of the need to develop supplier
partnerships, integrate and coordinate the flow of goods from
supplier’s supplier to ultimate customer, and share
information among supply chain partners, the infrastructure
necessary to facilitate such seamless integration is as yet
unavailable. There is pressure in emerging markets to rapidly
adopt logistics and supply chain integration practices in an
effort to compete globally.
Chen and Paulraj (2004) proposed a research framework
for supply chain management based upon the “collaborative
advantage” paradigm. The framework incorporates
environmental uncertainty, strategic purchasing, information
technology, supply network structure, and logistics integration
as impacting buyer-seller relationships and subsequently
resulting in improved buyer and seller performance.
Managers have traditionally focused on improving the
performance of the organizational entity for which they are
directly responsible. Supply chain management requires an
external focus in which managers must consider the impact of
organizational strategies on supply chain partners. Attempts
to optimize organizational performance may negatively impact
overall supply chain performance, thus damaging the
competitive advantage of the chain (Chopra and Meindl,
2004; Meredith and Shafer, 2002).
According to Chopra and Meindl (2004), supply chain
performance is optimized only when an “inter-organizational,
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
inter-functional” strategic approach is adopted by all chain
partners. Such an approach maximizes the supply chain
surplus available for sharing by all supply chain members.
Meredith and Shafer (2002, p. 261) argue that “if each
segment of the supply chain is acting in a way to optimize its
own value, there will be discontinuities at the interfaces and
unnecessary costs will result. If an integrated view is taken
instead, there may be opportunities in the supply chain where
additional expense or time in one segment can save
tremendous expense or time in another segment.”
Organizational strategies that support supply chain
strategies should strengthen the competitive position of the
supply chain which, in turn, enhances performance of each of
the individual supply chain partners. While the link from
supply chain performance is theoretically justified, no
empirical evidence related to the link was identified.
Logistics performance model
A decade ago, Morash and Clinton (1997) proposed a schema
for future supply chain research that included transportation
and logistics capabilities as the link between supply chain
structure and performance. While Wisner (2003)
hypothesized a positive link between logistics strategy and
organizational performance, he did not report data collection
related to logistics strategy measurement and did not report
results related to his hypotheses. Schramm-Klein and
Morschett (2006) assessed the relationship between logistics
quality and the organizational performance of firms in the
retail sector. It is our purpose to build on the work of
Schramm-Klein and Morschett (2006), Wisner (2003), and
Morash and Clinton (1997) by empirically investigating the
link between logistics performance and organizational
performance in the manufacturing sector. We utilize
Wisner’s measure of supply chain management strategy, a
measure of logistics performance from Bowersox et al. (2000),
and measures of the marketing performance and financial
performance of the organization from Green and Inman
(2005) to collect data from a national sample of plant and
operations managers to support a structural analysis of a
theorized logistics performance model. We propose a logistics
performance model that incorporates logistics performance as
the focal construct with supply chain management strategy as
antecedent and organizational performance, both financial
and marketing, as consequences. Although the model as
proposed is original, it does build upon and extend the works
of Green et al. (2006) and Wisner (2003). The model
incorporates six hypotheses and is illustrated in Figure 1.
Construct definitions
The model incorporates the following constructs:
.
supply chain management strategy;
.
logistics performance;
.
marketing performance; and
.
financial performance.
A supply chain management strategy requires an end-to-end
supply chain focus that supports integration of business
processes such as purchasing, manufacturing, selling, and
logistics throughout the chain for the purpose of providing
optimum value to the ultimate customer/consumer (Cohen
and Roussel, 2005; Wisner, 2003). Implementation of such a
strategy requires that actions be taken to strengthen
319
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
relationships and develop trust among supply chain partners
to facilitate the integration of processes throughout the supply
chain from suppliers’ supplier to ultimate consumer/consumer
(Cohen and Roussel, 2005; Wisner, 2003). The logistics
performance construct reflects the organization’s performance
as it relates to its ability to deliver goods and services in the
precise quantities and at the precise times required by
customers. Bowersox et al. (2000) incorporate performance
metrics such as customer satisfaction, delivery speed, delivery
dependability, and delivery flexibility. Marketing performance
reflects the organization’s ability to increase sales and expand
market share as compared to its competition (Green and
Inman, 2005; Green et al., 2006). Financial performance
reflects an organization’s profitability and return on
investment as compared to its competition (Claycomb et al.,
1999; Green et al., 2004; Green and Inman, 2005).
Hypotheses
Vokurka and Lummus (2000) specify the goal of supply chain
management as adding value for customers at reduced overall
costs. The added value should be reflected in the cost, quality,
flexibility, and delivery components of supply chain
performance (Ho et al., 2002). Oliver and Delbridge (2002)
and Bowersox et al. (2000) provide empirical evidence related
to the impact of a supply chain management strategy on
supply chain performance. Oliver and Delbridge (2002)
compared six “high performing” supply chains with six “low
performing” chains on the basis of four supply chain
performance measures. High performing chains exhibited
fewer incoming defects, fewer outgoing defects, a lower
percentage of late deliveries to second-tier suppliers and a
lower percentage of late deliveries from first-tier suppliers.
Bowersox et al. (2000) gathered data from 306 senior North
American logistics executives and categorized the companies
represented as either “high achievers” or “average achievers”
in terms of supply chain competencies. The high and average
achievers were then compared on the basis of logistics
performance metrics related to customer service, quality,
productivity, and asset management. The high achievers
exhibited significantly higher scores for each performance
metric measured. Based on this theoretical justification and
the supporting empirical evidence from Bowersox et al.
(2000), hypothesis 1 is stated as follows:
H1. A supply chain management strategy is positively
associated with logistics performance.
Wisner (2003) hypothesized supply chain management strategy
as a positive predictor of firm performance. Justification for the
hypothesis was based on the argument that performance
evaluation of the purchasing and supply management functions
will become closely linked to measures of organizational
performance such as growth, profitability, and market share
(Carter and Narasimhan, 1996). Wisner (2003) surveyed US
and European manufacturing and service organizations and
structurally assessed a model that incorporated supplier
management and customer relationship strategies as
antecedents to supply chain management strategy and firm
performance as a consequence. The link from supply chain
management strategy to firm performance was found to be
positive and significant as hypothesized. Additional empirical
evidence is provided by Armistead and Mapes (1993), who
collected data from 38 UK manufacturing organizations. They
measured supply chain integration and perceptions of
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
Figure 1 Theorized logistics performance structural model with hypotheses
manufacturing performance and found them to be highly and
positively correlated. After surveying senior supply and
materials management professionals in the USA, Tan (2002)
concluded that supply chain management practices positively
impact firm performance. Vickery et al. (1999) surveyed CEOs
of firms in the office and residential furniture industry to assess
the relationships among supply chain flexibility measures of
product, volume, launch, access and target market flexibility,
and measures of overall firm performance. They found volume
flexibility to be positively correlated with all measures of
performance. Launch and target market flexibility were
correlated with four of the six measures of performance.
Product flexibility was related only to return on investment,
and access flexibility only to market share. Tan et al. (2002)
collected data from 101 senior managers of US manufacturing
firms to assess the relationship between supply chain
management factors and firm performance measures. They
found that the supply chain characteristics factor was
negatively correlated with average selling price and positively
correlated with overall product quality and overall customer
service levels. Green et al. (2006) surveyed sales managers for
manufacturing firms and found positive links between supply
chain management strategy and both marketing and financial
performance. Based on the theoretical justification and
supporting empirical evidence, the second and third
hypotheses are:
H2. A supply chain management strategy is positively
associated with marketing performance.
H3. A supply chain management strategy is positively
associated with financial performance.
Organizational strategies that support supply chain strategies
should strengthen the competitive position of the supply chain
which, in turn, will enhance performance of each of the
individual supply chain partners. Although no empirically
tested measure of supply chain performance was found,
logistics performance focuses outside the manufacturing
function on the manufacturer/customer relationship, and, as
Bowersox et al. (2000) describe it, logistics performance is a
reflection of supply chain superiority. Lin (2006, p. 257)
contends that logistics service providers work to integrate
“business flow, physical flow, money flow, and information
flow in the supply chain.” Such integration serves to
320
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
strengthen the supply chain’s overall ability to delivery value
to the ultimate customer. Shao and Ji (2006, p. 64) assert that
“logistics is the key to making and keeping customers.”
Novack et al. (1992) and Schramm-Klein and Morschett
(2006) argue that logistics performance is a necessary
prerequisite to marketing performance. The logistics
function creates place, time, quantity, and space value,
which are essential to customer satisfaction (Novack et al.,
1992; Sheen and Tai, 2006). Wisner (2003) theorized a
positive association between logistics performance and
organizational performance. Schramm-Klein and Morschett
(2006) hypothesized positive associations between logistics
quality and marketing and financial performance and found
support for the hypotheses in a sample of 262 retailers. Based
upon the theoretical justification and empirical results,
hypotheses 4 and 5 are stated as follows:
H4. Logistics performance is positively associated with
marketing performance.
H5. Logistics performance is positively associated with
financial performance.
While organizational managers must focus attention and
resources on supply chain functions such as logistics, their
primary concern remains improved organizational
performance. Specifically, managers work to improve
marketing performance in terms of sales and market share
growth. The growth of market share and sales growth should
impact financial performance through improved revenue
numbers. Anderson et al. (1994) found that marketing
performance, as measured by customer satisfaction, positively
impacts financial performance, as measured by return on
investment. Green et al. (2006) surveyed sales managers for
manufacturing firms and found a positive link between
marketing performance and financial performance. In their
study of retailers, Schramm-Klein and Morschett (2006,
p. 283) hypothesized that “marketing performance has a
positive effect on company performance” and found that sales
performance positively influenced financial performance.
Based on this theoretical justification and empirical
evidence, hypothesis 6 is stated as follows:
H6. Marketing performance is positively associated with
financial performance.
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
Methodology
Plant and operations managers representing 1,461 different
firms were selected from the Manufacturers, News, Inc.
database of US manufacturers with 500 or more employees.
These manufacturing managers were surveyed using a
traditional initial and follow-up mailing procedure during
the spring of 2005.
The sample frame was constructed primarily to target
relatively high-level managers such as plant and operations
managers. Such high-level managers were targeted in the
belief that, while they are intimately aware of the internal
operational workings of their organizations, they are also well
aware of their organization’s supply chain strategy and the
performance of such supply chain functions as logistics. As
the focus of operations related research shifts from the firm to
the supply chain level, it becomes more difficult for
researchers to identify groups within organizations that are
both aware of both internal and external processes and
performance. As more supply chain professionals are
employed by firms, a new more appropriate sample frame
for supply chain research may develop.
In total, 142 responded with completed instruments for a
response rate of 9.7 percent. The response rate is not atypical
of that obtained in industrial research (Harmon et al., 2002).
Other reported response rates under similar circumstances
are:
.
7.5 percent (Nahm et al., 2004);
.
10.8 percent (Harmon et al., 2002); and
.
6.7 percent (Tan et al., 2002).
Larson (2005) found that response rates for mail survey-
based studies in the Journal of Business Logistics declined
precipitously during the period from 1989 to 2003. While
manufacturing managers are the prime source for supply
chain management related data, they are often under severe
time and resource constraints.
In addition to the survey response rate, item completion
rate can be used as another measure of survey effectiveness
(Klassen and Jacobs, 2001). Klassen and Jacobs (2001,
p. 717) define item completion rate as “the proportion of
survey items answered relative to all applicable items.” The
item completion rate for this study is a relatively high 96.7
percent.
In their discussion of sample size necessary to support
structural equation modeling, Hair et al. (2006, p. 742) state,
“SEM models containing five or fewer constructs, each with
more than three items (observed variables), and with high
item communalities (0.6 or higher), can be adequately
estimated with samples as small as 100-150.” The
measurement model illustrated in Figure 2 incorporates four
constructs, each with three or more observed items, all of
which exhibit communalities greater than 0.60. The sample
size of 142 is, therefore, considered adequate to support the
structural equation analysis necessary to assess the logistics
performance model (Hair et al., 2006).
All of the respondents indicated that they worked for
manufacturing organizations. In total, 62 percent of the
respondents identified themselves specifically as plant or
operations managers. An additional 15 percent held
purchasing and inventory management positions. A total of
19 specific manufacturing SIC codes were identified and
respondents represented 33 different states.
321
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
Non-response bias was assessed using a common approach
described by Lambert and Harrington (1990) in which the
responses of early and late respondents are compared. Of the
study respondents, 54 percent (77) were categorized as early
respondents and 46 percent (65) were categorized as late
respondents based on whether they responded to the initial or
follow-up request to participate. A comparison of the means
of the descriptive variables and the scale items for the two
groups was conducted using one-way ANOVA. The
comparisons resulted in statistically non-significant
differences. Because non-respondents have been found to
descriptively resemble late respondents (Armstrong and
Overton, 1977), this finding of general equality between
early and late respondents supports the conclusion that non-
response bias is not a major concern.
When data for the independent and dependent variables are
collected from single informants, common method bias may
lead to inflated estimates of the relationships between the
variables (Podsakoff and Organ, 1986). Harman’s one-factor
test was used post hoc to examine the extent of the potential
bias. Substantial common method variance is signaled by the
emergence of either a single factor or one “general” factor
that explains a majority of the total variance (Podsakoff and
Organ, 1986). Results of the factor analysis revealed seven
factors, which combined to account for 71 percent of the total
variance. While the first factor accounted for 31 percent of the
total variance, it did not account for a majority of the
variance. Based upon these results, problems associated with
common method bias are not considered significant.
Results
Measurement of constructs
A 12-item scale developed by Wisner (2003) was used to
measure supply chain management strategy. Respondents
were asked to indicate the importance of the listed issues and
concerns to their organization’s supply chain efforts. Logistics
performance was measured using a 13-item scale developed
by Bowersox et al. (2000). Respondents were asked to rate
their organization’s performance compared to that of their
competitors on the performance metrics related to customer
service, cost management, quality, productivity, and asset
management performance metrics. Organizational
performance was measured using two scales previously used
and assessed by Green and Inman (2005). Respondents were
asked to compare their organization’s financial performance
(four-item scale) and marketing performance (three-item
scale) to the performance of competitors.
Scales such as those incorporated in this study must exhibit
unidimensionality, reliability, and content, discriminant,
convergent, and predictive validity (Garver and Mentzer,
1999; Ahire et al., 1996). Because all study scales were
previously developed and assessed (Green and Inman, 2005;
Wisner, 2003; Bowersox et al., 2000), content validity is
assumed. Following the standard methodology used by Dunn
et al. (1994), refinement of the measurement scales is
conducted using the same data set used to assess the
structural model. While Dunn et al. (1994) acknowledge that
collection of a second data set to test the structural model is
preferred, they acknowledge that the expense of collecting the
second data set is often prohibitive. This is the case here.
Unidimensionality of the supply chain management
strategy, logistics performance, and financial performance
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
Figure 2 Logistics performance measurement model with standardized correlation coefficients (relative x2 ¼ 2:02, GFI ¼ 0:83, CFI ¼ 0:94,
RMSEA ¼ 0:08)
scales was assessed using confirmatory factor analysis, as
recommended by Gerbing and Anderson (1988). It was
necessary to re-specify the supply chain management strategy
and logistics performance scales to achieve sufficient
unidimensionality. The supply chain management strategy
scale was reduced to six items and the logistics performance
scale to five items. Generally, items with standardized
coefficients less than 0.70 and items that contributed to
standardized residuals with values greater than 3.00 or less
than 2 3.00 were deleted (Raykov and Marcoulides, 2000).
The supply chain management strategy and logistics
performance scales, as re-specified, and the financial
performance scale yielded goodness-of-fit index (GFI)
values greater than 0.90 (Ahire et al., 1996), non-normed-fit
index (NNFI) and comparative-fit index values greater than
0.90 (Garver and Mentzer, 1999), and root mean square
error of approximation (RMSEA) values between 0.05 and
322
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
0.08 (Garver and Mentzer, 1999), indicating sufficient
unidimensionality. Because the marketing performance scale
includes only three items, it could not be subjected to a full
confirmatory factor analysis. It did, however, exceed the
requirements that all parameter estimates be of the proper
sign, significant, and greater than 0.70 as recommended by
Garver and Mentzer (1999). The scale items used in the
analysis to follow are identified in Table I.
Alpha and construct-reliability values greater than or equal
to 0.70 and a variance-extracted measure of 0.50 or greater
indicate sufficient scale or factor reliability (Garver and
Mentzer, 1999). The alpha, construct-reliability, and
variance-extracted values for each of the scales exceeded the
recommended values indicating sufficient reliability.
Convergent validity for the supply chain management
strategy, logistics performance, and financial performance was
assessed using the normed-fit index coefficient as
 Impact of logistics performance on organizational performance Supply Chain Management: An International Journal
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman Volume 13 · Number 4 · 2008 · 317 –327

Table I Measurement scales

Supply chain management strategy

Please indicate the importance of each of the following issues/concerns to your organization’s supply chain management efforts (1 5 low
importance, 7 5 high importance)
SCMS3 Searching for new ways to integrate SCM activities
SCMS4 Creating a greater level of trust throughout the supply chain
SCMS6 Establishing more frequent contact with supply chain members
SCMS9 Communicating customers’ future strategic needs throughout the supply chain
SCMS10 Extending supply chains beyond your firm’s customers/suppliers
SCMS11 Communicating your firm’s future strategic needs to suppliers
Logistics performance
Please rate your company’s performance in each of the following areas as compared to the performance of your competitors (1 5 much worse
than competition, 7 5 much better than competition)
LOGPERF3 Delivery speed
LOGPERF5 Delivery dependability
LOGPERF6 Responsiveness
LOGPERF8 Delivery flexibility
LOGPERF10 Order fill capacity
Financial performance
Please rate your organization’s performance in each of the following areas as compared to the industry average (1 5 well below industry
average, 7 5 well above industry average)
FINPERF1 Average return on investment over the past three years
FINPERF2 Average profit over the past three years
FINPERF3 Profit growth over the past three years
FINPERF4 Average return on sales over the past three years
Marketing performance
Please rate your organization’s performance in each of the following areas as compared to the industry average (1 5 well below industry
average, 7 5 well above industry average)
MRKPERF1 Average market share growth over the past three years
MRKPERF2 Average sales volume growth over the past three years
MRKPERF3 Average sales (in dollars) growth over the past three years

recommended by Ahire et al. (1996), with values greater than Table II Descriptive statistics and correlations
0.9 indicating strong validity. The NFI for each of the scales
exceeds the 0.90 level, indicating sufficient convergent Mean SD
validity. When the NFI is unavailable, as for the marketing A. Descriptive statistics (n 5 142)
performance scale, Garver and Mentzer (1999) recommend Supply chain management strategy
reviewing the magnitude of the parameter estimates for the (SCMS) 4.91 1.18
individual measurement items to assess convergent validity Logistics performance (LP) 5.42 .93
with statistical significance of an estimate indicating a weak Financial performance (FP) 4.63 1.22
condition of validity and an estimate greater than 0.7 Marketing performance (MP) 4.55 1.30
indicating a strong condition. The parameter estimates for
the marketing performance items exceeded the criteria. All B. Correlation matrix (n 5 142) SCMS LP FP MP
scales exhibit convergent validity. SCMS 1.000
Discriminant validity was assessed using a x2 difference test LP 0.230 * 1.000
*
for each pair of scales under consideration, with a statistically FP 0.193 * 0.243
* * 1.000
*
significant difference in x2 indicating validity (Garver and MP 0.248 * 0.225
* * 0.706
* * * 1.000
Mentzer, 1999; Ahire et al., 1996; Gerbing and Anderson,
Note: * *Correlation is significant at the 0.01 level (two-tailed)
1988). All possible pairs of the study scales were subjected to
x2 difference tests with each pairing producing a statistically
significant difference, indicating sufficient discriminant
validity. Predictive validity was assessed by determining A structural assessment of the full measurement model
whether the scales of interest correlate as expected with indicates that the measurement model fits the data moderately
other measures (Ahire et al., 1996; Garver and Mentzer, well with a relative chi-square (x2/degrees of freedom) of 2.02,
1999). A review of the correlation matrix (Table II) for the a RMSEA of 0.08, a GFI of 0.83, an NFI of 0.91, and a CFI
study values supports claims of predictive validity for each of 0.94. The full measurement model is displayed in Figure 2.
study variable. The study variables are positively correlated The individual measurement scales are considered sufficiently
with the coefficients significant at the 0.01 level. unidimensional, reliable and valid and the fit of the

323
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
measurement model is considered sufficient to support
further assessment of the structural model.
Structural equation modeling results
Summary values for the study variables were computed by
averaging across the items in the scales. Descriptive statistics
and the correlation matrix for the summary variables are
presented in Table II. All correlation coefficients are positive
and significant at the 0.01 level.
Figure 3 illustrates the model with the structural equation
modeling results specified in the LISREL 8.8 output. The
relative x2 (x2/degrees of freedom) value of 2.02 is less than
the 3.00 maximum recommended by Kline (1998). The root
mean square error of approximation (0.08) equals the
recommended maximum of 0.08 (Schumacker and Lomax,
2004). While NNFI (0.93) is above the recommended 0.90
level (Byrne, 1998), the GFI (0.83) is not. These indices,
however, are more heavily impacted by a relatively small
sample size, and, as Byrne (1998) points out, the comparative
fit index (CFI) and incremental fit index (IFI) are more
appropriate when the sample size is small. The CFI (0.94)
and IFI (0.94) both exceed the recommended 0.90 level
(Byrne, 1998).
Four of the study hypotheses are supported by the
standardized estimates and associated t-values. The
relationship between SCMS and logistics performance (H1)
is significant at the 0.05 level with an estimate of 0.23 and t-
value of 2.52. The estimate of 0.21 for the relationship
between supply chain management strategy and marketing
performance (H2) is significant at the 0.05 level with a t-value
of 2.34. The relationship between supply chain management
strategy and financial performance (H3) is not significant with
an estimate of 0.00 and t-value of .04. The relationship
between logistics performance and marketing performance
(H4) is significant at the 0.05 level with a standardized
estimate of 0.18 and an associated t-value of 2.02. The
relationship between logistics performance and financial
performance (H5) is not significant with a standardized
estimate of 0.09 and t-value of 1.35. The relationship between
marketing performance and financial performance is
significant at the 0.01 level with a standardized estimate of
0.69 and a t-value of 7.67.
Figure 3 Theorized logistics performance structural model with standardized coefficients. t-Values are shown in parentheses (relative x2 ¼ 2:02,
GFI ¼ 0:83, CFI ¼ 0:94, RMSEA ¼ 0:08)
324
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
Generally, the results support the proposition that the
adoption of a supply chain management strategy leads to
improved supply chain performance, as measured by logistics
performance, which in turn leads to improved organizational
performance. It is very difficult to measure overall supply
chain performance directly. The logistics function, however, is
an externally focused supply chain function that has global, as
well as local, implications for managers in the manufacturing
sector.
While the performance of manufacturing managers
continues to be evaluated based on organization-level
metrics related to the sales, market share, and profitability
of the organization, the results of this study support the
contention that manufacturing managers make decisions that
directly support supply chain performance which will, in turn,
enhance organizational performance. This expectation that
local managers first be concerned with and make decisions
that strengthen the supply chain is relatively new and may be
difficult for local managers to embrace. In this supply chain
era, however, success of the organization depends upon the
success of the supply chain or chains in which the
organization operates as a partner. These results support the
propositions that organizations now compete globally at the
supply chain level, that organizational performance depends
directly on supply chain performance, and that local
manufacturing managers focus on and make decisions that
enhance supply chain performance. In short, local
optimization now depends on global optimization. This is a
relatively new mindset but, as the results indicate, an
important one for manufacturing managers.
Conclusions
The theorized logistics performance model fits the data
moderately well providing support for four of the six study
hypotheses. As the focal construct, logistics performance is
positively impacted by supply chain management strategy and
directly impacts marketing performance which, in turn,
impacts financial performance. These results support the
positive relationship between logistics performance and
organizational performance within the manufacturing sector.
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
The success of the individual supply chain partners may
now depends upon the overall success of the supply chain(s)
in which the partners participate. Manufacturing managers
should now consider the implications for the overall supply
chain when making decisions related to their organization’s
manufacturing, purchasing, selling, and logistics processes.
Those processes are integrated and coordinated throughout
the supply chain to better serve the ultimate customers. It has
become critically important to measure the performance at
the supply chain level as well as organizational performance.
The theoretical proposition is that success at the supply chain
level will result in success at the organizational level. The
problem for both practitioners and researchers is that supply
chain performance is relatively difficult to measure. This
study incorporates an established measure of logistics
performance as a surrogate for supply chain performance.
Logistics is clearly a supply chain function in that it links
manufacturers and customers although those customers may
not be the ultimate customers in the supply chain.
The results of this study support the broad contention that
manufacturers should focus on strengthening the supply
chain(s) in which they operate. Successful adoption of a
supply chain management strategy requires a supply chain
focus and efforts by managers to strengthen linkages with
both suppliers and customers. These stronger relationships
result in improved performance of supply chain related
functions such as logistics, purchasing and selling. In this
particular case, a supply chain focus resulted in improved
logistics performance, which in turn led to improved
organizational performance. While organizational managers
will likely still be evaluated on organization-level performance
metrics, the route to enhancing organizational performance
may well be through supply chain performance in the future.
In short, global optimization trumps local optimization.
While the objectives of the study were successfully
accomplished, limitations of the study should be noted. A
survey methodology was used that resulted in a relatively low
response rate, raising concerns of potential non-response bias.
Although the two waves of responses were compared and no
evidence of bias was noted, a more direct assessment of the
potential bias utilizing data from a third wave and an intensive
follow-up on non-respondents would have strengthened the
study. Because responses related to both the dependent and
independent variables were collected from the same
individual, the potential for common method bias was a
concern. While subsequent testing for the bias relieved the
concern, collection of the strategy and performance data from
separate sources would also have strengthened the study.
The study results have important implications from
manufacturing managers. The sustained, long-term success
of a manufacturing organization now depends upon
developing competitive advantage as a member of one or
more supply chains. While manufacturing managers have
embraced supply chain management as a strategic initiative,
they continue to search for appropriate tactical approaches to
implement the strategy. The logistics processes linking
manufacturer and customers play an important role in
supporting a supply chain management strategy. As
manufactures work to improve the logistics processes, they
support their organization’s supply chain strategy resulting in
improved performance for the overall supply chain and
ultimately their manufacturing organizations.
325
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
References
Ahire, S.L., Golhar, D.Y. and Waller, M.A. (1996),
“Development and validation of TQM implementation
constructs”, Decision Sciences, Vol. 27 No. 1, pp. 23-56.
Anderson, E.W., Fornell, C. and Lehmann, D.R. (1994),
“Customer satisfaction, market share, and profitability:
findings from Sweden”, Journal of Marketing, Vol. 58 No. 3,
pp. 53-66.
Armstrong, J.S. and Overton, T.S. (1977), “Estimating
nonresponse bias in mail surveys”, Journal of Marketing
Research, Vol. 14 No. 3, pp. 396-402.
Armistead, C.G. and Mapes, J. (1993), “The impact of
supply chain integration on operating performance”,
Logistics Information Management, Vol. 6 No. 4, pp. 9-14.
Bowersox, D.J., Closs, D.J., Stank, T.P. and Keller, S.B.
(2000), “How supply chain competency leads to business
success”, Supply Chain Management Review, Vol. 4 No. 4,
pp. 70-8.
Byrne, B.M. (1998), Structural Equation Modeling with
LISREL, PRELIS, and SIMPLIS, Lawrence Erlbaum
Associates, Mahwah, NJ.
Carter, J.R. and Narasimhan, R. (1996), “Purchasing and
supply management: future directions and trends”,
International Journal of Purchasing & Materials
Management, Vol. 32 No. 4, pp. 2-12.
Chen, I.J. and Paulraj, A. (2004), “Towards a theory of
supply chain management: the constructs and
measurements”, Journal of Operations Management, Vol. 22
No. 2, pp. 119-50.
Chopra, S. and Meindl, P. (2004), Supply Chain Management:
Strategy, Planning, and Operation, 2nd ed., Pearson
Prentice-Hall, Upper Saddle River, NJ.
Claycomb, C., Germain, R. and Dröge, C. (1999), “Total
system JIT outcomes: inventory, organization and financial
effects”, International Journal of Physical Distribution and
Logistics, Vol. 29 No. 10, pp. 612-30.
Cohen, S. and Roussel, J. (2005), Strategic Supply Chain
Management: The Five Disciplines for Top Performance,
McGraw-Hill, New York, NY.
Cooper, M.C., Lambert, D.M. and Pagh, J.D. (1997),
“Supply chain management: more than a name for
logistics”, The International Journal of Logistics
Management, Vol. 8 No. 1, pp. 1-14.
Council of Supply Chain Management Professionals (2007),
“Supply chain management and logistics management
definitions”, available at: www.cscmp.org/Website/
AboutCSCMP/Definitions/Definitions.asp.
de Kluyver, C.A. and Pearce, J.A. II (2006), Strategy: A View
from the Top, 2nd ed., Pearson Prentice-Hall, Upper Saddle
River, NJ.
Dunn, S.C., Seaker, R.F. and Waller, M.A. (1994), “Latent
variables in business logistics research: scale development
and validation”, Journal of Business Logistics, Vol. 15 No. 2,
pp. 145-72.
Gammelgaard, B. and Larson, P.D. (2001), “Logistics skills
and competencies for supply chain management”, Journal
of Business Logistics, Vol. 22 No. 2, pp. 27-50.
Garver, M.S. and Mentzer, J.T. (1999), “Logistics research
methods: employing structural equation modeling to test
for construct validity”, Journal of Business Logistics, Vol. 20
No. 1, pp. 33-57.
 Impact of logistics performance on organizational performance
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman
Gerbing, D.W. and Anderson, J.C. (1988), “An updated
paradigm for scale development incorporating
unidimensionality and its assessment”, Journal of
Marketing Research, Vol. 25 No. 2, pp. 186-92.
Green, K.W. Jr and Inman, R.A. (2005), “Using a just-in-
time selling strategy to strengthen supply chain linkages”,
International Journal of Production Research, Vol. 43 No. 16,
pp. 3437-53.
Green, K.W. Jr, McGaughey, R. and Casey, K.M. (2006),
“Does supply chain management strategy mediate the
association between market orientation and organizational
performance?”, Supply Chain Management: An International
Journal, Vol. 11 No. 5, pp. 407-14.
Green, K.W. Jr, Medlin, B. and Whitten, D. (2004),
“Developing optimism to improve performance: an
approach for the manufacturing sector”, Industrial
Management & Data Systems, Vol. 104 No. 2, pp. 106-14.
Hair, J.F. Jr, Black, W.C., Babin, B.J., Anderson, R.E. and
Tatham, R.L. (2006), Multivariate Data Analysis, 6th ed.,
Pearson Prentice-Hall, Upper Saddle River, NJ.
Harmon, H.A., Brown, G., Widing, R.E. II and Hammond,
K.L. (2002), “Exploring the sales manager’s feedback to a
failed sales effort”, Journal of Business & Industrial
Marketing, Vol. 17 No. 1, pp. 43-55.
Ho, D.C.K., Au, K.F. and Newton, E. (2002), “Empirical
research on supply chain management: a critical review and
recommendations”, International Journal of Production
Research, Vol. 40 No. 17, pp. 4415-30.
Klassen, R.D. and Jacobs, J. (2001), “Experimental
comparison of web, electronic and mail survey
technologies in operations management”, Journal of
Operations Management, Vol. 19, pp. 713-28.
Kline, R.B. (1998), Principles and Practice of Structural
Equation Modeling, Guilford Press, New York, NY.
Lai, K. and Cheng, T.C.E. (2003), “Supply chain
performance in transport logistics: an assessment by
service providers”, International Journal of Logistics:
Research and Applications, Vol. 6 No. 3, pp. 152-64.
Lambert, D.M., Cooper, M.C. and Pagh, J.D. (1998),
“Supply chain management: implementation issues and
research opportunities”, The International Journal of Logistics
Management, Vol. 9 No. 2, pp. 1-19.
Lambert, D.M. and Harrington, T.C. (1990), “Measuring
nonresponse bias in customer service mail surveys”, Journal
of Business Logistics, Vol. 11 No. 2, pp. 5-25.
Larson, P.D. (2005), “A note on mail surveys and response
rates in logistics research”, Journal of Business Logistics,
Vol. 26 No. 2, pp. 211-22.
Larson, P.D. and Halldorsson, A. (2004), “Logistics versus
supply chain management: an international survey”,
International Journal of Logistics: Research and Applications,
Vol. 7 No. 1, pp. 17-31.
Lin, C. (2006), “Influencing factors on the innovation in
logistics technologies for logistics service providers in
Taiwan”, The Journal of American Academy of Business,
Vol. 9 No. 2, pp. 257-63.
Mentzer, J.T., DeWitt, W., Keebler, J.S., Min, S., Nix, N.W.,
Smith, C.D. and Zacharia, Z.G. (2001), “Defining supply
chain management”, Journal of Business Logistics, Vol. 22
No. 2, pp. 1-25.
Meredith, J.R. and Shafer, S.M. (2002), Operations
Management for MBAs, 2nd ed., Wiley, New York, NY.
326
Supply Chain Management: An International Journal
Volume 13 · Number 4 · 2008 · 317 –327
Morash, E.A. and Clinton, S.R. (1997), “The role of
transportation capabilities in international supply chain
management”, Transportation Journal, Vol. 36 No. 3,
pp. 5-17.
Morash, E.A. and Clinton, S.R. (1998), “Supply chain
integration: customer value through collaborative closeness
versus operational excellence”, Journal of Marketing: Theory
and Practice, Vol. 6 No. 4, pp. 104-20.
Nahm, A.Y., Vonderembse, M.A. and Koufteros, X.A.
(2004), “The impact of organizational culture on time-
based manufacturing and performance”, Decision Sciences,
Vol. 35 No. 4, pp. 579-607.
Novack, R.A., Rinehart, L.M. and Wells, M.V. (1992),
“Rethinking concept foundations in logistics management”,
Journal of Business Logistics, Vol. 13 No. 2, pp. 233-67.
Oliver, N. and Delbridge, R. (2002), “The characteristics of
high performing supply chains”, International Journal of
Technology Management, Vol. 23 Nos 1-3, pp. 60-73.
Podsakoff, P.M. and Organ, D.W. (1986), “Self-reports in
organizational research: problems and prospects”, Journal
of Management, Vol. 12 No. 4, pp. 531-44.
Rabinovich, E. and Knemeyer, A.M. (2006), “Logistics
service providers in Internet supply chains”, California
Management Review, Vol. 48 No. 4, pp. 84-108.
Raykov, T. and Marcoulides, G.A. (2000), A First Course in
Structural Equation Modeling, Lawrence Erlbaum
Associates, Mahwah, NJ.
Rodrigues, A.M., Bowersox, D.J. and Calantone, R.J. (2005),
“Estimation of global and national logistics expenditures:
2002 data update”, Journal of Business Logistics, Vol. 26
No. 2, pp. 1-15.
Schramm-Klein, H. and Morschett, D. (2006), “The
relationship between marketing performance, logistics
performance and company performance for retail
companies”, International Review of Retail, Distribution and
Consumer Research, Vol. 16 No. 2, pp. 277-96.
Schumacker, R.E. and Lomax, R.G. (2004), A Beginner’s
Guide to Structural Equation Modeling, Lawrence Erlbaum
Associates, Mahwah, NJ.
Shao, X. and Ji, J. (2006), “Reconfiguration of
pharmaceutical logistics operations in China: an empirical
study”, Transportation Journal, Vol. 45 No. 4, pp. 52-66.
Sheen, G. and Tai, C. (2006), “A study on decision factors
and third party selection criterion of logistics outsourcing:
an exploratory study of direct selling industry”, The Journal
of American Academy of Business, Cambridge, Vol. 9 No. 2,
pp. 331-7.
Srivastava, S.K. (2006), “Logistics and supply chain practices
in India”, VISION – The Journal of Business Perspective,
Vol. 10 No. 3, pp. 69-79.
Stank, T.P., Davis, B.R. and Fugate, B.S. (2005), “A strategic
framework for supply chain oriented logistics”, Journal of
Business Logistics, Vol. 26 No. 2, pp. 27-45.
Stank, T.P., Keller, S.B. and Closs, D.J. (2002),
“Performance benefits of supply chain logistical
integration”, Transportation Journal, Vol. 41 Nos 2/3,
pp. 32-46.
Tan, K.C. (2002), “Supply chain management: practices,
concerns, and performance issues”, Journal of Supply Chain
Management, Vol. 38 No. 1, pp. 42-53.
Tan, K.C., Lyman, S.B. and Wisner, J.D. (2002), “Supply
chain management: a strategic perspective”, International
 Impact of logistics performance on organizational performance Supply Chain Management: An International Journal
Kenneth W. Green Jr, Dwayne Whitten and R. Anthony Inman Volume 13 · Number 4 · 2008 · 317 –327

Journal of Operations and Production Management, Vol. 22 Wisner, J.D. (2003), “A structural equation model of supply
No. 6, pp. 614-31. chain management strategies and firm performance”,
Vaidyanathan, G. (2005), “A framework for evaluating third- Journal of Business Logistics, Vol. 24 No. 1, pp. 1-26.
party logistics”, Communications of the ACM, Vol. 48 No. 1,
pp. 89-94.
Vickery, S., Clanatone, R. and Dröge, C. (1999), “Supply
chain flexibility: an empirical study”, Journal of Supply
Chain Management: A Global View of Purchasing and Supply,
Vol. 35 No. 3, pp. 16-23. Corresponding author
Vokurka, R.J. and Lummus, R.R. (2000), “The role of just-in-
time in supply chain management”, The International Dwayne Whitten can be contacted at: contacted at: dwhitten
Journal of Logistics Management, Vol. 11 No. 1, pp. 89-98. @mays.tamu.edu

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints

327