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Mediating Role of Competitive Advantage on the Relationship of Supply Chain

Management and Organizational Performance on the Food Industry of
Thailand

Article · August 2019

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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

Mediating Role of Competitive Advantage on

the Relationship of Supply Chain Management
and Organizational Performance on the Food
Industry of Thailand
Jatturong Ploenhad1, Pornpanna Laoprawatchai2, Chairit Thongrawd3, *Kittisak Jermsittiparsert4,5
1,2,3
College of Logistics and Supply Chain, Suansunandha Rajabhat University, Bangkok, Thailand
1jatturong.pl@ssru.ac.th
2pornpanna.la@ssru.ac.th
3chairit.th@ssru.ac.th
4
Department for Management of Science and Technology Development, Ton Duc Thang University, Ho Chi
Minh City, Vietnam
5
Faculty of Social Sciences and Humanities, Ton Duc Thang University, Ho Chi Minh City, Vietnam
4,5kittisak.jermsittiparsert@tdtu.edu.vn

*Corresponding Author

Abstract- This study evaluated the effectiveness of associated with the supply chain. Thus, the SCM
supply chain management (SCM) practices with refers to the coordination that has strategic nature
respect to competitive advantage and firm between the trading partners that achieve the dual
performance. It also investigated the mediating role goal of SCM: to enhance the individual
of competitive advantage between SCM practices and performance of the entity and to enhance the
organizational performance relationships. It used the performance of all the associated companies with
PLS-SEM to examine the association between the supply chain. The SCM now becomes an effective
variables under study. Data were collected form the
competitive tool that eliminate information flows
supply chain mangers of the food industry in
Thailand. The results indicated that effective from supply chain and make them able to compete
practices of SCM could increase the competitive the rivals. Therefore, the attention of business
advantage and organizational performance. This managers, consultants and academicians have
study also revealed that the competitive advantage of increased towards the concept of SCM. In addition,
the firm mediates the SCM practices and almost all of the organizations have now realized
organizational performance relationship. that SCM is an effective tool in building a
sustainable competitive advantage for the products
Keywords: Supply Chain Management Practices, in the global market.
Competitive Advantage, Organizational Performance The growing importance of SCM with respect to
increasing competition and globalization creates an
opportunity that this area should be investigated
1. Introduction further. Although, several previous studies have
been undertaken on the concept of SCM in
The need for effective SCM practices is increasing
different perspectives including; management
with time due to market globalization, and
information system, logistics and transportation,
intensified competition situation exists in the
organization theory and operations management.
market. These challenges force the organizations
Moreover, several theories were also used to
that they escalate their processes in a way that
explore the SCM concept in different perspectives,
products are available at the right place within the
namely; competitive strategies, resource-based
right time and bearing very low cost that leads the
theory, industrial organization and cost analysis
organization towards the high profitability. This
theory [1]. However, the growing reputation of
motive cannot be achieved without effective SCM
supply chain in the performance of the entities are
practices. Thus, the practicing and understanding of
still gaining the attention of the new researchers on
SCM now become a vital prerequisite that helps the
the concept of SCM practices. Moreover, the
organization in staying alive in the global
concept of SCM is based upon two separate paths,
competition and enhance organizational
namely; transportation and logistics management
performance by generating high profitability [1].
and supply management. As for as supply
The effective practices of SCM not only enhance
management is a concern, it involves the
the performance of the individual entity but also
purchasing of goods and supplies them in a very
enhance the performance of all organization
low handling cost by applying the Just in time (JIT)
______________________________________________________________ technique. While transportation and logistics
International Journal of Supply Chain Management
IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print)
Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/)
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

management means the supply of the goods at the competitive advantage and organizational
right place with in the right time that increase the performance on the food industry of Thailand.
effectiveness of the overall supply chain, these two SCM is one of the major tools that improve the
factors are necessary for the improvement of firm performance. The food industry of Thailand is
individual firm performance and performance of also a growing industry in the country. The
the whole supply chain. Based on all the above involvement of SCM practices in this industry can
evidence, this study is also evaluating the firm also increase its performance and give them a
performance with the help of SCM practices that competitive edge among other industries in the
provide a competitive advantage to the country [4, 5]. This industry provides the semi-raw
organization. material that is used in other industries as a raw
The complexity and evolutionary nature of SCM martial such as skins of many animals used by the
are also the reasons for the attraction of researchers other industries to produce different things.
toward the practices of SCM. The focus of most of Moreover, this industry also provides the final
the previous studies had only on the upstream and products to its end users in the shape of sea food,
the downstream side of SCM practices regarding nuts, vegetables etc. The following Table 1 shows
the selection of supplier. The previous studies on the improvement in the performance of the food
the selection of the suppliers are supplier industry due to the effective supply chain from
involvement, manufacturing performance, supplier 2009 to 2015. The figure shows that the growth of
selection, influence of alliances of suppliers, the companies increased from 0% to 8% and
supplier performance and supplier orientation average growth rate is 2% due to the supply chain.
management [2]. The role of the supplier on buyer Moreover, the operating margin of the companies
and supplier relationship, supplier responsiveness also increased from 0.01 to 0.17 and the average
and supplier attitude investigated only on the increase in operating margin was 0.1. In addition,
supplier side. Moreover, some of the studies deals inventory turnover also increased from 5 to 7 units
with downward linkage among retailer and due to the supply chain and the average increase in
manufacturers and few studies consider both the turnover was seven units. Furthermore, Return
downward and upward sides of that relationship on capital and book value were also increased due
with the help supply chain simultaneously. to the effective supply chain implemented in the
However, several studies are available on the companies. Table 1 shows all the figure of
practices of the supply chain, both upwards and improvement in the performance due to the supply
downwards streams. Moreover, the linking chain given below:
activities were detracted, and less attention had
been paid with reference to SCM practices, and this
study examined the role of SCM practices on

Table 1. Improvement in Performance of Food Industry due to Supply Chain (2009-2015)

Company Growth Operating Inventory Return on Book Supply
Margin Turns Invested Capital Value Chain
Rank
The Arcger Daniels -1% 0.03 7 7% 1.40 1
Midland Company
Campbell Soup Company 0% 0.15 6 17% -6.81 3
Con Agra Foods Inc. 5% 0.07 5 6% 18.43 11
Danone SA 2% 0.12 9 3% 6.49 7
General Mills Inc. 4% 0.16 7 11% 4.36 10
The Hershey Company 1% 0.17 6 21% 43.51 5
Kellog Company 5% 0.13 7 12% 5.72 5
Maple Leaf Food Inc. 1% 0.01 13 9% 4.68 8
Mondelez International 8% 0.13 6 8% 3.08 2
Inc.
Nestle SA -4% 0.14 5 17% 5.59 9
The J.M. Smucker 0% 0.15 4 7% -11.94 3
Company
Average 2% 0.11 7 11% 3.39 N/A

The SCM tools can increase the performance of the According to Figure 1, the revenue of automotive
organization by getting a commutative advantage was increased by 9.2% while the revenue of
in the market. The following Figure 1 shows the chemical and material was increased by 12.3%. In
performance of the company by giving the revenue addition, the revenue of the computer increased by
of the companies that is improved due to the 10.7% whereas the revenue of consumer goods
effective supply chain that are implemented. increased by 10.0%. Moreover, the revenue of
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

pharmaceutical was increased by 9.1% while the increased by 7.4%.

revenue of the telecommunication equipment was

Figure 1. Performance of Supply Chain Management

2. Literature Review also refer to the extent of the defensible position

under the competition over the competitors. In
This section provides a review of the literature addition, it also refers that the capability of the
regarding the previous studies on the topic of SCM, company that allows to differentiate it from the
competitive advantages and firm performance. This competitors in the market [7]. Furthermore,
section is divided into subparts; the first part Koufteros, et al. [8] found in their study that the
describes the SCM practices, the second part capabilities that provide the competitive advantage
describes competitive advantage, the third part of to the company include; premium price,
the section provides the knowledge about dependable delivery, customer quality, production
organization performance and the rest of the innovation and competitive pricing. The firm that
sections show the literature of past studies on the has above-mentioned capabilities is considered that
relationships between the variables under study. the firm has a competitive advantage over its rivals
in the market.
2.1. SCM Practices
2.3. Organizational Performance
SCM practices are the activities that are undertaken
by the firms to increase the effectiveness of their Organizational performance is defined as the
supply chain. Moreover, Donlon [3] mentioned that ability of the organization that achieves the market-
the SCM practices include supplier partnership, oriented and financial goals of the organization [9].
continues the flow of the process, cycle time The short-term goals of the implementation of
compression, and sharing technology information. SCM practices are to enhance the productivity,
Furthermore, Alvarado and Kotzab [4] described in cycle time and inventory of the firm [10]. In
their study that the SCM practices include the core addition, the long term goals of the implementation
competencies, effective internal-organizational of practices of SCM are to enhance the profits,
system, and understanding the supply chain market share and investment of the company and
practices. In addition, SCM practices also include all the other entities of supply chain. “Financial
the supply chain integration, JIT capabilities, metrics” are considered as a vital tool of comparing
information sharing and characteristics of the and measuring organizational behavior over time
supply chain. [5]. Additionally, agreed goals, risk [11]. The effective supply chain leads to increase
and reward sharing, sharing information, the organizational performance by providing a
cooperation and long term relation with partners competitive advantage to the firm. Most of the
are the major practices of the supply chain [6]. previous studies used the financial as well as
market criteria to measure the organizational
performance variable of the study.
2.2. Competitive Advantage

Competitive advantage is the ability of the

organization to compete in the market with its
competitors. Moreover, the competitive advantage
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2.4. SCM practices and Organizational H2: SCM practices have a positive impact on the
Performance competitive advantage of the firm.

Several studies examine the capabilities of SCM 2.6. Competitive Advantage and
practices with reference to organizational Organizational Performance
performance, and this section of the study provides
a review of previous literature on the relationship Several studies examine the capabilities of
between SCM practices and organizational competitive advantage with reference to the
performance. A study by Lin, et al. [12] conducted organizational performance, and provides the
on the supply chain of several industries in Hong review of previous literature on the relationship of
Kong and Taiwan. They found that the “competitive advantage” and organizational
organizational performance in term of customer performance. Moreover, Collins and Clark [19]
satisfaction, strategies of supplier participation and conducted the study on 73 firms and revealed that
reduction in the cost of products are influenced by the competitive advantage creates the extra demand
the effective supply chain practices. They also for the products that enhance the performance of
revealed that effective SCM practices are a the organization. Similarly, a study by Yamin, et al.
necessary element for the improvement of [20] conducted a study on the manufacturing
organizational performance of Hong Kong and companies of Australia. They indicted in their
Taiwan. Moreover, Green Jr, et al. [13] conducted study that growing competition in the market is
the study on Chinese firms by collected data from required to take the competitive advantage on the
142 operational managers and indicated in their rivals exist in the market. This competitive
study that SCM practices are the vital tool for the advantage can lead the organization to improved
logistics performance. In addition, effective SCM financial performance. In addition, Agha, et al. [21]
practices are not only influenced the market conducted the study on the paint industry in the
performance of the firm but also have influenced UAE by collecting data from 77 managers. They
the financial performance of the firm positivity. analyzed in their study that any type of competitive
Furthermore, Germain, et al. [14] conducted the advantage can improve the process of the business
study on the variability of SCM process to check that can lead the business towards high
the level of inconsistency regarding the impact of performance. Based on all studies mentioned
SCM practices and revealed that variability in the above, this study develops the following
process of SCM could improve the financial hypothesis:
performance of the firm. Based on all studies
mentioned above, this study develops the following H3: Competitive advantage has a positive impact
hypothesis: on the performance of the firm.

H1: SCM practices have a positive impact on the 2.7. Mediating Role of Competitive Advantage
performance of the firm. on the Relationship of SCM Practices and
Organizational Performance
2.5. SCM practices and Competitive
Advantage The effective practices of SCM can create a
competitive advantage for the firm, and this
The SCM practices enable that create a competitive advantage improved the performance of the firm. A
advantage for the firm in the market [15]. In study by Cao and Zhang [22] found that the supply
addition, Markley and Davis [16] conducted the chain improves the collaboration between the firm
study on sustainable practices of the supply chain and its suppliers, that create collaboration
by using secondary data and indicated that advantage for the firm that helps the organization
sustainable practices of SCM could create a to improve its performance. Similarly, Huo [23]
competitive advantage for the firm. Moreover, Ling conducted the study on 617 Chinese companies and
and Ogunmokun [17] mentioned that the topic of indicated in his study that SCM practices increase
competitive advantage with practices of SCM was the internal and external integration, and this
ignored by previous studies. They also indicated competitive advantage can increase the firm
that competitive advantage could be achieved performance. Moreover, the practices of supply
through the effective practices of the supply chain. chain enhance the relationship with suppliers,
Similarly, a study by Scannell, et al. [18] conducted vendors and customer. This competitive advantage
on the automotive industry and indicated that also increases the performance of the firm [24].
positive practices SCM could be able to bring the Based on all the studies mentioned above, this
competitive advantage for the SCM implemented study develops the following hypothesis:
firmly. Based on all studies mentioned above, this
study develops the following hypothesis:
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

H4: Competitive advantage has mediated the SCM practices have five dimensions, the first
relationship between SCM practices and dimension is strategic supplier partnership (SSP)
organizational performance of the firm. that have six items, customer relationship (CR) is
the second dimension that has five items,
information sharing (IS) is the third dimension that
has six items, information quality (IQ) is the fourth
3. Research Methods dimension that has five items and Postponement
(POS) is the last dimension that has three items. In
Primary data were collected through a addition, competitive advantage also has five
questionnaire for analysis. The list of the dimensions, the first dimension is price/cost (P/C)
respondent was collected from the “Department of that have two items, quality (Q) is the second
Industrial Work Thailand”, respondents were the dimension that has four items, delivery
managers of the supply chain working in the food dependability (DD) is the third dimension that has
industry of Thailand. However, the companies who three items, product innovation (PI) is the fourth
have not the separate department of SCM, they data dimension that has three items and time to market
were collected form the top-level executives or (TM) is the last dimension that has four items.
production mangers who know the practices of Finally, organizational performance is the one-
SCM. At the first stage, 1,500 respondents were dimensional variable that has seven items
selected and send them the questionnaire for data
requirement. Only 586 questionnaires were 3.2. Data Collection Procedure
returned from the respondents out of them 26
responses were not meet the satisfactory criteria An email sent to the supply chain managers and
and excluded from the analysis. Thus, only 560 other top-level managers where the separate SCM
valid response were remained for analysis that was department did not exist, to obtain the consent
approximately 37.33% response rate. Furthermore, regarding data collection. Total 1,500
many of the questions in the survey were changed questionnaires was sent to the managers after
according to the environment and nature of the getting consent from them, but only 586 responses
study and its scope. Five points Likert scale was were returned. Moreover, 26 responses out of 586
used to answer the questions (from 1 for strongly were not up to the standard and eliminated from the
disagree to 5 for strongly agree) [25]. analysis. Finally, 560 valid responses were selected
3.1. Measures for analysis purpose.

3.3. Research Framework

SCM Practices
 Supplier Partnership Competitive
 Customer Advantage
Relationship  Price/Cost Organizational
 Information Sharing  Quality Performance
 Information Quality  Delivery
 Postponement Dependability
 Product Innovation
 Time to market

Figure 2. Theoretical Framework

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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

4. Results The second criteria are Cronbach’s Alpha that

should be greater than 0.07, and the results show
This study used the PLS-SEM to investigate the that the value of Cronbach’s Alpha is more than the
relationships among under study variables. The limit that means no issue with convergent validity.
validity of the items and constructs must be check The third criteria are composite reliability (CR) that
before to test the relationships between variables. should be greater than 0.07, and the results show
There are four criteria to check the convergent that the value of CR is more than the limit, that
validity of the items; the first criteria is outer means no issue with convergent validity. The last
loadings that should be greater than 0.50. criteria are Average Variance Extracted (AVE) that
According to the results of this study, the outer should be greater than 0.05, and the results show
loadings of almost all items are greater than 0.05 that the value of AVE is more than the limit that
that means no problem with convergent validity. means no issue with convergent validity.

Table 2. Convergent Validity

1st Order Constructs 2nd Order Constructs Items Loadings Alpha CR AVE
Organizational
Performance OP1 0.814 0.907 0.931 0.729
OP2 0.888
OP3 0.853
OP4 0.895
OP5 0.816
Customer Relationship CR1 0.826 0.905 0.934 0.78
CR2 0.909
CR3 0.92
CR5 0.875
Supplier Partnership SP1 0.783 0.869 0.902 0.607
SP2 0.849
SP3 0.756
SP4 0.734
SP5 0.723
SP6 0.821
Information Quality IQ1 0.856 0.908 0.935 0.784
IQ2 0.916
IQ4 0.885
IQ5 0.883
Information Sharing IS1 0.82 0.869 0.911 0.718
IS2 0.864
IS4 0.82
IS5 0.884
Postponement POS1 0.882 0.844 0.906 0.763
POS2 0.862
POS3 0.875
Supply Chain
Management Practices CR 0.778 0.939 0.854 0.897
SP 0.807
IQ 0.815
IS 0.814
POS 0.816
Time to Market TM1 0.945 0.942 0.958 0.851
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

Table 2 (Continue)
1st Order Constructs 2nd Order Constructs Items Loadings Alpha CR AVE
TM2 0.92
TM3 0.915
TM4 0.91
Price / Cost PC1 0.958 0.915 0.959 0.922
PC2 0.962
Product Innovation PI2 0.823 0.57 0.823 0.699
PI3 0.849
Quality Q1 0.872 0.908 0.936 0.785
Q2 0.93
Q3 0.915
Q4 0.824
Delivery Dependability DD1 0.962 0.743 0.859 0.687
DD2 0.954
DD3 0.477
Competitive Advantage IM 0.247 0.892 0.852 0.675
PC 0.733
PI 0.842
Q 0.851
DD 0.747

This study is used the Heterotrait and Monotrait constructs are less than 0.05, that means no
(HTMT) ratio to check the discernment validity of problem with discriminant validity.
the constructs. The value of HTMT should be less
than 0.05, and Table 3 shows the values of all

Table 3. Discernment Validity (HTMT) First Order

CR DD IM IQ IS OP PC PI POS Q SP
CR
DD 0.245
IM 0.071 0.168
IQ 0.562 0.345 0.119
IS 0.796 0.311 0.056 0.589
OP 0.511 0.573 0.164 0.533 0.499
PC 0.275 0.524 0.032 0.41 0.416 0.557
PI 0.476 0.799 0.104 0.715 0.578 1.026 1.079
POS 0.693 0.369 0.087 0.698 0.704 0.579 0.49 0.748
Q 0.511 0.537 0.177 0.46 0.495 0.836 0.482 0.846 0.607
SP 0.334 0.484 0.076 0.579 0.469 0.615 0.751 0.971 0.483 0.513

Table 4. Discernment Validity (HTMT) Second Order

CA OP SCMP
CA
OP 0.82
SCMP 0.682 0.693
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

Figure 2. Measurement Model Assessment

The direct and mediating relationship between the competitive advantage also has a positive impact
variable is mentioned in Table 5 given below. The on organizational performance (β = 0.647; t =
results show that practices of SCM has increase the 15.273), and supported the H3. In addition, the
organizational performance (β = 0.206; t = 4.378), results show that competitive advantage has a
and supported the H1. While, practices of SCM has mediating impact on the relationship of SCM
also increase the competitive advantage (β = 0.663; practices and organizational performance (β =
t = 19.94), and supported the H2. Whereas, the 0.429; t = 12.874), and supported the H4.

Table 5. Path Analysis

Original Standard Deviation T Statistics P Values
Sample (O) (STDEV) (|O/STDEV|)
CA -> OP 0.647 0.042 15.273 0.000
SCMP -> CA 0.663 0.033 19.94 0.000
SCMP -> OP 0.206 0.047 4.378 0.000
SCMP -> CA -> OP 0.429 0.033 12.874 0.000
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

Figure 3. Structural Model Assesment

5. Discussion the supply chain could gain a competitive

advantage.
This last section of the study provides a discussion The results also found that the competitive
regarding the results that are mentioned above in advantage can also become the reason to increase
the study. Moreover, it also provides the the performance of the firm. The results are also
comparison of current study results with the results similar to the results of Newbert [30] and Flynn, et
of past studies, and finally, it presents the al. [31] who also indicated the positive association
conclusion, the suggestion to future researchers and between competitive advantage and firm
limitations of the study. performance. In addition, the results proved that the
Increase the performance of an organization is the practices of SCM could increase the performance
prime goal of every personal in the wold. The focus by gaining the competitive advantage. SCM
of the organization is only on the enhance the practices bring the competitive advantages for the
performance by applying different strategies and firm and this advantage improve the performance
tools in the business processes. Supply chain of the firm. The results are aligned with results of
practises the major tool that boosts up the process Harrison and New [32] and Chan, et al. [33] who
of the business in a way that itenhances the found that supply chain gains the competitive
capacity of the firm to perform better and generate advantage that achieves the high performance goal
more profit for the business. This study also of the firm.
investigated the SCM practices impact on the Finally, this study concluded that effective
performance of the business with the mediating practices of SCM could increase organization
role of competitive advantage. The results revealed performance and also brings a competitive
that the effective practices of SCM could increase advantage for the firm. In addition, competitive
the performance of the company. The results are advantage has a positive association with
similar to Zhu and Sarkis [26] and Kim, et al. [27] organizational performance. Moreover, it also
who also found that SCM practices play a major concluded that SCM practices bring the
role in the performance of the firm. Moreover, the competitive advantage that leads the companies
results are also indicated that SCM practices can towards high financial and market performance.
also bring a competitive advantage. The results are Thus, the competitive advantage mediates the
also aligned with the results of Jones and Riley [28] relationship between the practices of SCM and
and Mason and Towill [29], who also proved that organizational performance.
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Int. J Sup. Chain. Mgt Vol. 8, No. 4, August 2019

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