Exploring the effects of lean practice and supply chain disruption on performance

Exploring the effects of lean practice and supply chain disruption on performance

As the scale and scope of economy are expanded globally, companies in general have been exposed to supply chain vulnerability. Supply chain disruption occurs due to different reasons such as natural disaster, defects from suppliers, and internal operation failure. Supply chain risks and their management have received much attention from both academia and industry because of many different incidents among supply chain related business activities over the years. Managing supply chain risks is becoming increasingly important in a way not only to mitigate and cope with many uncertainties across supply chain network and maintain a normal level of on-going operations but gain a competitive advantage over competitors. After an extensive review of exiting literatures, this study identifies two research gap: 1) there is a lack of study which defines supply chain risks and establish their measures and 2) the relationship between lean practices and supply chain disruption occurrences (SCDO) have not been tested yet, let alone their impacts on firm performance. Lean practices have been a dominant approach to deal with business and supply chain issues but many studies suggest that the leaner supply chain process is becoming, the more vulnerable their supply chain network becomes. Hence this study attempts to 1) develop and validate SCDO measures, 2) test the relationship between lean practices and SCDO, and 3) examine the impact of SCDO on firm performance. Based on the research gaps identified, this study proposes three hypotheses: 1) the higher level of lean practices that a firm implements, the higher level of supply chain disruption will take place, and 2) the more frequent supply chain disruption occurrences, the lower level of operational performance that a firm will achieve, and 3) the higher level of operational performance that a firm will achieve, the higher level of financial performance that a firm will achieve. The expected contribution of this study is as follows. First, the development and validation of SCR are provided. With a large-scale survey conducted resulting from 198 companies in the U.S., this study contributes to the establishment of SCDO measures. Second, the study attempts to confirm that lean practices will increase the perception of supply chain risk, consequently impact firm performance negatively.