Do Supply Chain Performance Influence Firm Profitability? A Predictive Approach in the Context of the Indian Pharmaceutical Industry

Abstract

The competitive nature of the pharmaceutical industry necessitates that its multifaceted supply-chain be cost-efficient and profitable. This paper aims to ascertain the critical supply-chain financial indicators influencing pharmaceutical-supply-chain (PSC) performance, revealing its unique features and assessing these indicators’ effect on profitability. This paper measures the PSC performance of 55 public-limited Indian pharmaceutical firms, including multinational enterprises, integrating supply-chain financial variables and SCOR KPIs through a ten-year timeline. The critical supply-chain-performance indicators (SCPIs) are identified from the measured set through factor analysis. A panel data random effect model is developed, linking these critical SCPIs and profitability to understand their significant influence on profitability. This paper has evidenced the existence of three critical SCPIs, revealing working capital efficiency, material flow efficiency and investment efficiency. It has also proved the significant influence of these SCPIs on firms’ profitability and has brought out the importance of material flow efficiency in terms of inventory and distribution efficiency as a leading contributing factor for profitability. This paper contributes to finding key PSC performance features and their vital role in pharmaceutical firms’ profitability. Supply-chain managers can enhance PSC’s specific performance areas to be cost-efficient and can increase the firm’s profitability.

Impact of Supply Chain Performance on Firms’ Export Capability: Development of a Statistical Model

“…(Bruce et al, 2004;Sellitto et al, 2014;Tripathi & Talukder, 2020;Tripathi et al, 2018). The researchers have used the economic value addition (EVA) model (Jin et al, 2017), balanced score card (BSC) (Smit et al, 2017), supply chain operation reference (SCOR) model (Kottala & Herbert, 2019;Tripathi et al, 2021), system dynamic approach (Singh et al, 2021), fuzzy logic (Katiyar et al, 2018), and artificial neural network (ANN; Tsai & Huang, 2017) towards supply chain performance measures and development of SCPIs. In addition, initiatives have begun towards integrating the latest blockchain technology (BCT) into the supply chain systems of the firms and activities to enhance their supply chain performance (Nandi et al, 2020).…”

“…Researchers have also ascertained that PSC's performance gets influenced substantially by critical financial indicators, subject to material flow efficiency, investment efficiency, and working capital efficiency. These indicators, in turn, have a significant impact on the firm's profitability (Tripathi et al, 2021).…”

“…The literature review has revealed that the components such as raw material import, distribution cost, total landed cost, efficiency in managing fixed assets, investments, effective inventory handling, and better working capital adjustment chiefly impact the firm's supply chain performance and export performance (A.T. Kearney Insight, 2016;Rentala et al, 2014;Tripathi et al, 2021;Tyagi & Nauriyal, 2017). Hence, to measure and analyse the firm's export performance in aggregation with the supply chain performance, we have considered a set of variables comprising select financial indicators and SCOR KPIs, signifying the export and the supply chain performances.…”

“…A lower DCER value signifies the efficiency of supply chain components, in handling the distribution activities across the chain, generating reduced distribution cost, for a given level of net sales. This decrease, in turn, facilitates the firm to operate with a reduced TCS (SCOR Model: Overview of Version 11, APICS, 2014;Shah, 2016;Tripathi et al, 2021).…”

“…However, though many of these insights discussed broader aspects of supply chain management and firms' export competitiveness, they have lacked empirical evidence relating firms' export performance with different parameters of supply chain performance. While cohesions on developing models on supply chain performance measures are established recently (Sellitto et al, 2014;Smit et al 2017;Talavera, 2015;Tripathi et al, 2021;Tripathi & Talukder, 2019), further scope exists for establishing a predictive model relating firms' supply chain performance with export capability. Establishing such a model can help firms recognize the effect of supply chain performance on export performance, enabling them to make decisions with better precision, regarding different parameters of supply chain performance, to improve their export capability.…”