Effects of supply chain agility on profitability

Abstract

Purpose The purpose of this paper is to identify factors affecting agile supply chain and evaluate the effect of these factors on profitability. To that end, after reviewing the theoretical foundations of this field, the authors identified the factors affecting supply chain agility and profitability and provided an appropriate conceptual model to measure and verify this relationship. Design/methodology/approach A 48-item questionnaire was prepared and distributed among 270 members of staff and managers of the company from which 240 questionnaire were completed and returned. The response rate was 88 percent. Using exploratory factor analysis (EFA), 37 indicators were selected and redundant questions were excluded. Results were analyzed using the structural equation modeling technique, and the relationships between factors were obtained and the impact of each supply chain agility factor on profitability was determined and prioritized. Findings Through EFA, the indicators related to each supply chain agility factor and profitability were extracted and using the literature, supply chain agility indicators were classified in four factors of speed, responsiveness, competency and flexibility and the indicators related to profitability in one factor, and confirmatory factor analysis (CFA) was conducted accordingly. The CFA results showed that all four factors are significantly associated with profitability, and flexibility has the greatest impact on profitability, and speed has minimal impact on profitability. Research limitations/implications As this study has been done in the context of Iran, cautious should be taken to generalize the results. Originality/value Other studies have examined the effect of agility on business performance and the relationship between them but this study, by providing a comprehensive set of supply chain agility evaluation criteria and indicators and considering all its dimensions, intends to identify the factors affecting supply chain agility and evaluate and determine the effects of these factors on profitability and examine if supply chain agility affects profitability.