VALUE CREATION THROUGH EFFECTIVE DEMAND-DRIVEN SUPPLY CHAIN MANAGEMENT: EMPIRICAL EVIDENCE FROM LONG-RUN STOCK PERFORMANCE

Demand-driven supply chain management (DDSCM) has become a strategic weapon to create value for firms. However, the existing literature provides limited empirical support on the value creation of effective DDSCM. Building on... [ view full abstract ]

Demand-driven supply chain management (DDSCM) has become a strategic weapon to create value for firms. However, the existing literature provides limited empirical support on the value creation of effective DDSCM. Building on the existing literature and the theory of dynamic capabilities, we hypothesize that DDSCM can create significant market value for shareholders. We use AMR’s “Supply Chain Top 25” ranking to obtain a sample of firms independently identified as top performing DDSCM firms, and examine their long-run stock performance. The results show that investing in the portfolio of top DDSCM firms can generate significantly positive abnormal returns after controlling for a variety of factors to discount alternative explanations. To provide further evidence regarding the practical application of our findings, we investigate buy-and-sell abnormal returns and show that investors can earn significantly positive abnormal returns by simultaneously buying a portfolio of top DDSCM firms and selling a portfolio of matching firms.