Developing a Financial Statement-Based Effectiveness Measure of Interorganizational Systems' Contribution

Abstract

Measuring the contribution of interorganizational systems (IOS) is challenging, and mainly based on subjective surveys. The purpose of this study is to objectively examine the effectiveness of IOS, through data from corporate financial statements. We developed a novel performance measure: an effectiveness ratio that reflects changes in average inventory level in comparison with change in annual sales. This measure reflects a certain aspect of improvement in supply chain management achieved by the evident developments of IOS, while considering external events that affected the companies. Two samples of American and Israeli companies were used for developing and empirically examining the suggested effectiveness ratio over 20 years (1993-2012). The results show considerable improvement as measured by the average effectiveness ratio of randomly selected American international companies in the cosmetics and toiletry products sector. However, the Israeli sample of food suppliers and importers, showed average marginal improvement, and major variance among the companies.

• measurement of interorganizational systems (IOS) effectiveness
• financial statement analysis
• supply chain management
• longitudinal study
• performance measurement
• value creation