Companies with high-performing supply chains differentiate themselves from ordinary performers through the superior application of six management practices, McKinsey research finds. As a result, these companies enjoy lower distribution and logistics costs, better service outcomes, and better inventory performance than others do. Against a backdrop of economic uncertainty and rising supply chain risk, our research has implications for high-tech, manufacturing and assembly, packaged-goods, pharmaceutical, and retailing companies.

To study the link between supply chain performance and the underlying practices driving it, we conducted in-depth interviews with operations executives at more than 60 companies across Europe and North America. The research, conducted together with the Georgia Institute of Technology’s College of Management, assessed the performance of the respondents’ companies in more than 50 aspects of supply chain management, including business processes, corporate culture, network configurations, organizational structures, strategy, supporting infrastructure, and the capabilities of personnel. After interviewers plotted the executives’ responses on a scale of one to five (five was the highest), the results were organized into tertiles and compared with supply chain performance metrics provided by the respondents on cost, inventory, and service levels.

When we examined the relationship between the scores and performance, six broad practices emerged as significant...