Technological and Economic Development of Economy
ISSN: 2029-4913/eISSN: 2029-4921
2020 Volume 26 Issue 4: 947–969
EFFECTIVE FACTORS OF IMPLEMENTING EFFICIENT SUPPLY
CHAIN STRATEGY ON SUPPLY CHAIN PERFORMANCE
Maryam DANESHVAR1, Seyed Hossein RAZAVI HAJIAGHA1,
Laura TUPĖNAITĖ2*, Farkhondeh KHOSHKHESLAT1
1Department of Management and Finance, Khatam University, Tehran, Iran 2Department of Construction Management and Real Estate, Civil Engineering Faculty, Vilnius
Gediminas Technical University, Vilnius, Lithuania
Received 21 December 2018; accepted 19 April 2020
Abstract. Nowadays, the importance of supply chain management and its effect on business
performance is undeniable. Boosting competitive environment makes every single firm adopt an
assignable supply chain strategy. This study is one of the rare practical researches that recognize
key factors related to the application of a successful and efficient supply chain strategy. So far,
many researchers have conducted studies on responsive supply chain strategy; but in this study,
it is sought to focus on efficient supply chain strategies due to increasing need for organizations
to enhance efficiency and reduce costs. Structural equation modelling using SmartPLS software
is used to examine the research assumptions. Analysis of the structural model showed that there
is a positive relationship between implementation of efficient supply chain strategy with supply chain performance; therefore the main research hypothesis is confirmed. Research revealed
internal integration, top management support and information technology as efficient supply
chain characteristics that have positive effects on supply chain performance. To reduce costs of
implementation of efficient supply chain strategy, it is necessary to invest in factors that influence
supply chain performance positively.
Keywords: supply chain, efficiency, performance, strategy, information technology, structural
JEL Classification: L61, M11, C12, C51.
A special paradigm should be considered in the modern business management: businesses
which don’t operate individually might be more successful in competition with other organizations, since the business management has entered into the internetwork era. Therefore,
supply chains have become the major and dominant paradigm of business and competition
(Amoozad Mahdiraji et al., 2014). Nowadays, the problem is no longer the competition of
948 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
brands, but supply chains. A supply chain can be defined as “a process with a complete set
of activities wherein raw materials are transformed into final products, then delivered to
customers by distribution, logistics, and retail” (Yazdani et al., 2017).
A successful supply chain requires coordination and coherence between different operations, while most organizations concluded that it is necessary to apply different strategies to
establish efficient supply chains (Lambert & Cooper, 2000).
The design of appropriate supply chains is a critical issue in the supply chain management. Indeed, it is an effective and efficient path to serve the consumers. Today, the organizations and production companies are faced with a series of challenges such as short product
life, expanding and diversifying products and increasing uncertainty about the demand and
producers, and thus, choice of supply chain strategy becomes more important (Birhanu et al.,
2014). One of the other challenges influencing supply chains is bullwhip effect. Several factors
effect on the behavior of bullwhip effects in supply chain. For instance, Kadivar and Akbarpour Shirazi (2018) studied the impact of different distribution centers on BE. Forecasting
methods are among the highly referred factors affecting BE (Chen et al., 2000; Bayraktar
et al., 2008). Results of Paik and Bagchi (2007) illustrated the demand forecast updating, level
of echelons, and price variations as the most important factors affecting BE. Also, AdensoDiaz et al. (2012) identified stock and WIP adjustment controllers, the sharing of information
among the links, and the final customer demand variability, along with forecasting method,
as the main factors of BE. Considering these findings, it seems that a strategic viewpoint
regarding how to adjust the above mentioned factors is a key decision in the phase of supply
chain design. The strategic viewpoint decisions greatly effect on determination of operational
capabilities as a major tool to control BE.
Porter (1998) suggested that the strategy is meant to create a unique and valuable position that includes a set of actions. In a supply chain, the vital part of the strategy is to create
a balance between its different measures. A policy might only succeed when various activities are integrated and coordinated with each other, or better, improve and strengthen each
other. So supply chain management is not a strategy in itself but should be part of the supply
chain strategy, and this strategy is also part of the business (organization) strategy (Stadtler
& Kilger, 2005).
In past studies, several strategies were provided for supply chain, which can generally be
divided into two categories: responsive or agile supply chain strategies, and efficient or lean
supply chain strategies (Fisher, 1997). Current studies emphasize importance of green supply
chain management (e.g. Chatterjee et al., 2018; Liou et al., 2016; Khaksar et al., 2016; Bai &
Sarkis, 2018), sustainable supply chain management with reverse logistics (e.g. KeshavarzGhorabaee et al., 2017; Kianpuor et al., 2017). Some of the studies integrate innovative management techniques, including application of Internet of Things (e.g. Pishdar et al., 2018),
and, intelligent and advanced decision support systems (e.g. Yazdani et al., 2017; Amoozad
Mahdiraji et al., 2018).
In this study, it is sought to focus on efficient supply chain strategies due to the increasing
need for organizations to enhance efficiency and reduce costs in the country. In this regard,
the past researches and results are examined to recognize the variables that affect the application of this type of supply chain strategies, while evaluating their effects on the supply
Technological and Economic Development of Economy, 2020, 26(4): 947–969 949
chain performance of the industrial tile and ceramic producers association of Iran. Application of information technology for management of suppliers and consumers, relationship
management for suppliers and consumers, support and commitment of senior management
and internal cohesion are factors that have been considered in this study. To achieve this
aim, structural equation modeling (SEM) methodology is used to investigate the relation
among identified variables. SEM is a well-known and widely used method in different fields,
e.g. marketing and consumer research (Baumgartner & Homburg, 1996), psychological research (MacCallum & Austin, 2000), strategic management (Hair et al., 2012), construction
research (Xiong et al., 2015), tourism research (do Valle & Assaker, 2016), ecological studies
(Fan et al., 2016), human resource management research (Ringle et al., 2020), and hospitality
research (Ali et al., 2018).
1. Theoretical background
Supply chain management has originated and flourished in the manufacturing industry (Ju
et al., 2017). Global Supply Chain Forum (GSCF), consisting of a group of academic researchers and several non-competing organizations, aiming to promote the concept of supply
chain management and its application, defined the supply chain management as an integrated
fundamental business procedure which starts from the producers who provide the services,
products and information and finishes with creating more added value for end consumers
(Lambert & Cooper, 2000).
In the APICS dictionary (APICS, 2016), the term “supply chain” is defined as a set involving all processes that connect producing firms and consumers. These processes start
with supplying the raw materials and finish with final product delivery to the end consumer.
Along with that, “supply chain” is translated as a collection of organization’s internal and
external activities to allow the value chain to provide services and products for clients (Cox
et al., 1995).
Other research suggests that this phenomenon is a set of activities which creates added
value about the organization’s suppliers and consumers. Receiving input from producers of
the organization, adding value and delivering it to consumers are major activities of a supply
chain (Simchi-Levi et al., 2004).
Definitions and observations from the organizations and industries that are working together emphasize a common fact that the supply chain shouldn’t be considered as a single
isolated process. Most efforts in the supply chain were doomed to failure, just because they
considered a unilateral view-either from producer’s side or from supplier’s side- in the business. So, as it has been emphasized by researchers in this field, “Supply chain and its management” is more of a process than a single event.
1.1. Supply chain strategies
Fisher (1997) explained that consideration of the type of the demand for products of a company is the initial step in enhancing supply chain strategies. In this regard, he has divided
the products into two categories of innovative and functional products.
950 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
The functional products are characterized by such attributes as the ability to predict the
demand, the life cycle of more than a year and a profit margin of 5 to 20 percent. Further,
the diversity and expansion of such products are low, while there are less than 10 to 20 different classifications for each one. Besides, the time of order, completion of the product and
its delivery to the end consumer is from 6 months to a year.
In contrast, innovative products don’t enjoy the ability to predict demand (and/or such
prediction is of high uncertainty). Their life cycle is between 3 months to a year, while the
profit margin is between 20 and 60 percent. However, this category of products has high
diversity and expansion (often there are millions of different classifications in each product
group). Additionally, the time of the order, completing the product and its delivery to the
end consumer is from one day to two weeks (Fisher, 1997). In his recent study, Fisher (1997)
reported two different strategies, one for each of the above categories. He proposed the efficient supply chain strategy for practical products and responsive supply chain strategy for
the novel products.
Recently, literature on supply chain strategies has evolved; observations on strategies by
different authors are provided in Table 1. They include supply chain integration, relationship
management, use of information technologies (IT), information and communication technologies (ICT), top management commitment and other measures. The conceptual model,
Figure 2, examined the relationships of variables with supply chain performance that are
listed in the first column of Table 1. In fact, the constructs of the model in Figure 2 are obtained by reviewing the subjects of previous studies.
Table 1. Literature review
Subject Researchers Findings
The strategic nature of adopting a supply chain wide perspective,
on the one hand produces significant potential advantage, and on
the other needs trading partners to think and act strategically. This
is easier said than done within a stand-alone firm, let al.ne across
various and dispersed group of trading partners.
Supply chain collaboration has an important impact on organization’s
performance in terms of exchange of diverse resources and a powerful
joint decision making between collaborators. Also the main issue
for participants is awareness of the facilitators to supply chain
Adaptability between supply chain partners’ technological systems, as
well as cultural and operational values, increase supply chain process
integration. Also supply chain capabilities mediate the relationship
between supply chain process integration and organizational
Zhao et al.
Internal integration and relationship obligation to clients and
suppliers have simultaneous effect on external integration with clients
and suppliers. Organizations must first expand internal integration
abilities through system, data and process-integration, and then they
can engage in significant external integration.
Technological and Economic Development of Economy, 2020, 26(4): 947–969 951
Subject Researchers Findings
Internal integration enhances external integration and the
organization performance is improved by the internal and external
integration directly and indirectly. Also there is the mediating effect
between supply chain integration and the organization performance.
Lee et al.
The main contributor for cost control is internal integration while the
best policy to reach supply chain reliable performance is integration
with the supplier.
Goffin et al.
Manufacturers can decrease costs, enhance quality and enrich new
product development, if they have close relationships with selected
et al. (2008)
Authors have proposed an innovative conceptual model that
improved relationship assessment process. The model determines a
range of network impacts, divided into impacts of sub-suppliers, other
suppliers, indirect or end customers, and other customers.
et al. (2014)
There is relationship between supplier relationship management and
competitive performance. Two components of supplier relationship
management, namely, supplier partnership development and supplier
lead significantly to time reduction and positively influence the
Company’s customer tendency and supply-base tendency are
supplementary strategic assets that contribute to better performance.
et al. (2014)
The supply chain performance concentrates mainly on operational
and economic performance measures while paying less attention to
relational and strategic performance measures. A complete framework
of supply chain performance measures has to include four main
dimensions: relational, operational, strategic and economic.
flow in supply
Akcay et al.
Accessing the required information in the supply chain is critical for
minimizing costly reworks and delays.
Han et al.
Tree types of IT flexibility, namely, operational, transactional, and
strategic and their effects on firm performance are considered in the
research model. The finding shows that transactional and operational
IT flexibility are first order ingredients that impact organization
performance indirectly. In contrast, strategic IT flexibility is identified
as a second-order ingredient having a direct effect on organization
Wu et al.
IT-enabled supply chain abilities are firm-specific and hard-to-copy
across companies. These abilities can serve as a catalyst in converting
IT-related resources into higher value for a company.
The practical conclusions show the critical role of IT applications and
methods on the establishment of a stable competitive advantage based
on supply chain management.
Colin et al.
The strategies and ICT have an effect on the performance of the
supply chain management. The use of ICT enables the managing of
information materials and ignores the delays that lead to reduce the
costs and improve customer satisfaction.
Continue of Table 1
952 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
Subject Researchers Findings
The impact of a supply chain’s IT architecture on supply chain
potentials and the effects of lean and agile supply chain strategies
are investigated. The results show that organizations which have
various supply chain strategies concentrate on various aspects of IT
architectures. Also supply chain capacity is a facilitator to improve
supply chain performance by means of appropriate supply chain IT.
The information technology abilities and information sharing have
significant influence on logistics integration. Also logistics integration
has significant influence on operations function.
Huo et al.
Supply chain coordination mediates the relationship commitment
and information technology and impact on supply chain performance
from a resource synergy view.
Managers are only committed to a successful implementation if they
find themselves having enough penalties associated with a failed
implementation. Only when they realize that there exists side-bets
and penalties of enough magnitude, their commitment will be
consistent and the implementation successful.
et al. (2019)
Top management commitment mediates the influence of external
force on supplier relationship management positively.
Sukati et al.
There is a significant relationship between supply chain management
practices and supply chain performance and supply chain
management performance is weakly predicted by supply chain
Supply chain flexibility is an important operations strategy dimension
for organizations to achieve and maintain competitive advantage.
Liu et al.
Coordinated replenishment and delivery (CRD) with respect to
quantity discount and resource constraints is more practical for
joint purchasing and inventory decision. A Hybrid Tabu search
algorithm is used to obtain satisfactory answers for model. Results
show the resource constraints significantly weaken the effects of
quantity discount strategy, especially for large-scale problems.
Moreover, constraints in the coordinated stage are more sensitive than
constraints in the delivery stage.
Review of previous research in the area of supply chain strategies shows that there is no
study in which internal integration, relationship management, information technology, and
top management support are considered as a component of efficient supply chain strategy.
Internal integration that has a positive impact on organizational performance has been studied in several researches (Zhao et al., 2011; Lee et al., 2007). Customer relationship management (Ziggers & Henseler, 2016) and supplier relationship management (Goffin et al.,
2006; Johnsen et al., 2008; Al-Abdallah et al., 2014) have also been considered because they
improve the performance of efficient supply chain. Prior research has also claimed that IT is
End of Table 1
Technological and Economic Development of Economy, 2020, 26(4): 947–969 953
associated with an increase in overall efficiency (Lillrank, 2003). Also, IT affects the performance of supply chain management (Colin et al., 2015). Top management contributes to the
integration of information sharing into an overall organizational business strategy and thus
provides vision, guidance, and support for the efficient implementation of SCM (Wu et al.,
2004; Li & Lin, 2006). This study for the first time introduces a framework to examine these
factors as components of the efficient supply chain strategy and examines the impact of these
factors as well as the efficient supply chain strategy on supply chain performance.
1.2. Implementation of efficient supply chain strategy
and supply chain performance
The nature of efficient supply chain strategy is based on the removal of additional activities,
utilizing the advanced and developed technologies and minimizing the amount of inventory.
Qrunfleh and Tarafdar (2014) also admitted in their studies that the supply chain strategy
enables removing excess inventory, improving quality and reducing costs in different sectors
to improve the performance. So, it is expected that it will result in an increased level of efficiency, providing better performance of supply chain (Qrunfleh & Tarafdar, 2014). The main
hypothesis of the research is explained as follows:
The main hypothesis: Implementation of efficient supply chain strategy is positively related
to supply chain performance.
To test this hypothesis, by investigating past research, the factors affecting the implementation of efficient supply chain strategy were discussed. The factors and sub-hypotheses
associated with them are:
1. The application of information technology to manage suppliers and consumers:
Information technology involves the computers as well as digital communication tools associated with them, which are able to significantly reduce the costs of communication and
information processes (Brynjolfsson & Hitt, 2000).
Information technology-related needs should be aligned with the business context, and
the fit between these needs and capabilities of information technology provides for improved
performance of the supply chain (Huo et al., 2015). In this study, to better understand the
investments made in its upstream and downstream flows, information technology is divided
into two categories: for suppliers, and for consumers.
Sub-hypothesis H1: The use of information technology is positively related to supply chain
2. Relationship management with suppliers and consumers
“Supplier Relationship Management” (SRM) is strategic planning and managing of all interactions with suppliers to maximize its value” (Singh et al., 2017). It also seeks new suppliers
to reduce costs, predict procurement more frequently and share information, to achieve other
benefits through communicating with them.
The customer relationship is a process, in which the organization receives information
about their business from the customers, and uses it as a means to be responsive to their needs,
while trying to achieve a deep understanding of their demands (Ziggers & Hensler, 2016).
954 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
Effective relationship with suppliers and customers enables the entire supply chain to
be flexible toward market needs, which are ever changing, and give adequate response. At
the same time, employees at various levels within the organization of producer and supplier
might provide different suggestions to continually improve and evaluate them, and receive
the feedbacks as well as the required information from customers and suppliers for decisionmaking. The results of such studies demonstrated that why the relationship between people,
groups and organizations involved in supply chain is critical and necessary for its performance (Chin et al., 2004).
Sub-hypothesis H2: The relationship management is positively related to performance of supply chain.
3. Internal integration
The term “integration” has been cited frequently in relation to the concept of supply chain
in past studies, and specifically, is raised as a new view in the business strategy associated
with supply chain to create sustainable competitive advantage (Kannan & Tan, 2010). Other
researchers acknowledged that internal integration cohesion is referred to the extent that an
organization is able to make its activities, trends and behaviors as participatory, coordinated
and manageable processes to supply needs of its consumers and, mainly, involves cohesion in
the information systems and data bases. In fact, it determines that different activities within
an organization shouldn’t set individually, but as part of an integrated process (Zhao et al.,
Sub-hypothesis H3: Internal cohesion is positively related to performance of supply chain.
4. The support and commitment of senior management
Calhoun (2009) defined “commitment” as the purpose and intent to use of time and energy
in order to achieve a goal. The support of senior management involves the integration of
information shared within the organization, and developing a vision, guidance and support
for effective implementation of supply chain management (Youn et al., 2013).
Sub-hypothesis H4: The support and commitment of senior management is positively related
to performance of supply chain.
2. Research methods
To test these hypotheses an empirical study was conducted. Figure 1 shows the research
An empirical study was conducted to empirically validate the model. The study focused on
supply chain management departments in Iranian’s tile and ceramic factories. Empirical evidence was drawn from a sample which consisted of 66 top and middle managers in tile and
ceramic factories, chosen by random sampling through Cochran’s formula.
Based on the relevant literature and research framework, a questionnaire was designed to
measure relationships of variables; including 30 items (see Appendix).
Technological and Economic Development of Economy, 2020, 26(4): 947–969 955
The supplier relationship management was measured using 10 items with a measurement
scale proposed by Johnsen et al. (2008). To measure customer relationship management,
authors have adopted the measurement with five items from Ziggers and Henseler (2016).
Internal integration was measured using three items with a measurement scale proposed
by Prajogo and Olhager (2012). Information technology was assessed using five items from
Huo et al. (2015) and finally top management support and commitment was assessed using
four items from Nektarios (2015). A 5-point Likert scale was used: “1” for “too little” and
“5” for “too much”. However, according to negative aspects of two items relating to supply
Figure 1. Research process flowchart
Select the questionnaire to measure the variables
Checking the questionnaire’s validity and reliability
• Construct validity with loading factor and T-value (aer data gathering)
• Convergent validity with AVE (after data gathering)
• Discriminate validity with Fornell & Lorker test (after data gathering)
• Composite reliability (aer data gathering)
• Communality reliability (aer data gathering)
Chose the sample by random sampling through Cochran’s formula
Designing the conceptual model based on Literature review
Data analysis with SEM
Checking the questionnaire’s validity and reliability
• Content validity with CVR & CVI
• Reliability with Cronbach’s alpha
956 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
chain performance, the items were analyzed in reverse manner: when the respondents answered “too little”, answer was considered as “too much” and vice versa. Also, four items are
related to demographic information about respondents. The demographic information about
respondents is shown in Table 1A of the Appendix.
2.2. Validity and reliability of questionnaire
The content validity was estimated in two steps. First, two academicians and five practitioners reviewed the questions to make judgments on clearness and appropriateness. For the
pilot study, researchers adopted the items based on their feedback. In second step, validity of questionnaire was evaluated through content validity ratio (CVR) and content validity index (CVI). In this stage, five supply chain experts were asked to answer the prepared
questionnaire-shown in Appendix-and express their opinions about the items of designed
questionnaire. In case of five experts, acceptable values for CVR and CVI are 0.99 (Lawshe,
1975), and 0.79 (Waltz & Bausell, 1983), respectively. Following equations were utilized to
evaluate the indexes: / 2
n N CVR
− = . (1)
In above equation, n is related to number of experts that selected “useful” for questionnaire items and N is the number of all experts, who were five in this research.
= . (2)
In above equation, n is related to number of experts that selected “clear” and “very clear”
for questionnaire items and N is the number of all experts. CVR and CVI values for all questionnaire items were confirmed. Detailed information on acceptable CVR and CVI values is
provided in Table 2A of the Appendix.
Before actual data gathering, 20 senior managers completed the questionnaire to test its
reliability. The value of Cronbach’s alpha showed that the reliability was acceptable. Composite Reliability (CR) also was used to evaluate the reliability of measurement model. Obtained
values for both these indexes should be greater than 0.7; however, Moss et al. (1998) stated
that for constructs with few items, Cronbach’s alpha could be more than 0.6 (see Table 2).
2.3. Data analysis approaches
Structural equation modeling (SEM) using SmartPLS software was used due to (a) small sample size (b) not being sensitive to non-normal data and (c) inclusion of composite constructs
to examine the research assumptions. Descriptive characteristics of variables are shown in
Measurement (outer) Model Analysis. The initial phase in data analysis was estimation of
the measurement model. Validity and reliability of measurement model (outer model) were
examined for this purpose.
Convergent validity. To evaluate convergent validity, Average Variance Extracted (AVE)
was used. AVE equal to or more than 0.5 shows high convergent validity (Fornell & Larker,
1981). Values of AVE shown in Table 2 confirmed adequate validity of latent variables.
Technological and Economic Development of Economy, 2020, 26(4): 947–969 957
Table 2. Validity and reliability measures
Construct Item Factor
loading Mean CR Cronbach’s α AVE > 0.5
Common goals with suppliers 0.519
3.29 0.913 0.893 0.518
What is the extent of ignorance
of organizational goals to
improve the supplier’s positive
What is the expanse of discord
over e.g. nature of orders or
How often your organization
managers meet face-to-face with
What is the extent of employee
partnership in relationship with
What is the extent of influence
on supplier’s decision? 0.828
What is the extent of reliance
on supplier’s technology or
What is the extent of ability
to persuade suppliers to do
something they do not want to
What is the extent of confidence
that suppliers adhere to perform
What is the extent of confidence
that suppliers have competence
to produce what contract
Anticipation & respond to
customer’s needs 0.637
3.62 0.840 0.759 0.517
Assessment of formal &
informal customer’s complaints 0.764
Follow up with customers for
quality/service feedback 0.846
Reflection of customer focus in
business planning 0.751
Interact with customer to set
reliability responsiveness &
The level of information
exchange with major supplier
through the information
0.865 3.2 0.843 0.723 0.645
958 M. Daneshvar et al. Effective factors of implementing efficient supply chain strategy on supply chain …
Construct Item Factor
loading Mean CR Cronbach’s α AVE > 0.5
The foundation of a fast
ordering system with main
Stable procurement through the
network with main supplier 0.864
The level of linkage with
major customers through the
3.56 0.888 0.750 0.799
The level of computerization for
major customers’ orders
Top managers play an effective
role in coordination between
supply chain partners
3.48 0.821 0.709 0.539
Top managers consult with
each other to select supply chain
Top managers play an effective
role in conflict management on
Top managers support
coordination among supply
Inter organizational logistic
activities are closely coordinated 0.702
3.16 0.837 0.708 0.633
Organizational logistic activities
are well integrated with
integration is characterized
by excellent distribution,
transportation and warehousing
The percentage of deviation
from budget 0.709
3.4 0.803 0.635 0.582 Ratio of operation cost to prime
Ratio of net profit to production
Discriminant validity. The rate of distinguishing a concept of a particular latent variable
from a concept of other latent variables is known as discriminant validity. For each construct,
Square root of the AVE should be greater than the correlation between the construct and
other constructs of the model. All constructs in the model have proper discriminant validity
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