Paradigm of modern business era has changed completely that competition is no longer between companies rather it is between supply chains. However, Ethiopian firms are not sufficiently getting the benefits of SCM due to lack of the practice of integration, collaboration and not having willingness and the practice of managing supply chains. Developing long term strategic partnership with a few competent & innovative suppliers, collaborate with them in non- core process out sourcing enable the organizations to improve over all organizational performance and generate sustainable competitive advantage. The objective of this study was to examine the effects of SRM practices on organization performance and competitive advantage of large manufacturing companies in Bahir Dar. The positivist research paradigm and deductive research approach with explanatory research design was employed. The target population were classified in to five strata based on departments. After classification of target population in to strata, Yamane’s sample size determination formula was used to determine the exact sample size and the sample size was proportionally distributed to each departments. A total of 171 qualified questionnaires were used for the data analysis. SEM with AMOS version 23 was used to examine the effects of SRM practices on organization performance and competitive advantage. The result showed that SRM practices positively and significantly affects organization performance and competitive advantages of large manufacturing companies in Bahir Dar. Also, competitive advantage positively affects performance of manufacturing companies. Therefore, the managerial implication of the study for manufacturing companies that SRM is an effective way of competing, and the implementation of SRM practices enhance competitive advantage and improve performance of manufacturing companies.