Purpose – The purpose of this paper is to give some theoretical suggestions and practical approaches in support of the implementation of “cluster supply chain” (CSC), which is a new management paradigm and enhances the competitiveness of small and medium enterprises (SMEs) through integrating the advantages of supply chain and industrial cluster. Design/methodology/approach – A case study of cluster supply chain is carried out applied to JingCheng Mechanical and Electrical Holding Co. Ltd ( JCH), which explains the advantages and challenges of implementing the new business pattern. Data presented and analyzed include pre-CSC and CSC performance of participants. Findings – The paper clarifies the following questions: When do small firms use cluster supply chain to run a business? How do small firms use cluster supply chain? What effects does the application of CSC strategy have on SMEs’ competitive performance? Practical implications – The application of CSC strategy can help SMEs to face the global challenges through all kinds of collaborations. Meanwhile, core enterprises can also extend their business at a lower cost by means of this business pattern. Originality/value – This paper bridges the gap between academic theoretical studies and practical realization through the case study of JCH, which can encourage and lead to managerial ideas and insights to service system realization and avoid deficient or erroneous grounds in the planning, implementation and evaluation of cluster supply chain.