Erl inda Yunus

FORUM KAJIAN PENGEMBANGAN

22 Januari 2013

DRIVERS OF

SUPPLY CHAIN INTEGRATION: EMPIRICAL EVIDENCE FROM INDONESIA

INTRODUCTION

Research gaps and research questions

THEORY DEVELOPMENT

Research model and hypotheses

METHODOLOGY

RESULTS

DISCUSSION

Implications for research

Implications for practice

Limitations and suggestions

Contributions

OUTLINE

INTRODUCTION

The importance of supply chain management practices in

today‟s business ( Lee , 2002 ; Anderson & Narus , 1990 ; Chr i s t opher, 1997 ; S imch i -Lev i e t

a l . 2002) .

0

50

100

150

200

250

300

1991-19931994-1996

1997-19992000-2002

2003-20052006-2008

10 19 42

87

175

255

Figure 1. Total Number of SCM Articles (13 Journals)

Adapted from Jain et al. (2010)

Improved performance (e.g., Droge et al., 2004; Flynn et al., 2010)

Mixed findings (Fabbe-Costes & Jahre, 2008): need a clear definition,

valid measures, and other contextual factors

Drivers of Supply Chain Integration (SCI):

Increasing global competition (Lummus & Vokurka, 1999; Handfield &

Nichols, 1999)

Demand changes, supply uncertainties, technological

changes (Mentzer et al., 2000; Afuah, 2001; Chen & Paulraj, 2004)

Opportunity of new markets (Frohlich & Westbrook, 2002)

Internal motivation?

Supply chain management practices in developing countries?

INTRODUCTION

Research Gaps

RQ1: To what extent do manufacturing firms integrate with

their supply chain members?

RQ2: To what extent firms‟ integration with supply chain

members improve their performance?

RQ3: To what extent do firms‟ external drivers trigger the

integration with supply chain members?

RQ4: To what extent do firms‟ internal drivers trigger the

integration with supply chain members?

INTRODUCTION

Research Questions

Definition of Supply Chain Integration (SCI)

The interrelationship among “the departments, functions, or

business units within the firm that „source‟, „make‟, and „deliver‟

products” and the external relationships “with entities outside the

enterprise, including the network of direct suppliers and their

suppliers and direct customers and their customers” (Rosenzweig, 2003)

Scope of SCI (Naras imhan & K im , 2002 ; Campbe l l & Sankaran , 2005 ; F l ynn e t a l . , 2010 ;

Zhao e t a l . , 2010) :

Internal Integration

Supplier Integration

Customer Integration

A focal firm as an appropriate unit of analysis (F ranke l e t a l . , 2008)

SCI: measures the degree of integration that a focal firm pursues

with its supply chain partners.

THEORY DEVELOPMENT SUPPLY CHAIN INTEGRATION

THEORY DEVELOPMENT RESEARCH FRAMEWORK

External Drivers Supply

Uncertainty

Demand

Uncertainty

Technology

Uncertainty

Supply Chain

Integration

Customer

Integration

Internal

Integration

Supplier

Integration Internal Drivers

Customer

Orientation

Anticipation of

Benefits

Firm

Performance

H2a +

H1a,1b

+

Business

Performance

Operational

Performance

H2b +

H2c +

H3a +

H3b +

METHODOLOGY SAMPLE - INSTRUMENT

Sample Indonesian-based manufacturing firms (2010 Kompas Directory &

PPM Database)

Two informants from each firm

Senior managers in Supply Chain/Logistics > Internal drivers and SCI

Senior managers in Marketing/Finance > External drivers, Firm performance

N=223 out of 813 firms (160 invalid contact info) – 34.15% response rate

Profile

20.6% owner or top management (e.g., CEO) and 48.7% senior managers

34.8% 1-5 years with the company; 26.2% 5-10 years, 30.7% more than 10 years

Instrument Translated into B. Indonesia and back translated into English

External Drivers 5-pt Likert scale (1=“strongly disagree” and 5=“strongly agree”)

Supply Uncertainty (SU)

Demand Uncertainty (DU)

Technology Uncertainty (TU)

4 items

5 items

4 items

Chen and Paulraj (2004)

Internal Drivers (new measure) 5-pt Likert scale (1=“strongly disagree” and 5=“strongly agree”)

Anticipation of Benefits (AB)

Customer Orientation (CO)

5 items

3 items

Lummus & Vokurka, 1999; Frohlich & Westbrook, 2002

Chen & Paulraj, 2004; Kaynak & Hartley, 2008;

Lockström et al., 2010

Supply Chain Integration 5-pt Likert scale (1=“not at all” and 5=“extensive”)

Customer Integration (CI)

Supplier Integration (SI)

Internal Integration (II)

6 items

6 items

8 items

Flynn et al. (2010)

METHODOLOGY INSTRUMENT DEVELOPMENT

Firm Performance 5-pt Likert scale (1=“strongly disagree” and 5=“strongly agree”)

Operational Performance (OP)

Business Performance (BP)

6 items

4 items

Flynn et al. (2010)

DATA

COLLECTIO

N &

ANALYSIS

PROCEDURE

Literature review

& interview with

2 VPs of SCM

Initial Instrument

for Internal

Drivers

Pilot-test using 61

practitioners

Establishing

content validity

Testing for

reliability &

construct validity

Refinement

Data collection

with full

questionnaire

Test for internal

consistency using

Cronbach’s alpha

Test for uni-

dimensionality &

validity using CFA

Testing for

criterion-related

validity

Pre-test with

academicians and

SCM practitioners

Establishing

content validity

METHODOLOGY EXPLORATORY FACTOR ANALYSIS

EFA for the new scale: Internal drivers

RESULTS MEASUREMENT RELATED

RESULTS MEASUREMENT RELATED

Test for normality and multicollinearity

Test for normality using skewness-kurtosis statistics and Histogram

Test for multicollinearity using Tolerance (>.20) and VIF (<4.0)

All VIF values were below 4.0 except for SCI14 (VIF = 5.196) and SCI15 (VIF = 4.735)

Test for non-response bias

Split data: Oct-Dec 2011 (n1=89) and Jan-Feb 2012 (n2=134)

Using simple t-test for all constructs > all values were insignificant, except for Technology Uncertainty and Firm Age constructs

Test for common method variances

Harman‟s single factor test using EFA (Podsakoff et al., 2003):

11 factors explaining 70.85% of the variance (first factor = 23.89%)

CFA (Byrne, 1998; Hu & Bentler, 1999) showed a poor fit

(χ2(1034) = 5102.15, CFI = .77, GFI = .43, normed fit index or NFI = .73,

NNFI = .76, and RMSEA = .160)

RESULTS MEASUREMENT RELATED

Unidimensionality: Goodness-of-fit indices

RELIABILITY

AND

CONVERGENT

VALIDITY

Ext

ern

al d

rive

rs

Inte

rna

l d

rive

rs

Fir

m p

erf

orm

an

ce

RELIABILITY

AND

CONVERGENT

VALIDITY

(contd.)

Supply chain integration

RESULTS MEASUREMENT RELATED

Discriminant validity analysis

RESULTS MEASUREMENT RELATED

Second-order construct analysis for supply chain integration (SCI)

Supply

Chain

Integration

Customer

Integration

Supplier

Integration

Internal

Integration

RESULTS RESEARCH-QUESTION RELATED

1.00

2.00

3.00

4.00

5.00

Customer

Integration

Supplier

Integration

Internal

Integration

3.72 3.63 3.58

3.80 3.67

3.75

RQ1 - The Extent of SCI and a Comparison

223 Indonesia Mfg Firms (2011-2012)

151 Thailand Mfg Firms (Wong et al., 2011)

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Customer Integration Supplier Integration Internal Integration

5.21 5.08 5.02

5.32 5.14

5.25

4.26

3.51

4.05

5.58

4.82

5.43

5.09

4.88

5.47 5.36 5.16

5.49

The Extent of SCI

223 Indonesia Mfg Firms (2011-2012)

151 Thailand Mfg Firms (Wong et al., 2011)

617 China Mfg firms (Flynn et al.,2010; Zhao et al., 2011)

57 US Automotive-Parts Firms (Vickery et al., 2003)

244 Korean Mfg Firms (Narasimhan & Kim, 2002)

379 Japan Mfg Firms (Narasimhan & Kim, 2002)

RESULTS HYPOTHESES TESTING – RQ2-4

Model fit: χ2(487) = 678.49, χ2/df = 1.39, CFI = .97, NFI = .90, GFI = .85, NNFI = .96, RMSEA = .042

Supply

chain

integration

Supply

uncertainty

Demand

uncertainty

Technology

uncertainty

Anticipation

of benefits

Customer

orientation

-1.56

Operational

performance

Business

performance

1.16

6.69**

2.24*

2.83**

Firm

size

Firm

age

Control Variables

2.14* .90

-0.87

0.57

SUMMARY OF RESULTS

External Drivers Supply

Uncertainty

Demand

Uncertainty

Technology

Uncertainty

Supply Chain

Integration

Customer

Integration

Internal

Integration

Supplier

Integration Internal Drivers

Customer

Orientation

Anticipation of

Benefits

Firm

Performance

H2a

H1a,1b

Business

Performance

Operational

Performance

H2b

H2c

H3a

H3b

RESULTS FOLLOW-UP ANALYSIS

Hierarchical regression results for dimensions of SCI

DU

AB

SU

TU

CO

CI

SI

II

DU

AB

SU

TU

CO

CI

SI

II

DU

AB

SU

TU

CO

CI

SI

II

DISCUSSION

The findings supported previous studies related to the posit ive

relat ionship between supply chain integration and f irm performance ( e . g . , D roge e t a l . , 2004 ; F l ynn e t a l . , 2010 ; Germa in e t a l . , 2008 ; Wong e t a l . , 2011)

It investigated SCI in a developing country.

Insignificant external influences on SCI

Indonesia as a moderate-economy growth

2008: Indonesia=28% manufacturing share of GDP; China=34% (WB, 2010).

2000-2008: Indonesia‟s manufacturing sector grew 4.9% annually; China‟s

grew 11.6% annually (WB, 2010).

2011 (est.): Indonesia=3.50% annual industrial production growth;

China=13.90% (The World Factbook, 2011).

Liu et al. (2010): coercive power significantly influenced e-SCM adoption.

Type of industry

DISCUSSION

Follow -up analysis

Demand uncertainty and technology uncertainty induce internal integration

Implications for practice

Through SCI firms could improve their operational and business

performances.

Close collaboration to perform logistics synchronization, information sharing,

incentive alignment, and collective learning.

Internal integration: remove silo mentality, close coordination among units.

DISCUSSION

Limitations and suggestions for future research

Cross-sectional study: SCI practices and performance were measured

at the same time.

Future research: incorporate time lag or use longitudinal study.

Perceptual measure for firm performance: using multiple items and

two informants.

Future research: triangulates results with objective data and different

methods.

The context of the study: manufacturing firms in Indonesia.

Future research: compares and contrasts findings from different countries

and different types of industry.

DISCUSSION

This study brings a different perspective of supply chain

integration as it provides evidence from a developing country.

This study extends the examination of integration

antecedents by investigating firm‟s external and internal

drivers.

This study contributes to the OM literature by providing a

new measure, that is, internal drivers, which was tested and

validated using a rigorous process (Church i l l , 1979 ; Ma lho t ra & G rove r,

1998 ; L i e t a l . , 2005) .

CONTRIBUTIONS

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