GSGM 7263 OPERATIONS MANAGEMENT

AND STRATEGY INDIVIDUAL ASSIGNMENT – ARTICLE REVIEW

The Impact of Supply Chain Integration on Operational Capability in Malaysian Manufacturers

Name: ONG MAY LING Matrix No.: ST1409MD0020 Section : 20

GSGM 7263 OPERATIONS MANAGEMENT AND STRATEGY

2015

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Article Review

The article discuss on the effect of supply chain integration (SCI) on operation capability from 201 Malaysian small- and medium-sized manufacturers (SMM) and rigorous structural equation modeling methods. Supply chain management (SCM) is a holistic approach to demand, sourcing and procurement, production and logistics process management (Chow, Madu, Kuei, Lu, Lin, & Tseng, 2008). It is a network consisting of all parties involved both downstream and upstream, directly or indirectly for manufacturing and delivering a product or service to the end customers (Mentzer, Dewitt, & Keebler, 2001). SCM practices in SMMs are relevant to operational performance and have an indirect relationship between SCM and firm performance. The SCI plays an important role in determining organizational performance. SCI requires a collaborative effort among suppliers, cross-functional departments and customers that are linked and coordinated by the flow of processes and information (Boon-itt & Wong, 2011). In Malaysia, SMEs have the potential to be a powerful engine for growth and innovations which contribute to the increase of Gross Domestic Product (GDP) at 6.8% comparable with the overall economy 5.1% in year 2001 and total employment of the country. (SME Annual Report (2011/12)) The hypothesized model linking the relationship between SCI and operational capability mainly grounded within the resources-based view (RBV) and network perspective theory to explain firm-specific and relational capabilities. Two research questions surround the theoretical framework in the research. Which kind of SCI practices does SMMs need and which specific kinds of operational capability are being practiced by SMMs? The important kind of SCI practices needed by SMMs to achieve enhance operational capability are supplier management (SM), customer relationship (CR), manufacturing participation in strategy (MPS) and inventory control (IC) (Tracey, Fite, & Sutton , 2004). Whereas for operational capabilities, the potential sources of competitive advantage are cooperation and reconfiguration. The relationship between SCI and operational capability is grounded on network perspective theory. They have been found to lead significantly to operational performance which influences the abilities of a firm to compete in the market. The hypothesis develops that SCI is positively related to operational performance. A questionnaire was mailed and hand delivered to the target respondent sought was primarily Chief Executive Officer (CEO), Managing Director, owner of the firms or senior officer/executive in charge of supply chain practice in the firm listed in SME Corporation Malaysia official website. Total of 19 questions were used to measure the construct of SCI: SM, CR, MPS and IC. The construct of OC was operationalized and by measuring the item including the new and better practice adoptions, resources reconfigurations and knowledge/ competence development to respond to market changes were used to measure OR. The questionnaire were based on a 5-point Likert scale ranging from 1 (strongly disagree) to 5 (strongly agree). The profile of respondent are from the industry group of food product & beverage, chemical, petrochemical & polymer, metal & other non-metallic mineral products, machinery, equipment & instruments, furniture & wood-based products and others. The data analysis and research findings are based on exploratory factor analysis (EFA) used to assess construct validity of SCI and operational capability. Bartlett’s test of sphericity and Kaiser-Meyer- Olkin (KMO) measured the sampling adequacy. The data collected were worthy of factor analysis. All factors were acceptable and indicated evidence of reliability based on Cronbach’s alpha values. Structural equation modelling (SEM) was used to test the hypothesized full structural model. The result provides adequate support showing that the sub-constructs of SCI are positively related to operational capability.

GSGM 7263 OPERATIONS MANAGEMENT AND STRATEGY

2015

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The finding implication for academic and theory building result that the extends previous supply chain practice framework is different key dimension of SCI practice among countries, where in Malaysian manufacturing SMMs should consider customer integration, supplier integration and internal functions in combination. The study is the first paper to examine the relationship between SCI and operational capabilities using SEM method which show a positive relationship that stress the role of learning in implementing supply chain practice over time in addition helps firm to develop capabilities that are hard to intimate and create value. As theoretical implication for academic, managers and practitioners, the finding provide useful tools to evaluate current supply chain practices and recommend simple but effective and efficient practices to perform vitally important supply chain function aimed at enhancing operational capabilities. Manager can suggest to the company in investing only the capability to develop a competitive differentiation strategy for sustainable performance based on the general overview of the implementation of suitable combined effect of SCI practice for enhancing operational capabilities. I strongly agree that the studies contribute to both practical and theoretical knowledge but with several limitation factors such as the sample population were narrowly focused in Malaysia SMMs in several location and not whole Malaysia manufacturing industry. A large sample needed to be empirically tested in order to obtain result which can be generalized. It would be great importance to include more manufacturing companies for clearer representation of full picture of Malaysia’s manufacturing industry. A number of respondents from each participating firm to be collected for to increase the reliability of the research, since only one respondent from each firm collected for this study. Other factors of supply chain practice and operational capabilities are required for future research. The future research need to study the impact of business environment risks and the SCM domino effect on the performance of the organization and determine the effective use of SCM Analytics Framework by the SCM practitioners.

Bibliography Boon-itt, S., & Wong, C. (2011). The Moderating effect of technological and demand uncertainities

on the relationship between supply chain intergarion and customer delivery performance. . International Journal of Physical Distribution & Logistics Management, 41(3), 253-276.

Chow, W., Madu, C., Kuei, C.-H., Lu, M., Lin, C., & Tseng, H. (2008). Supply chain management in the US and Taiwan: An empirical study. Omega: The International Journal of Mnagemnet Science, 36, 665-679.

Mentzer, J., Dewitt, W., & Keebler, J. (2001). Defining supply chain managment. Journal of Business Logistics, 22(2), 1-25.

SME Annual Report (2011/12). (n.d.). Retrieved February 1, 2013, from SME Corporation Malaysia: http://www.smecorp.gov.my/vn2/node/177

Tracey, M., Fite, R., & Sutton , M. (2004). An explanatory model and measurement instument: A guide to supply chain management research and application. American Journal of Business, 19(2), 53-69.