Linking digitalization and human capital to shape supply chain integration in omni-channel retailing
Summary (5 min read)
Introduction
- Retailers have increasingly embraced an omni-channel retailing (OCR) strategy to provide consumers with seamless shopping experience across channels (Rodríguez-Torrico et al., 2017; Shen et al., 2018) .
- Brick-and-mortar retailers such as Macy's, Nordstrom, and Walmart are expanding their online offerings and introducing new modes, such as in-store fulfillment of online orders.
- In a recent survey, 31% of retail managers said that a challenge of digitalization was that "it requires new skills that people don't have in their organization" (Aruba, 2020: P4) .
- The complex and dynamic retail supply chain network and multi channels adds difficulty to realize SCI.
- 2016; Song et al., 2019) , as one of the industries most affected by digitalization, recent scholars appeal for the development of quantitative research to explore the impact of digitalization on the OCR supply chain and the role of "human" (Hagberg et al., 2016; Cai et al., 2020) .
RQ2. Does digitalization positively influence SCI in the context of OCR?
- Knowledge is a fundamental strategic asset that contributes to the improvement and success of supply chains (Attia and Eldin, 2018) .
- Therefore, SCI can be considered as the strategic objective of KM.
- Next, since digital infrastructures help organizations to gather, structure, transfer or apply explicit knowledge through integrative applications and allows the exchange of tacit knowledge through interactive applications (Schniederjans et al., 2019) , a digitalization-based solution may help to achieve SCI.
- The authors study intends to contribute to the OCR supply chain research and practice by examining the relationships among HC, digitalization and SCI of OC retailers from the theoretical perspective of KM.
- Section 4 describes the analysis process and the results of this study's empirical research.
Digitalization
- Several existing studies have qualitatively confirmed the positive role of digitalization in fostering a stronger competitive edge.
- Rakowski (2015) addressed how technology drives a new wave of productivity through the digitalization of key organizational and financial processes.
- Büyüközkan and Göçer (2018) presented a comprehensive framework in which digitalization was divided into five parts, namely digital strategy, digital organization/culture, digital product/service, digital operation, and digital customer experience.
- There is still lack of quantitative research regarding the role of digitalization in OCR supply chain management.
Human Capital in Digitalization
- Management literature described HC as the sum of managers ' and employees' skill, attitude, and interrelationship (Jin et al., 2010; Flothmann et al., 2018) .
- Managers are responsible for decision making and play a strategic role in the organization (Porter, 1980) .
- Their specialized and analytical abilities within his or her specialty are important for making the right decisions, as well the ability to work effectively with people is essential for developing group collaboration (Benson et al., 1991) .
- Kosmol et al. (2019) considered people's capabilities as a key factor in determining the success of digitalization because people and digital technology go hand-in-hand.
- There are still research gap that should be filled.
Digitalization in Supply Chain Integration
- As current competition is among supply chains and not between individual organizations, SCI is the key to gain competitive advantages (Song et al., 2019) .
- Therefore, the realization of OCR requires not only the internal integration of retailers, but also the joint efforts with other entities within the whole supply chain (Cai et al., 2020) .
- Supplier integration consists of a strategic collaboration between retailers and suppliers in all production activities (e.g. joint inventory decision) (Delic et al., 2019; Song and Song, 2021) .
- Feng and Shanthikumar (2018) found that manufacturing firms are now able to obtain individualized customer data to personalize the sales process, product design and service through smart devices.
- Shi et al. (2020) and Feyissa et al. (2019) found that digitalization is able to coordinate complex activities in a supply chain by facilitating improvement in a firm's collaborative and communication capabilities as well as their level of SCI.
Knowledge Management
- Knowledge management (KM) is defined as creating, storing/retrieving, transferring, and applying knowledge inter-and intra-organizations (Alavi and Leidner, 2018) .
- KM is considered vital to implementation of supply chain practice in a business environment characterized by rapid changes, technological advancements, changing customer needs and higher competition (Schoenherr et al., 2014) .
- Apart from the broad application of KM in SCM field, KM perspective can also provide the theoretical lens to link HC and digital transformation (Büyüközkan and Göçer, 2018; Yahya and Goh, 2002) .
- Research claimed that the authors are living in an era in which data is generated in huge volume with high velocity and variety (Alavi and Leidner, 2018; Attia and Eldin, 2018) .
- Thus, human factors couldn't be ignored, as previous literature claimed that humans are the central bearers of knowledge.
Hypotheses Development
- SCI requires retailers not only to manage internal knowledge, but also to absorb and acquire knowledge from external supply chain partners (Shou et al., 2018; Schniederjans et al., 2019) .
- Based on the KM perspective, this study aims to identify the relationship between HC, digitalization, and SCI under the context of OCR.
- This study's conceptual model is illustrated in Figure 2 and the rationale for the hypothesized model is explained below.
- Previous literature on SCI showed that the influence of control variables (e.g. firm age, firm size) on the level of integration is relatively weak (Oh et al., 2012; Yu et al., 2017) .
Effects of HC on Digitalization
- As KM is based on the ability of a firm's members to add value to business processes through the creation, sharing, codification and integration of explicit and tacit knowledge, managers play an essential role (Büyüközkan and Göçer, 2018) .
- Previous literature has widely recognized that supporting top management is a critical enabler for strategic digitalization initiatives (Kosmol et al., 2019) and for digital technology use in organizations, because people engaged in key roles on digitalization initiatives ensure the collaboration between units (McKinsey, 2018) , Therefore, the authors propose the following hypothesis: H1.
- First, retailers that have experts with rich digitalization knowledge realize the implementation of advanced tech solutions (Wang and Xu, 2018) .
- Second, employees provide services directly to customers, so employee attitudes toward work affect their timely perception of consumer demand preferences and play an important role in improving the OCR digital experience (Hagberg et al., 2016) .
- Third, high-quality employees are more capable of knowledge identification and absorption, team cooperation and communication within organization, leading them to accept the trends of digitalization (Park and Kim, 2018) .
Effects of Digitalization on SCI
- Being aware of a company's knowledge management and using digital technology to strengthen it, can facilitate the internal integration (Gao et al., 2020; Wilkesmann and Wilkesmann, 2018) .
- Third, digital technologies like AR and VR, can improve the seamless experience among channels, reflecting the application of digital knowledge in OCR (Delic et al., 2019) .
- Therefore, the authors propose the following hypothesis: H3.
- Second, digitalization ensures the timeliness and effectiveness of joint decision-making and knowledge sharing between retailers and suppliers especially during emergencies (Hübner et al., 2016) .
- The use of new knowledge and technologies in the development process to significantly improve customers' purchase, delivery, and consumption patterns for products and services (Bell et al., 2017) .
Sampling and Data Collection
- As the largest developing country and e-commerce market, the Chinese mainland presents tremendous value and potential to the retail sector.
- In 2019, the overall revenue of Chinese retail reached 6T USD, and comprised of 57.8% of China's economic growth.
- Before launching the questionnaire, the authors carried out the pre-test with interviews of three managers and three senior employees from OC retailers, and the necessary modifications were conducted based on their feedbacks to ensure the acceptability and understandability.
- Since there was only one respondent for each questionnaire, common method bias (CMB) might have been a problem.
Measurement of Constructs
- A comprehensive review of the studies across the fields of HRM, SCM, OCR, and digitalization in Internet reports (e.g. McKinsey, Bain) and academic researches was conducted to identify potential measures for the conceptual constructs.
- Specifically, the measurements of managers' capital and employees' capital involve three dimensions: skills, attitudes, and interpersonal relationships (e.g. Song et al., 2020) .
- HC emphasizes cross-channel departmental collaboration capabilities, and digitalization includes providing digital consumer experience.
- Supplier integration mainly refers to the sharing of operational information (e.g. inventory information) and joint operational decision-making with suppliers.
- Each item was assessed by the strength of respondent's agreement, with "1" indicating "strongly disagree" and "5" indicating "strongly agree".
Reliability and Validity
- Exploratory factor analysis was conducted to ensure the unidimensionality of the scales.
- All items had strong loadings (greater than 0.5) on the specific factor that they were intended to measure.
- Table 2 demonstrates that all α values were above 0.8 and that all composite reliability values were greater than 0.8, thus confirming the reliability of the constructs.
Results
- Structural equation modeling (SEM) with the maximum likelihood estimation method and LISREL 8.70 software were used to estimate the relationships among the constructs.
- To minimize multicollinearity, the independent variables and the moderators were mean-centered (Marodin et al. 2017) .
- Figure 3 shows the SEM results with the standardized coefficients for the significant paths.
Discussion of the Results
- The authors findings provide substantial empirical support for the positive relationships among HC, digitalization and SCI in the context of OCR.
- Different from the explanation of this phenomenon in existing papers, the KM perspective provides a useful theoretical lens to explain the findings in this paper.
- Today, knowledge is an important strategic asset.
- SCI relies on knowledge sharing and transferring within the whole supply chain (Schniederjans et al., 2019) .
- The authors findings also indicate that digitalization has the greatest effect on internal integration.
Theoretical Implications
- The authors study makes significant contributions to the extant literature.
- On the one hand, to the best of their knowledge, this study is the first to investigate the relationships among HC, digitalization and SCI within the context of OCR.
- Mostly focusing on manufacturing industries, it was unknown whether these relationships still exist in the context of OCR.
- The theoretical lens of KM in this paper informs the development of conceptual model, where HC is the main facilitator, digitalization provides a creative solution, and SCI is the strategic objective, and adds explanatory power to their results (Zorzini et al., 2015) .
- The authors reveal that digitalization as a creative solution which helps organizations to gather, structure, produce, convey, and apply knowledge have varied impact on the three dimensions of SCI -internal integration, supplier integration, and customer integration.
Managerial Implications
- The managerial implications of this paper are three-fold.
- First, their results motivate retailers to focus on the cultivation of HC, especially the employee level.
- Second, the positive effect of digitalization on three dimensions of SCI has been confirmed.
- Third, the authors also suggest retailers to pay more attention on internal integration.
- Starting from internal digitalization, advanced technologies enable retailers to digitize and integrate resources and operations from physical and online retail channels.
Conclusions, Limitations, and Future Research
- This study identifies the relationships between HC, digitalization, and SCI in the context of OCR based on a KM perspective.
- Some findings are consistent with theoretical expectations and the findings of previous studies in that both managers' capital and employees' capital are positively related to the level of a firm's digitalization and that digitalization is positively related to the level of SCI.
- First, the digitalization of industry is changing the roles and responsibilities of personnel, requiring transformation of Human Resource Management (HRM) functionalities (Zhou et al., 2020) .
- Finally, in this paper, the authors developed the conceptual model without considering of any control variables.
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Frequently Asked Questions (15)
Q2. What are the future works in "Linking digitalization and human capital to shape supply chain integration in omni-channel retailing" ?
Although this study makes a significant contribution to the literature and practice, there are a few limitations that provide avenues for further research. Future studies could perform the multi-respondent survey to further improve the accuracy of the information. Future studies could investigate and compare the effect of potential control variables ( e. g. firm age, firm size, firm ownership ) on digitalization and SCI.
Q3. What is the key to gain competitive advantages?
As current competition is among supply chains and not between individual organizations, SCI is thekey to gain competitive advantages (Song et al., 2019).
Q4. How can the authors improve the seamless experience among channels?
digital technologies like AR and VR, can improve the seamless experience among channels, reflecting the application of digital knowledge in OCR (Delic et al., 2019).
Q5. How does the study address the role of employees in the digital workplace?
employees provide services directly to customers, so employee attitudes toward work affect their timely perception of consumer demand preferences and play an important role in improving the OCR digital experience (Hagberg et al., 2016).
Q6. How can retailers create a network of cross-functional teams with end-to-end accountability?
retailers can create a network of cross-functional teams with end-to-end accountability that features fewer barriers, improving knowledge transferring (Schniederjans et al., 2019).
Q7. What are the main reasons why brick-and-mortar retailers are expanding their online offerings?
Brick-and-mortar retailers such as Macy’s, Nordstrom, and Walmart are expanding their online offerings and introducing new modes, such as in-store fulfillment of online orders.
Q8. how do they motivate employees to grow their careers?
leaders with good human skills can motivate employees to grow their careers and adapt to new trends (iSCOOP, 2020), supporting the sharing of both explicit and implicit knowledge within the organization (Chen et al., 2018).
Q9. What is the importance of human capital in OC?
In order to adapt to the changes brought by digitalization to the implementation of SCI of OC retailers,as the most difficult category of resource residing in firms, the importance of human capital (HC) cannot be ignored (Prajogo and Oke, 2016; Song and Song, 2021).
Q10. What is the role of the omni-channel retailing strategy?
In this era of rising consumer demands and technological advances, retailers have increasinglyembraced an omni-channel retailing (OCR) strategy to provide consumers with seamless shopping experience across channels (Rodríguez-Torrico et al., 2017; Shen et al., 2018).
Q11. What is the definition of a conflation of the order fulfillment process?
OCR is characterized by operations with continuous information exchange, joint operations, and supply chain network across channels that enable a conflation of the order fulfillment process (Hübner et al., 2016).
Q12. How do you develop specificabilities, skills, knowledge and attitudes?
To effectively cope with the new challenges of the digital workplace, employees must develop specificabilities, skills, knowledge, and attitudes (Park and Kim, 2018).
Q13. What are the benefits of digitalization for OC retailers?
A few recent studies have stated that digitalization has also brought benefits to OC retailers such as theredesign of cross-channel inventory policies and customer information databases, and the establishment of consistency in customer service (Adivar et al., 2019, Li et al., 2019).
Q14. What is the role of digitalization in the supply chain management?
Although in practice, digitalization has brought huge changes to retailers’ supply chain management(SCM), recent studies on digitalization has focused predominantly on the manufacturing and found that it leads to significant changes to manufacturing supply chains (e.g. Rakowski, 2015; Xu and Long, 2020), including the development of new products and services, operations, people and organizational management, business models, etc.
Q15. What is the main reason why a company should consider SCI from the perspective of a?
considering SCI represents the extent to which a company can collaborate with partners and manage its processes to achieve effective and efficient flows of products and services to the final customer (Huo, 2012), it is reasonable to explore how to better promote SCI from the KM perspective.