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Journal ArticleDOI

The impact of supply chain integration on performance: A contingency and configuration approach

TL;DR: The findings of both the contingency and configuration approach indicated that SCI was related to both operational and business performance, and indicated that internal and customer integration were more strongly related to improving performance than supplier integration.
About: This article is published in Journal of Operations Management.The article was published on 2010-01-01 and is currently open access. It has received 2535 citations till now. The article focuses on the topics: Supply chain & Supply chain management.

Summary (5 min read)

1. Introduction

  • Researchers have long articulated the need for a close, integrated relationship between manufacturers and their supply chain partners (e.g., Lambert et al., 1978; Armistead and Mapes, 1993).
  • These incomplete and evolving conceptualizations have led to inconsistent findings about the relationship between SCI and performance (e.g. Devaraj et al., 2007; Germain and Iyer, 2006; Das et al., 2006; Stank et al., 2001a).
  • The authors suggest that customer and supplier integration moderate the relationship between internal integration and performance, building upon its foundation.
  • In relating SCI patterns to performance, the authors examine both operational and business performance measures, which allows drawing more comprehensive conclusions.

2.1. Definition of SCI

  • The SCI construct is relatively new as an area of research, although there is an extensive body of research on unidimensional supply chain relationships, examining collaborative relationships between a manufacturer and either its customers or suppliers (Paulraj et al., 2008; Mabert and Venkataramanan, 1998; Spekman et al., 1998; Fawcett and Magnan, 2002).
  • The authors build upon the existing literature on the SCI construct, including the manufacturer (internal integration) and extending from it both directions (customer and supplier integration), and building upon its gaps to develop a parsimonious definition of SCI.
  • While operational coordination can only lead to operational benefits, strategic coordination provides both operational and strategic benefits (Sanders, 2008).
  • This definition also emphasizes intra- and inter-organization processes, since SCI is comprehensive and encompasses a variety of activities, including many that are focused on materials, transportation and administrative tasks (Bowersox and Morash, 1989; Hillebrand and Biemans, 2003).
  • Finally, the authors emphasize the customer-facing nature of SCI, stating that its primary objective is to provide maximum value for the customer.

2.2. Dimensions of SCI

  • Consideration of the dimensionality of SCI is important in understanding the way that the individual dimensions operate, as well as how they function jointly.
  • It is the degree to which a manufacturer structures its own organizational strategies, practices and processes into collaborative, synchronized processes, in order to fulfill its customers’ requirements (Cespedes, 1996; Kahn and Mentzer, 1996; Kingman-Brundage et al., 1995) and efficiently interact with its suppliers.
  • Internal integration and external integration play different roles in the context of SCI.
  • While internal integration recognizes that the departments and functions within a manufacturer should function as part of an integrated process, external integration recognizes the importance of establishing close, interactive relationships with customers and suppliers.

2.3. Contingency approach to SCI

  • Contingency theory (Lawrence and Lorsch, 1967; Thompson, 1967) argues that no theory or method can be applied in all instances, in other words, that there is no one best way to design an organization (Scott and Cole, 2000).
  • It employs a reductionist approach, treating an organization as decomposable into independent elements (Sinha et al., 2005).
  • The environment that an organization operates within shapes its structures and processes.
  • Structural contingency theory (Chandler, 1962; Lawrence and Lorsch, 1967; Galbraith, 1973) suggests that how well an organization performs depends on the extent to which the strategy that it seeks to pursue is aligned with its design.
  • This alignment between strategy and performance is described as ‘‘fit’’ in the strategic management literature (Drazin et al., 1985; Venkatraman and Prescott, 1990; Milgrom and Roberts, 1995).

2.3.1. Relationship between internal integration and performance

  • Just as internal fit indicates consistency among structural characteristics within an organization (Drazin et al., 1985; Venkatraman and Prescott, 1990; Milgrom and Roberts, 1995), internal integration recognizes that different departments and functional areas within a firm should operate as part of an integrated process.
  • This calls for an integrated customer order fulfillment process, in which all involved activities and functions work together.
  • Neely et al. (1995) listed cost, time, quality, delivery and flexibility as important measures of operational performance.
  • Internal integration is positively related to the operational performance of the manufacturer within a supply chain.

2.3.2. Relationship of customer and supplier integration to performance

  • According to structural contingency theory, external fit indicates consistency between an organizational structure and the strategy it pursues in response to its external environment.
  • A close relationship between customers and the manufacturer offers opportunities for improving the accuracy of demand information, which reduces the manufacturer’s product design and production planning time and inventory obsolescence, allowing it to be more responsive to customer needs.
  • In an integrated supply chain, development of a strong strategic partnership with suppliers will facilitate their understanding and anticipation of the manufacturer’s needs, in order to better meet its changing requirements.
  • Their argument rests on the notion that external uncertainties and linkages must be internally absorbed into the proper places in an organization and that the primary impediment to achieving the benefits of external SCI is intraorganizational barriers to internal integration.
  • Customer and supplier integration are positively related to the business performance of the manufacturer within a supply chain, given the relationship between internal integration and business performance.

2.3.3. Moderating effects

  • Contingency theory also suggests that individual dimensions of SCI will interact to affect performance.
  • A manufacturer’s efforts in external supplier and customer integration help it take full advantage of its internal integration, in order to achieve better operational performance.
  • Germain and Iyer (2006) found that the interaction between internal integration and customer integration was related to logistics performance, which in turn was related to financial performance.
  • The authors hypothesize two- and three-way interactions between the dimensions of SCI.
  • Customer and supplier integration will moderate the relationship between internal integration and business performance.

2.4. Configuration approach

  • This approach is somewhat limited.
  • While it allows detailed examination of the relationship between the dimensions of SCI and performance, its reductionism causes it to be unable to handle complicated organizational phenomena from a holistic perspective.
  • Results from a contingency approach can also be difficult to interpret when some of the interactions are nonsignificant.
  • A third issue related to the contingency approach is the multicollinearity between the independent variables that comprise a related construct like SCI that is often present.
  • The configuration approach argues that, when organizational elements are consistent with each other, a holistic, rather than piecemeal, analysis should be applied (Miller, 1986; Ward et al., 1996).

2.4.1. Configurations of SCI

  • The configuration approach focuses on establishing patterns or profiles.
  • According to configuration theory (Miller, 1986), the alignment of strategy and systems or practices is reflected in the patterns observed in practice.
  • Since different companies may place differing degrees of emphasis on the individual dimensions of SCI, various configurations of SCI exist.
  • While some may have well integrated internal systems, they may not have extended this approach to customers and suppliers, while others may be strong in customer or supplier integration and weaker in their internal integration.
  • There is a need for a taxonomy which is based on significant gaps between the groups, in order to have better insights about the relationship between SCI patterns and performance.

2.4.2. Impact of SCI patterns on performance

  • Configuration theory suggests that the emergent patterns of SCI will be related to operational performance in different ways.
  • It argues that organizations perform better when they develop better configurations of interconnected elements (Drazin et al., 1985; Sinha et al., 2005).
  • Furthermore, the relationship of SCI to performance may be determined by the pattern SCI, in terms of the strength and balance of the three dimensions.
  • Supplier and internal integration help manufacturers reduce mistakes and waste, through information sharing and joint planning, which is directly related to business performance.
  • The patterns of SCI are related to the business performance of the manufacturer within a supply chain.

3.1. Questionnaire design and measures

  • The authors surveyed the literature to identify valid measures for related constructs and adapted existing scales to measure internal integration (Narasimhan and Kim, 2002), customer and supplier integration (Narasimhan and Kim, 2002; Morash and Clinton, 1998), operational performance (Frohlich and Westbrook, 2001; Beamon, 1999; Vickery et al., 2003) and business performance (Narasimhan and Kim, 2002).
  • When there were no reliable and valid existing measures, the authors developed new measures, based on their understanding of the constructs and their observations during company visits and interviews.
  • The Chinese version was then translated back into English by another operations management professor, and the translated English version was checked against the original English version for discrepancies.
  • In Hong Kong, a bilingual version of the questionnaire was used.
  • There were two preliminary assessments of the questionnaire.

3.2. Sampling and data collection

  • Data were collected from manufacturing companies in China.
  • Guangzhou and Shanghai have enjoyed a higher degree of economic reform and marketization, and Hong Kong is one of the freest economies in the world.
  • Follow-up telephone calls and mailings were used to improve the response rate (Frohlich, 2002) and address potential missing data issues.
  • A profile of the respondents is presented in Tables 1 and 2, indicating that they represent a variety of industries and their distribution is representative of the concentration of industries in the cities studied.
  • Analysis of Harmon’s single-factor test of common method bias (Podsakoff and Organ, 1986; Podsakoff et al., 2003; Hochwarter et al., 2004) revealed nine distinct factors with eigenvalues above or near 1.0, explaining 72.1% total variance.

3.3. Reliability and validity

  • Each variable’s cumulative proportion was plotted against the cumulative proportion for several test distributions, revealing that the data appeared to be approximately normally distributed.
  • The authors first used CFA to evaluate convergent validity as suggested by O’Leary-Kelly and Vokurka (1998).
  • Each measurement item was linked to its corresponding construct, and the covariance among the constructs was freely estimated.
  • The estimates for the average variance extracted (AVE) were higher than 0.50 for four constructs, and 0.46 for the fifth construct.

4.1. Contingency analysis of SCI

  • Hierarchical regression analysis was used to test hypotheses 1– 3.
  • In the second step, the authors assessed the relationship of customer and supplier integration to operational or business performance, given the relationship between internal integration and operational or Table 4 Regression results for operational performance.
  • Adding customer and supplier integration to the model yielded a significant change in R2, indicating that the addition of customer and supplier integration contributed significantly to the predictive power of the model.
  • Therefore, the results only partially supported hypothesis H2a.
  • The interactions between customer or supplier integration and internal integration were not statistically significant, while there was a significant interaction between customer and supplier integration.

4.2.1. Emergent taxonomy of SCI

  • H4 posits that an emergent taxonomy can be developed, based on the internal, supplier and customer integration of manufacturers.
  • The other three SCI patterns were balanced, with similar levels of customer, supplier and internal integration within each pattern.
  • This difference between the patterns was weaker than their difference in SCI strength.
  • Fig. 3 indicates that the clusters were differentiated from each other by the discriminant functions representing SCI strength and SCI balance.
  • Between 96.3% and 98.7% of the respondents were correctly classified, indicating very high predictive ability.

4.2.2. Relationship between SCI patterns and performance

  • Analysis of variance was used to test the relationship between SCI patterns and performance.
  • Scheffe post hoc analysis was used to determine differences between specific patterns.
  • The High Uniform pattern had the best operational performance, followed by the High Customer Leaning pattern.
  • Similarly, there was not a significant difference in operational performance among the Medium Uniform, Low Uniform, and Medium Customer Leaning patterns of SCI.
  • Table 9 also shows the relationship between SCI pattern and business performance, revealing that the High Uniform and High.

5. Discussion

  • The authors found that most of their hypotheses were supported or partially supported, broadly indicating that SCI is related to performance.
  • The interaction of supplier and customer integration was related to operational performance.
  • This suggests that companies should begin SCI with internal integration, laying the foundation for customer and supplier integration.
  • The authors High Uniform pattern is similar to their OutwardFacing pattern, which included the upper quartile of both customer and supplier integration, and their High Customer Leaning pattern is similar to Frohlich and Westbrook’s (2001) Customer-Facing pattern.
  • SCI pattern is related to performance and SCI capability is cumulative in improving performance, which was not revealed by the contingency approach.

6. Conclusions and limitations

  • This study extends the existing research on SCI in several important ways.
  • Second, this research describes SCI in three dimensions: internal, customer and supplier integration, finding that internal integration forms the foundation upon which customer and supplier integration build.
  • While their study makes a significant contribution to the SCI literature and has important implications for practice, there are some limitations and opportunities for future studies.
  • These relationships may not be the same for all company sizes, industries or regions.

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Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors explore how two dimensions of interpersonal relationships (i.e. size and range of relationships) affect supplier-initiating risk management behaviours (SIRMB) and supply-side resilience.
Abstract: Purpose The aim of the study is to explore how two dimensions of interpersonal relationships (i.e. size and range of relationships) affect supplier-initiating risk management behaviours (SIRMB) and supply-side resilience. Further, the study aims to explore the moderating role of dependence asymmetry. Design/methodology/approach Nine hypotheses are tested based on a moderated mediation analysis of survey data from 247 manufacturing firms in China. The data are validated using a subset of 57 attentive secondary respondents and archival data. Findings SIRMB positively relates to supply-side resilience. Further, SIRMB mediates the positive relationship between range and supply-side resilience, and this relationship is stronger at lower levels of dependence asymmetry. Yet, although dependence asymmetry positively moderates the relationship between range and SIRMB, it negatively moderates the relationship between size and SIRMB. We did not, however, find evidence that size has a conditional indirect effect on supply-side resilience through SIRMB. Practical implications Managers in buying firms can incentivise SIRMB to enhance supply-side resilience by developing a diverse rather than a large set of interpersonal relationships with a supplier. This might include allocating particular employees with a wide range of contacts within a supplier to that relationship, while it may be necessary to adopt different networking strategies for different supplier relationships. Firms in a highly asymmetrical relationship may seek to raise supplier expectations about the necessity to initiate risk management behaviour or look to change the dynamic of the relationship by managing contracts for fairness. Originality/value New knowledge on SIRMB as a mediating variable underpinning the relationship between interpersonal relationships and supply-side resilience is provided; and empirical evidence on the opposing moderation effect of dependence asymmetry is presented.

20 citations

Journal ArticleDOI
TL;DR: Contrary to current understandings, the central statement of this study is that horizontal organization is not an alternative to vertical organizational structure but they can be effectively coupled.
Abstract: Purpose The purpose of this paper is to extend the knowledge of the use of performance measurement systems (PMS) in situations where the benefits of both vertical and horizontal integration strategies are sought simultaneously. Design/methodology/approach This is a single case study, the purpose of which is to build a contextual theory. Findings The main results highlight three competing and partly contradictory tendencies in the development and use of PMS in organizational integration. In addition, the authors have identified features of PMS that may benefit or hinder integration. Grounded on empirical findings the paper presents a more complete theoretical framework of PMS for integration. Research limitations/implications The propositions of the framework need to be tested in different contexts with case and field studies or a large sample of data using statistical techniques to improve external validity. The causal relationships explored in this study may be further developed using longitudinal studies. Practical implications In acquisition situations there exists the need for vertical integration to control the growing complexity but at the same time for horizontal control to advance customer-centred production. Performance measurement is the key issue to examine the execution and results of such integrations. Originality/value Case study findings are used to develop a more comprehensive theory of PMS design and use in situations where both vertical and horizontal integration are sought. Contrary to current understandings, the central statement of this study is that horizontal organization is not an alternative to vertical organizational structure but they can be effectively coupled.

20 citations

Journal ArticleDOI
TL;DR: In this paper, the authors conceptualized and empirically tested a framework that shows how both external and internal integration practices are significant and positively associated with SC value addition and firm performance.
Abstract: Drawing on the supply chain (SC) management literature, this article conceptualizes and empirically tests a framework that shows how both external and internal integration practices are significant and positively associated with SC value addition and firm performance. The framework also tests the impact of value addition as a reinforcing factor on firm performance. The outcome of this investigation is interesting for both SC researchers and practitioners because the current SC integration literature is conflicting. A structural equation modeling technique, using a sample of 366 large-scale manufacturing companies based in India, is considered in this paper to test the framework. The results support all five research hypotheses which indicate that paramount firm performance requires tight external and internal integration and higher level of value addition. Although the external integration is found to be rather influential than the internal integration, SC players need to have integrated internal business processes for tight external integration. This paper also explains the implication of collective planning and decision making to respond promptly to external market events and reveals the importance of value addition.

20 citations


Cites background from "The impact of supply chain integrat..."

  • ...Thus, to cope with these challenges, foster mutual benefits and maintain own competitiveness, companies together with their partners are looking at ways to find novel supply chain (SC) management methods for sustainability in the global marketplace (Flynn et al. 2010; Jacobs et al. 2016; Ataseven and Nair 2017)....

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  • ...At the same time, strong SC relationship provides opportunities for improving the accuracy of demand information and required inventory as well as significantly reducing the time associated with product design and production planning (Flynn et al. 2010)....

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  • ...Many researchers have recognized this study by quoting it in their own research (Pagell 2004; Flynn et al. 2010)....

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Journal ArticleDOI
TL;DR: In this paper, the authors investigate the contingencies of supply chain risk management (SCRM) in manufacturing multinational corporations (MNCs) by exploring the moderating role of international asset dispersion in the performance effect of SCRM, as well as the counteraction effect of Supply chain integration (SCI).
Abstract: The purpose of this study is to investigate the contingencies of supply chain risk management (SCRM) in manufacturing multinational corporations (MNCs) by exploring the moderating role of international asset dispersion in the performance effect of SCRM, as well as the counteraction effect of supply chain integration (SCI).,Multi-country survey data from a sample of 378 responses collected by the sixth round International Manufacturing Strategy Survey were analyzed. Hierarchical regression analysis was conducted to test the proposed hypotheses.,The results demonstrate that SCRM improves the operational effectiveness of manufacturing MNCs but this performance effect is attenuated by international asset dispersion. Nevertheless, external integration can counteract the negative effect of international asset dispersion and ensure the efficacy of SCRM practices.,The results of this study provide suggestions for supply chain managers of manufacturing MNCs to better conduct SCRM practices under the condition of dispersed international assets. Besides, supply chain managers can leverage external integration to ensure the efficacy of SCRM practices.,Although there are plenty of studies on the relationship between SCRM and operational performance, prior findings are inconsistent. This study sheds light on the SCRM-operational performance relationship by considering how a manufacturing MNC’s international asset dispersion can influence the efficacy of SCRM practices and how SCI can attenuate the negative effect of international asset dispersion.

20 citations

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TL;DR: Based on the resource-based view and the social capital theory, the authors investigates how quality management and green management in firms' supplier relational capital and customer relational capital can be combined.
Abstract: Based on the resource-based view and the social capital theory, this study investigates how quality management and green management in firms' supplier relational capital and customer relational cap...

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  • ..., 2003), and each item’s coefficient is greater than twice its standard error (Anderson and Gerbing, 1988), further demonstrating convergent validity....

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Frequently Asked Questions (8)
Q1. What have the authors contributed in "The impact of supply chain integration on performance: a contingency and configuration approach" ?

This study extends the developing body of literature on supply chain integration ( SCI ), which is the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intraand inter-organizational processes, in order to achieve effective and efficient flows of products and services, information, money and decisions, to provide maximum value to the customer. The authors study the relationship between three dimensions of SCI, operational and business performance, from both a contingency and a configuration perspective. Furthermore, the results indicated that internal and customer integration were more strongly related to improving performance than supplier integration. 

While their study makes a significant contribution to the SCI literature and has important implications for practice, there are some limitations and opportunities for future studies. Because integration between customers, suppliers and manufacturers is developed over time, it will be fruitful for future research to examine the evolution of SCI patterns in a longitudinal fashion. Second, because the data were only collected from manufacturers, future studies can broaden their scope by collecting data from all supply chain partners, including suppliers, manufacturers and customers. Future research should examine cross-cultural differences in the relationship between SCI and performance. 

To obtain a representative sample, the authors used the Yellow Pages of China Telecom in each of the four mainland China cities and the directory of the Chinese Manufacturers Association in Hong Kong as their sampling pool. 

Devaraj et al. (2007) found that customer integration did not have a significant direct effect on operational performance, but only moderated the effect of supplier integration on operationalperformance. 

To further assess common method bias, confirmatory factor analysis was applied to Harman’s single-factor model (Sanchez and Brock, 1996). 

The estimates for the average variance extracted (AVE) were higher than 0.50 for four constructs, and 0.46 for the fifth construct. 

The third step assessed the relationship between two- and three-way interactions of internal, customer and supplier integration and operational or business performance, in order to determine whether there was a moderating effect. 

Supplier integration may not contribute to operational performance directly, but instead interacts with customer integration in improving operational performance, reflecting the importance of manufacturers’ integration with both downstream and upstream supply chain partners.