Assessing the impact of business uncertainty on supply chain integration

• Published date: 08 August 2016
• DOI: https://doi.org/10.1108/IJLM-11-2014-0175
• Pages: 463-485
• Date: 08 August 2016
• Author: Minkyun Kim,Sangmi Chai
• Subject Matter: Management science & operations,Logistics

Assessing the impact of

business uncertainty on

supply chain integration

Minkyun Kim

Sogang Business School, Sogang University, Seoul, Republic of Korea, and

Sangmi Chai

Ewha School of Business, Ewha Womans University, Seoul, Republic of Korea

Abstract

Purpose –The purpose of this paper is to investigate how business uncertainty affects the

implementation of supply chain integration (SCI). More importantly, this research divides business

uncertainty into four dimensions and SCI into three dimensions to examine the role of each dimension.

In addition, it investigates the moderating effects of manufacturing approaches, such as push and pull,

in the relationship between SCI and performance.

Design/methodology/approach –Through a structured survey, this study collected 259 responses

from supply executives, and supply and purchasing managers of US manufacturing firms. The

empirical data analysis was done by using the partial least squares technique.

Findings –The results empirically support the findings that business uncertainty positively affects

implementation of SCI. Among the four dimensions of business uncertainty, dynamism and hostility

significantly affect implementation of internal integration, integration with suppliers, and integration

with customers. In addition, manufacturing approaches, such as push and pull, have a moderating

effect on the relationship between SCI and performance.

Practical implications –This study collected survey responses from a manufacturing firm in the

supply chain to assist managers to find a solution while dealing with business uncertainty through the

implementation of SCI. It also emphasizes manufacturing approaches, such as push and pull, in

implementing SCI to improve performance. Thus, supply and purchasing managers should consider

the business uncertainty that they are dealing with while developing their supply chain strategy.

Originality/value –To the best of the authors’knowledge, this study is the first to provide

meaningful insights on the effects of SCI toward dealing with business uncertainty. More importantly,

by dividing the dimensions of business uncertainty and SCI, this study presents empirical evidence of

the significant role of supply chain practices in uncertain business conditions. In addition, this study

addresses the gap in extant literature and shows that managers need to consider their manufacturing

approach in SCI to improve business performance.

Keywords Supply chain integration, Performance, Business uncertainty, Manufacturing approach

Paper type Research paper

1. Introduction

Organizations have to deal with a high degree of business uncertainty, owing to higher

competitive intensity and increasingly dynamic business conditions. More importantly,

current trends in supply chain management extend business uncertainty that arises

from globalization and lean manufacturing. Thus, supply chain managers should have

the capability to make quick and effective decisions to circumvent business

uncertainty. In addition, managers need to establish practical supply chain strategies to

quickly react to market changes and to improve performance. However, when supply

chain managers make a decision, they need to consider business uncertainty as a

The International Journal of

Logistics Management

Vol. 27 No. 2, 2016

pp. 463-485

©Emerald Group Publis hing Limited

0957-4093

DOI 10.1108/IJLM-11-2014-0175

Received 9 November 2014

Revised7May2015

Accepted 18 August 2015

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

This work was supported by the Sogang University Research Grant of 2011 (201110053.01).

463

Impact of

business

uncertainty

crucial contingency factor. More importantly, the existing literature on supply chain

management has thus far neglected business uncertainty and business conditions

(van der Vaart and van Donk, 2008). Responding to simple and complex business

conditions, intensity of information sharing within organizations and supply chain is

differentiated (Welker et al., 2008). In process industry, high level of uncertainty on

business conditionsregarding product specifications and volume of order units facilitates

more integration in thesupply chain (van Donk and van der Vaart, 2005). Therefore,this

study applies contingency theory from the perspectiveof supply chain management and

considers the role of business uncertainty in supply chain management to fill the gap in

the literatures by examining the relationship between business uncertainty and supply

chain integration (SCI) depending on the business conditions.

Contingency theory has been used in many studies of operations management.

Contingency theory suggests that organizational structures are molded with the

changing contextual factors to improve organizational performance (Donaldson, 2001).

Firms with flexibility fit in the contingency condition generate the better performance

(Volverda et al., 2012). The research of Zhang et al. (2012) applies a contingency theory in

the context of quality management: quality exploitation and quality exploration relating

to operational performance. This study also applies contingency theory as a theoretical

background in the context of supply chain management. The application of SCI

considered as a solution to deal with business uncertainty, and thus, this study regards

business uncertainty as a contingency variable. More importantly, this research also

investigates the indirect relationship between the four dimensions of business uncertainty:

munificence, dynamism, hostility, and heterogeneity and the firms’performance.

SCI is the degree of collaboration between manufacturers and their supply chain

partners as well as their intra- and inter-organizational processes to achieve an effective

flow of products, services, information, capital, and decision making in the supply chain

(Flynn et al., 2010). SCI consists of three main dimensions –internal integration, supplier

integration, and customer integration (Wong et al., 2011). This study considers SCI as one

of the most effective supply chain practices in solving the problems arising from

business uncertainty. Many previous studies have discussed the numerous benefits of

implementing SCI. Bowersox et al. (1999) highlight that SCI increases market and

relevancy value and increases the scope of economies of scale. Burt et al. (2003) emphasize

on continuous improvement and continuity of supply through technology transfers. Das et

al. (2006) also provides evidence that better relationship ties within the supply chain

enhances flexibility as well as capability and reduces transaction costs. This study

investigates how the four dimensions of business uncertainty affect the three dimensions

of SCI on the basis of our findings on SCI providing solutions for business uncertainty.

SCI is closely related to firms’performance. Prior studies already provide empirical

evidence that SCI improves performance (Danese and Romano, 2011; Kim, 2009;

Narasimhan and Kim, 2002). In investigating the relationship between supply chain

practices and the performance, the research of Brandon-Jones et al. (2014) applied

supply-based complexity as a moderating effect. The study of Closs et al. (1998) also

applied the level of demand variation between inventory and supply chai n

performance. The supply chain complexity, and inter-organizational learning have

been utilized to have a moderating effect on the relationship between global supply

chain risk and supply chain performance (Manuj and Mentzer, 2008). This study

follows a similar strategy; however, this study fills the gap in the literature by

investigating the moderating effect of the manufacturing approach that how firms

manufacture their products such as pull and push on the relationship between SCI and

464

IJLM

27,2