The influence of supply chain integration on operational performance. A comparison between product and service supply chains

• Pages: 444-463
• Date: 08 May 2017
• DOI: https://doi.org/10.1108/IJLM-12-2015-0241
• Published date: 08 May 2017
• Author: Kum Fai Yuen,Vinh Van Thai
• Subject Matter: Management science & operations,Logistics

The influence of supply chain

integration on operational

performance

A comparison between product and service

supply chains

Kum Fai Yuen

School of Civil and Environmental Engineering,

Nanyang Technological University, Singapore, Singapore, and

Vinh Van Thai

School of Business IT and Logistics, RMIT University, Melbourne, Australia

Abstract

Purpose –An implicit assumption of current supply chain integration (SCI) research is that the results

obtained from product supply chains can be directly extrapolated to service supply chains. The purpose of

this paper is to question this assumption of equivalence by proposing that the effects of internal integration

(II) and external integration (EI) on operational performance (OP) arecontingent on whether a firm operates in

a product and service supply chain.

Design/methodology/approach –Drawing on the contingency theory, a model that specifies and contrasts

the interrelationships between II, EI, and OP in product and service supply chains was proposed.

Subsequently, measures were developed and survey data were collected from 138 product and 174 service

companies in Singapore. The data were then analysed using multi-sampling analysis.

Findings –The effects of II and EI on OP varied significantly between product and service supply chains.

In addition, the relationship between II and OP was found to be partially mediated by EI in product supply

chains whereas a fully mediated relationship was observed in service supply chains.

Research limitations/implications –Within the context of SCI, different mediation patterns exist in

product and service supply chains. The results suggest adopting a contingency rather than a universalistic

approach in the management of firms’internal and external integrative capabilities to maximise OP.

Specifically, managers should adjust their II and EI efforts to achieve congruency with the type of supply

chain they serve.

Originality/value –This paper tests the assumption of equivalence and extends the current scope of SCI

contingency research by cross-examining the effects of II and EI on OP in both product and service supply

chains simultaneously.

Keywords Contingency theory, Supply chain integration, Operational performance, Product supply chain,

Service supply chain

Paper type Research paper

1. Introduction

Supply chain integration (SCI) has received growing attention among scholars and

practitioners in recent decades (Stank, Keller and Daugherty, 2001; Kim, 2013; Tseng and

Liao, 2015; Yuen and Thai, 2016a). It is defined as “the management of various sets of

activities that aims at seamlessly linking relevant business processes within and across

firms, and eliminating duplicate or unnecessary parts of the processes for the purpose of

building a better functioning supply chain”(Chen et al., 2009 p. 66). SCI emphasises

connectivity and simplification through the coordination, collaboration, cooperation,

interaction, and elimination of duplicate elements in business processes (Pagell, 2004;

Vickery and Dröge, 2010; Seo et al., 2015). In general, connectivity and simplification of

business processes can be improved or performed internally between departments, and

externally between upstream and downstream partners (Stevens, 1989).

The International Journal of

Logistics Management

Vol. 28 No. 2, 2017

pp. 444-463

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-12-2015-0241

Received 18 October 2015

Revised 28 December 2015

18 February 2016

19 April 2016

6 May 2016

Accepted 6 May 2016

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

www.emeraldinsight.com/0957-4093.htm

444

IJLM

28,2

There is a growing body of evidence indicating that SCI has a positive effect on

operational performance (OP), which includes cost, quality, flexibility, and delivery

outcomes (Flynn et al., 2010; Yuen and Thai, 2016b). A meta-analysis conducted by

Leuschner et al. (2013) revealed that the relationship between SCI and OP is positive.

However, in their study, the authors also cautioned that negative or non-significant results

reported by individual studies are not uncommon, and called for additional research to

explain for this phenomenon. In line with their observation, Zhao et al. (2011) acknowledged

that the sign and magnitude of the linkages between SCI dimensions and OP differ

considerably across studies.

In recent years, there has been a paradigm shift towards adopting a contingency

approach to explain the equivocal relationship between SCI and OP (Wong, Boon-Itt and

Wong, 2011). Contingency theory opposes universalistic theory and holds that the fit

between a firm’s structure and contextual factors influences performance (Donaldson, 2001).

In rudimentary terms, contingency theory suggests that greater fit results in stronger

performance. Some of the previous SCI-OP studies that have anchored on contingency

theory can be found in the work of Kim (2006) and Wong, Lai and Cheng (2011).

For example, Kim (2006) showed that there is greater fit between SCI and small firms,

suggesting that small firms reap greater operational benefits from integrating their supply

chain. In another study, Wong, Lai and Cheng (2011) showed that the effect of SCI on OP is

augmented by high level of environmental munificence, suggesting that firms operating in

an environment with rich resources and information can achieve greater benefits from

integrating their supply chain.

However, existing supply chain management contingency research has focussed

exclusively on the manufacturing sector despite the increasing contribution of services

towards global economies (Hua, 2013). In the literature, little distinction has been made

with regards to SCI in product and service supply chains, and there is c urrently a lack of

understanding as to whether the results obtained from product supply chains can be

directly extrapolated to service supply chains. In general, the treatment and management

of a service differ fundamentally from a product (Sengupta et al., 2006). One of the

differences is attributed to the characteristics of services which are associated with

heterogeneity, intangibility, perishability, and inseparability (Yuen and Thai, 2015a, b).

As it will be discussed in the literature section, this paper argues that these differences or

contextual factors affect the fit of a firm and subsequently, its OP. This paper posits that

the operational benefits of SCI are contingent on whether a firm operates in a product or

service environment.

A number of contributions to the current literature and practices can be expected from

this study. First, this study simultaneously analyses the effects of internal integration (II)

and external integration (EI) on OP. Not many studies have included II in their analyses

which obscure the definition and true effect of SCI. Second, this study introduces and

extends contingency theory in SCI-OP research by cross-examining the operational

contributions of II and EI in both product and service supply chains. Through this

examination, it addresses the question of equivalence, that is, to what extent the conceptual

meaning and magnitude of the relationships between II, EI, and OP differ between product

and service supply chains. Finally, the compartmentalisation of results into service and

product categories will offer differentiated strategies for managers to adjust their II and EI

efforts according to the types of supply chain they serve.

The remaining parts of this paper areorganised as follow. First, the concept of SCI and its

impact on OP are reviewed. Thereafter, a brief overview of contingency theory is provided

and its efficacy in reconciling mixed SCI-OP results is reviewed. Subsequently, the

contingency effects of supply chain type on the relationship between SCI and OP are

discussed and hypothesised. For the purposeof this study, supply chain type is dichotomised

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Influence of

SCI on OP