CORPORATE CULTURE: A NEW CHALLENGE TO E-SUPPLY

CHAIN MANAGEMENT SYSTEMS

Khalid Al-Mutawah, Vincent Lee and Yen Cheung

Clayton School of Information Technology, Monash University, Melbourne, Victoria 3800, Australia

Keywords: Corporate culture, electronic supply chain, performance measurement.

Abstract: The dynamic nature of today’s marketplace makes the survival of individual organizations too difficult.

Therefore, researchers are seeking new opportunities on forming collaborative networks like supply chains

(SCs). Nonetheless, the transition from competitive to cooperative relationships has been difficult for many

managers, as the necessary changes in corporate culture have proven quite difficult, thus organizations will

have considerable difficulties in partnering with external entities if they cannot develop a partnering culture.

Consequently, new research suggests traditional SCs with long-term relationships continue to exist, under a

new name of alliances called “e-supply chains”. One of the primary benefits of the e-SC is that it allows

firms to realize many benefits that were associated with the electronic business, yet in a SC management

context. The purpose of this research is to identify the aforementioned cultural challenge on e-SCs context.

To achieve this we will investigate two case studies; where one represents an e-SC and another for a

traditional SC. A comparison between the two cases, suggests that e-SCs are less effective by changes on

corporate culture than traditional SCs when forming SCs.

1 INTRODUCTION

The globalization, uncertainty and dynamic nature of

today’s markets have influenced individual

businesses to move from competitive to

collaborative strategies like supply chains (SCs).

SCs encompass all activities starting from acquiring

raw materials process, throughout manufacturing

and final products delivery to end users or

customers. A supply chain management (SCM)

system integrates and manages these activities

through enhanced long-term relationships to achieve

sustainable competitive advantage (Handfield and

Nichols, 1999). Nonetheless, the use of long term

relationships ignores gaining new opportunities

because organizations are strictly engaged with

long-term contracts that are often a costly decision

to be terminated (William, Esper and Ozment,

2002). Furthermore, there is a need for an efficient

mechanism to share real-time information (e.g.

customer preferences, store capacity, orders data)

between partners (Lee and Whang, 2000). Therefore,

another form of SCM systems called electronic

supply chain (e-supply chain) has emerged. This

new form provides another variation in inter-

organization relationship philosophies. However,

this new paradigm is facing a new challenge when

linking independent organizations over the Internet.

This challenge is the impact of organization’s

corporate culture differences in the SC’s

relationships. In this paper, we attempt to address

this challenge by initially developing an e-SC

structure. Then, Compare the impacts of corporate

culture differences on traditional and e-SC systems.

2 E-SUPPLY CHAIN

Dramatic economic and strategic changes brought

about by recent advances in technology, including

the Internet, the World Wide Web, broadband, and

wireless technologies, have expanded the scope of

SCs. Consequently, e-SCM systems have emerged

to use information and communication technology

(ICT) to link organizations and outsourced functions

together to enable low cost partnership and high

flexibility. However, the e-SCM system (e-SCMS)

needs a flexible structure to facilitate the

organizations with new relationships form unlike the

tied long-term relationships

279

Al-Mutawah K., Lee V. and Cheung Y. (2007).

CORPORATE CULTURE: A NEW CHALLENGE TO E-SUPPLY CHAIN MANAGEMENT SYSTEMS.

In Proceedings of the Ninth International Conference on Enterprise Information Systems - SAIC, pages 279-282

DOI: 10.5220/0002364602790282

 SciTePress

Figure 1: Basic e-SCMS structure. The large circle

represents the rotation path for the e-SCMS while the

small circles are participants within the supply chain

network. There are 4 suppliers (S1-S4), 4 manufacturers

(M1-M4), and 2 distributors (D1-D2). A short-term link

has been made between S3, M2, and D1.

2.1 Structure of e-SCMS

Unlike traditional SCM systems, the e-SCMS is

extremely dynamic. It uses the Internet to link

organizations and match available resources with

demands. Thus, the e-SCMS acts as a dynamic ring

that keeps ‘rotating’ until it matches couples. This

concept is similar to the National Semiconductor

Company case where the company implemented a

Web tool called “Portal” that operates through the

Internet. This tool allows customers to search all

distributors until they find the matched couple that

meets their demands (see Figure 1). Furthermore,

distributors search the Semiconductor stores to

check available resources. These couples will then

preserve the link as their needs are met. However,

when costs exceed the threshold limit or the services

quality declines, it will become inadequate in

meeting customers’ satisfaction and the

organizations concerned will decouple the linkages

and the e-SCMS begins the rotation process all over

again to find another beneficial partner. This

structure of the e-SCMS provides greater

adaptability and flexibility to form partnerships than

traditional long-term systems (see Figure 2). In view

of its dynamic nature, e-SCMS are also called short-

term strategic alliances. Furthermore, the rotation

and re-linking of processes are not expensive

because the majority of the organizations are using

the Internet as a communication channel, thus e-the

SCMS offers cost reduction to setup new links. In

addition, the opportunity to improve an

organization’s services is more than that of

traditional SC systems because breaking the links

are less complicated and less costly. This set-up is

particularly useful for small to medium-sized

organizations because the required technology

expenditure is relatively low. However, long-term

relationships can be developed as needed.

Figure 2: Basic structure for traditional supply chain

systems. The participants are linked in sequence with

long-term contracts where they cannot switch links until

they terminate their own contracts.

2.2 A New Challenge for the e-SCMS

The above dynamic structure requires frequent

changes to organizations’ corporate culture to meet

the changing expectations of various stakeholders in

a SC. Corporate Culture is defined as the philosophy

that defines the relationships nature between the

organization’s units internally and between the

organization and its constituents externally.

Discovering corporate culture involves finding out

strategies for managing internal and external

business affairs as the result of members' individual

personalities, beliefs, values and experiences that

shape organizational meanings and experiences.

Culture, defined by Schein (1990, p.111) as (a) a

pattern of basic assumptions, (b) invented,

discovered, or developed by a given group, (c) as it

learns to cope with its problems of external

adaptation and internal integration, (d) that has

worked well enough to be considered valid and,

therefore (e) is to be taught to new members as the

(f) correct way to perceive, think, and feel in relation

to those problems. Corporate culture is what we

generally call the “way we are working here”, how

we co-operate and collaborate. Culture also

comprises our human relations behaviour, our

common levels of standards and procedures, and all

the initiatives for how to make the organisation

function well both professionally and socially.

Corporate culture and the management

techniques of each firm in a SC should be

compatible for successful SCM systems (Ellram and

Cooper 1990; Lambert. Stock, and Ellram 1998;

Novack. Langley, and Rinehart 1995;Tyndan et al.

1998) because it becomes alpha and omega for

success or failure of many aspects within an

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organization particularly embedded with the

information systems. Organizational compatibility is

defined as complementary goals and objectives, as

well as similarity in operating philosophies and

corporate cultures in order to achieve sustainable

performance (Bucklin and Sengupta 1993).

Bucklinand Sengupta (1993) demonstrated that

organizational compatibility between the firms in an

alliance has a strong positive impact on the

effectiveness of the relationship (i.e., the perception

that the relationship is productive and worthwhile).

Cooper, Lambert, and Pugh (1997) also argue that

the importance of corporate culture and its

compatibility across SCs members cannot be

underestimated.

3 CASE STUDIES

In this section we identify the impact of corporate

culture differences in two different case studies. The

first case represents an e-SCMS, while the second

case represents a traditional SCMS.

3.1 PeCC Supply Chain

The Project e-Commerce and Communication

(PeCC) for Healthcare was initiated in 1996 (More

and McGrath, 2002). PeCC emerged from the

Australian Federal Government’s concern over

burgeoning costs in Australia’s $40 billion health

sector. PeCC was developed to introduce e-

commerce practices into the health sector with

almost 700 suppliers, automating pharmaceutical

and other supplies to hospitals and retail pharmacies.

More and Mcgrath asserted that many

challenges have emerged from the PeCC project,

such as people’s resistance to change, political

issues relating to Australia’s Commonwealth and

State Governments, and data ownership. However,

at a macro level an essential challenge is the

corporate cultural differences between an industry

private sector’s approach and the government’s

approach, both in their management styles and

process, and the presence or absence of commercial

pressures (such as concerns with cost effectiveness,

inefficiency, levels of bureaucracy, and monies).

At the micro level, the issue of corporate cultures

can also be problematic. For example, supply

managers regard nurses’ involvement in SCM as

opposition. Others criticise the IT professionals,

pressing for them to become more client focussed

and take the issue more seriously. Some urged that

hospitals are more client and patient-oriented rather

than continuing to persistently market proprietary

systems. The mismatched corporate culture, between

a hospital such as those of administrators, healthcare

professionals, and with supply managers, also

impinges on the efficiency of the SC. SCM always

come a poor second or third in importance compared

to medical service procedures and ward dispensary

activities, because healthcare professionals give a

higher priority to delivery of urgent drugs/equipment

and other patient’s cares activities.

Despite the cultural differences between

the PeCC’s organization there is still a continues

electronic communication channel that moderate the

negotiation and strength the links between partners,

because SC’s communication is facilitated by an

Internet-based platform, allowing more efficient

interaction between the pharmaceutical and

healthcare products industry’s outlets (retail and

hospital pharmacies), wholesalers, suppliers and

manufacturers. Therefore, PeCC’s SC continues

operating with some cultural differences that might

affect the SC’s performance, but a complete

compatibility is not crucial.

3.2 Japanese Logistics

Manufacturing practices popularized by the

Japanese, such as total quality management and just-

in-time procurement, have become the worldwide

gold standard for producing high-quality products.

Many authors attributed this golden reputation on

supply chain management to its timely delivery

which in Japan means 100% of deliveries precisely

on time, and high quality means zero defects

manufacturing. One might expect the same results

can be obtained when Japanese methods of logistics

management (planning and arranging the transport

and storage of goods and materials) are applied

internationally. However, research shows that

Japanese-owned logistics companies in Europe

struggle to meet those expectations. A study has

been performed to investigate the corporate culture

clash that outcome from the recent extension of

Japanese firms’ supply chains to Western Europe

supply chains.

The report (Smagalla, 2004) survey 65

manufacturers' European distribution centres with

Japanese logistics management. The Japanese

logistics subsidiaries failed to deliver superior

logistics support. In follow-up interviews, the

Japanese managers described a clash of cultures

underlying their operations. Non-Japanese staff was

frustrated that, among other things, proposals moved

slowly through multiple channels before decisions

CORPORATE CULTURE: A NEW CHALLENGE TO E-SUPPLY CHAIN MANAGEMENT SYSTEMS

281

could be made. In Japanese corporate culture a new

proposal must go through multiple levels before

making any decision. Therefore, decision making

process is a slow process. However, once a formal

decision has been made the action are taken very

quickly and collectively without any delay,

objections or hesitations, because all management

levels from bottom to up have been involved from

the beginning. On the other hand, in Western Europe

corporate culture oral discussion is allowed, and

decision-making process does not follow a bottom-

up structure, thus it is made faster.

Moreover, in Japanese culture more commitment

is given for operational excellence where making

mistakes is extremely not acceptable action.

Therefore high-ranking Japanese managers spent too

much time apologizing for service failures and

focused less on planning. On the other hand, in

European corporate culture accept that humans can

make mistakes, thus allowed to argue with

customers. The interviews also revealed that

European managers did not fully understand the

ultimate payoff of the Japanese service strategy.

Hence, applying the Japanese logistics within

Western firms is a difficult task with continues exit

of cultural differences, and absence of compatibility.

In this case corporate culture is mediating the SC’s

performance, thus cultural differences has more

impact than the PeCC case.

4 CONCLUSION

In summary, this research article contends that the

value and relative importance of corporate culture

and strategic alliances have changed, as we migrate

from the traditional SCM approach to the e-SCM

perspective. Hence, this research suggests that

corporate culture is less effective when managing

cultural differences on e-SC environment. The

rationale behind this proposition is that the Internet

and electronic commerce, combined with supply

chain-related opportunities, have given way to an

environment where the benefits of both the dynamic

e-SC structure to form inter-organizational relations

and the traditional SCM philosophy can be jointly

realized. The focus on corporate culture also

provides management with a guideline for assessing

potential cultural changes necessary to reap fully the

benefits of operating in the e-SCM environment.

The proposed structure of e-SC partnerships and

alliances provides a framework for further research

into SC relationships, and ultimately the ever-

changing and dynamic e-SC environment. The next

step in the process of researching partnerships and

alliances, as well as corporate culture, in e-supply

chains is empirically to test the propositions

developed in this article. Such tests will allow for

increased academic knowledge on the impact of the

corporate culture on the management of SC

organizations with a better understanding of the

cultural changes necessary to manage the e-SC

organization effective. Overall, this research

contributes to the understanding of the dynamic and

volatile electronic commerce marketplace by

focusing on the corporate culture differences’

management necessary in this environment

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