LEVERAGING DIGITALLY ENABLED SUPPLY CHAIN
INTEGRATION CAPABILITIES TO ENHANCE
ORGANISATIONAL PERFORMANCE
AND COMPETITIVE ADVANTAGE
Development of a Conceptual Model
Faraz Bidar, Antonio Lobo and Railton Hill
Faculty of Business & Enterprise, Swinburne University of Technology, Hawthorn, Melbourne 3122, Australia
Keywords: Supply chain integration, IT infrastructure, Human IT capabilities, Supplier and customer coordination.
Abstract: There has been considerable research investigating the impact of IT on supply chain management of
organization. The reason for this research is to enable organizations to improve their supply chain networks,
thus enhancing overall productivity, performance and competitive advantage. We have attempted to use the
Resource Based View (RBV) to develop a conceptual model aimed at investigating the effectiveness of
supply chain integration capability of organization.
1 INTRODUCTION
Recently the concepts of supply chain design and
management have become a popular operations
paradigm. This has become more important with the
development of information and communication
technologies (ICT) that include B2B e-commerce
technology and Electronic Data Interchange (EDI).
Owing to the ever-increasing complexity of systems
driving buyer–supplier relationships, organizations
have been compelled to resort to electronic
communication systems. Many organizations are
increasingly faced with the problem of having to
manage not just internal operations and functions,
but a broader range of relationships with trading
partners. This need has led many to look at
implementing technological solutions to enable this
process(Power, 2005). For example, the Internet
increases the richness of communications through
greater interactivity between the firm and the
customer (Watson et al., 1998). Internet and web-
based technologies have also significantly improved
collaboration and integration among supply chain
partners permitting strong supplier integration for
inventory planning, demand forecasting, and order
scheduling (Sanders, 2007). In this paper we have
endeavored to develop a conceptual model using the
Resource Based View (RBV). This model
incorporates IT infrastructure and human IT
capabilities of organisations, which in our view are
drivers of total supply chain integration capabilities.
The anticipated outcome of enhanced supply chain
integration on organisations is superior performance
relative to their nearest competitors.
2 LITERATURE REVIEW
The development of information and communication
technologies provides better information sharing
among supply chain members which is vital for
close coordination and collaboration in supply chain
(Lee, 2000). This implies that information provides
linkages amongst members of a supply chain that
can be used to orchestrate all activities across the
supply chain. The visibility of information to all
supply chain members can overcome problems
associated with communication, inventory costs,
customer service, and utilization of capacity
(Croom, 2005; Disney & Towill, 2003). However in
achieving this, companies need to invest large
amounts of money redesigning internal
organizational and technical processes, changing
traditional and fundamental product distribution
channels, altering customer service procedures and
training staff (Motwani et al., 2000). Moreover, it is
238
Bidar F., Lobo A. and Hill R. (2009).
LEVERAGING DIGITALLY ENABLED SUPPLY CHAIN INTEGRATION CAPABILITIES TO ENHANCE ORGANISATIONAL PERFORMANCE AND
COMPETITIVE ADVANTAGE - Development of a Conceptual Model .
In Proceedings of the International Conference on e-Business, pages 238-243
DOI: 10.5220/0002230002380243
Copyright
c
 SciTePress

important to note that inter-company information
sharing among supply chain members involves
competitive implications, which emerge because
shared information affects the bargaining powers of
the business partners. Anecdotal evidence suggests
that suppliers fear that the visibility of information
between supply chain members will give
competitors an open window onto their pricing
structures and operational capabilities (Jauhiainen et
al., 2006)
In recent years, the number of research studies
relating to the impact of IT on supply chain
relationship and performance is increasing. Related
issues have been discussed within an
interdisciplinary dialogue linking disciplines such as
in marketing (Kim et al., 2006), supply chain
management (Sanders, 2005), information systems
management (IS) (Rai et al., 2006) and strategic
management (Kim & Mahoney, 2006). However,
empirical evidence is still fragmented and a
comprehensive conceptual framework to integrate
different theoretical perspective is lacking in the
literature (Gunasekaran & Ngai, 2004; Jean et al.,
2008) Particularly, , there is limited research
evidence on how and why information technology
can create competitive advantage and performance
gains for firms in a supply chain management
context. Jean et al. asserts that although there are
some optimistic views of the contribution of IT on
business value, yet there are differing views on the
impact of IT on organisational performance (Jean et
al., 2008). Some authors call this phenomenon the
“IT productivity paradox” (Brynjolfsson & Yang,
1996; Lim et al., 2004; Sriram & Stump, 2004). This
paradox implies that IT does not necessarily enhance
productivity or business performance; in fact, IT
may even be viewed as a commodity which can be
easily be replicated by competitors (Carr, 2003), and
hence diminishes the prospects to develop
sustainable competitive advantage. Large scale IT
implementation within critical business processes
may actually disrupt business efficiency if not
undertaken very carefully.
Barney believes that the ‘resource based view’
(RBV) is a framework which can potentially be used
to enhance our understanding of the effect of IT on
a firm’s performance (Barney, 1991). He suggests
that the performance of organizations can be linked
to resources and skills that are firm-specific, rare,
and difficult to imitate or substitute. The RBV,
presently a dominant theoretical perspective in
strategic management literature, focuses on costly-
to-copy attributes of a firm which are seen as the
fundamental drivers of performance (Bharadwaj,
2000).
Despite the conceptual work which has been done
linking different resource attributes to firm
performance and competitive advantage, ambiguity
and confusion still exist with the application of RBV
to business-value research. For example, it is still
not clear how different IT resources interact with
other capabilities and business processes to impact
firm performance and create competitive advantage.
Moreover, although the role of IT is critical in
supply chain management (SCM), the theoretical
and empirical research related to digitally enabled
supply chain integration phenomenon has been
limited and piecemeal (Sahin & Powell, 2002). Also
there is no comprehensive framework available on
the application of IT (particularly in business to
business e-commerce) for achieving an effective
SCM (Gunasekaran & Ngai, 2004).
3 RESEARCH
METHODOLOGHY
This paper, using the RBV theory, aims to build a
conceptual framework which depicts how IT
capabilities enhance business performance in supply
chain relationships (supply chain integration
capabilities). Ultimately we hope to develop the
conceptual model from a firm’s perspective,
exploring holistic electronic channel interaction with
its key suppliers and customers in the B2B context.
In doing so, we focus on the function of IT
supported inter-organisational interaction in supply
chain relationships.
Based on our conceptual model, we have developed
a survey instrument which is aimed at capture of the
perceptions of senior supply chain and/or logistics
managers of large organizations. We have obtained
in-principle support of a supply chain management
professional body which has 15,000 organizational
members. The organization promotes a system for
the adoption and implementation of electronic
commerce (EDI and RFID based technology) and
global standard bar coding among their members.
Using on-line quantitative survey techniques we
intend to obtain data on each operationalized
construct within our conceptual model, and on their
relationships, guided by the above hypotheses. Data
will be analyzed using the structural equation
modeling (SEM) technique. All the linkages and
LEVERAGING DIGITALLY ENABLED SUPPLY CHAIN INTEGRATION CAPABILITIES TO ENHANCE
ORGANISATIONAL PERFORMANCE AND COMPETITIVE ADVANTAGE - Development of a Conceptual Model
239

hypotheses associated with our conceptual model
will be empirically tested.
4 TOWARD A CONCEPTUAL
MODEL
As shown in Figure 1 the proposed conceptual
framework is rooted in the emergent stream of RBV
in IT business value research, as discussed in the
previous section. According to the RBV, we argue
that firms with specific IT capabilities which are
rare, valuable and not easy substitutable can enhance
inter-organisational capabilities and processes.
Therefore, these inter-organisational capabilities and
processes can improve a firm’s ability to integrate
with its key suppliers and customers. In turn, these
processes and capabilities would possibly lead to
higher organisational performance. We
conceptualise IT capability as infrastructure
(technological) and human capabilities, both of
which are associated with the ability of a firm to use
IT-enabled supply chain technologies in
information sharing, process transaction,
coordination of activities, and facilitating of
collaboration with suppliers and customers. The
various constructs and sub-constructs within our
conceptual model are now briefly explained.
4.1 IT Infrastructure Capability
IT infrastructure integration is conceptualized as a
formative construct with three sub constructs: Data
consistency, Cross-functional SCM application
systems integration (which are related to process
oriented integration in SCM) and B2B digital
platform (which is related to the use of internet
technology by a firm).
4.1.1 Data Consistency
Data consistency is defined as the degree to which
common data definitions and consistency in stored
data have been established across a focal firm's
supply chain. Data consistency in supply chains are
enabled by common data definitions for key entities,
such as customer and product, as well as automated
systems for accurate data capture. This consistency
should enable process integration (Huber, 1990;
Malone et al., 1987), including the integration of
information, financial, and physical flows. Some of
the practical examples of data consistency are
standard bar-coding systems such as GS1 bar-coding
standards, product numbering and EDI.
4.1.2 Cross-functional SCM Application
Integration
It is defined as the degree of real-time
communication of a focal firm's function-specific
SCM applications with each other and with related
Enterprise Resource Planning (ERP) and Customer
Relationship Management (CRM) applications. Such
connectivity enables the management of cross-
functional process dependencies in a supply chain
(Rai et al., 2006). Note that application integration is
concerned with a firm's ability to interface function
specific supply chain applications with each other in
real time.
4.1.3 B2B Digital Platform Capability
It is the ability of firm to use internet technologies
for sharing information and managing its supply
chains. (Devaraj et al., 2007) classified e-Business
technologies into three categories depending on their
focus. The first category of technologies focuses on
the demand side, and relates to allowing customers
to order online, configure or customize products
online, and check the status of orders online. The
second set of technologies focuses on the supply
side, and addresses the capability of the company to
find and select suppliers online and purchase
material through online auctions. Finally, the third
set of technologies focuses on collaboration with
customers or suppliers, and relates to web-based
EDI, forecasting, inventory replenishment, and
scheduling capabilities.
4.2 Human IT Capability
This construct contains three sub constructs, namely:
knowledge and skills, top management support, and
strategic planning.
4.2.1 Knowledge and Skills
Tan et al. describe human IT resources as the
availability of employees with adequate experience
and exposure to information and communications
technology (ICT) and other skills (such as
marketing, business strategy) that are needed to
adequately staff Ecommerce initiatives and projects
(Tan et al., 2007). Power says of the importance of
knowledge and skills of employees, “staff would
need to be trained in the use and potential of the
technology in order to be able to effectively apply
them within their environment, and in order to relate
effectively with trading partners”(Power, 2004).
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4.2.2 Top Management Support
enhances IT success by making resources available
for implementation, integrating IT with business
strategy and processes, and ensuring continuity in IT
investment over time (Powell & Dent-Micallef,
1997).
4.2.3 Strategic Planning
It is a critical task especially for IT-enabled SCM. It
has long-term implications on the performance of IT
in SCM systems (Gunasekaran & Ngai, 2004).
According to Powell et al. the importance of
selecting strategic opportunities requires real links
between management information system and
strategic planning. Additionally it requires
management ability to seek out, to find, and to
recognise these strategic opportunities (Powell &
Dent-Micallef, 1997).
4.3 Supply Chain Integration
Capability
Several authors recognize that integration is a
fundamental principle of SCM (Cooper et al., 1997;
Gould, 1998; Mabert & Venkataramanam, 1998;
Tan et al., 1998). Supply chain integration links a
firm with its customers, suppliers, and other channel
members by integrating their relationships,
activities, functions, processes and locations (Kim &
Narasimhan, 2002).
Frohlich and Westbrook studied the effect of web-
based integration on demand chain management’s
operational performance. In their study, web-based
supply chain integration was measured by two
constructs: (1) e-integration with suppliers and (2) e-
integration with customers (Frohlich & Westbrook,
2002).
They suggest that as supply chain integration
increases as a result of e-business, stronger relational
ties develop between the companies across supply
chains (Frohlich & Westbrook, 2001).
4.4 Firm Performance
In the conceptual model we propose that supply
chain integration capabilities act as a mediating role
between IT-related resources and firm performance.
Enhancing supply chain integration can impact firm
performance in several ways. (Frohlich &
Westbrook, 2002) distinguish web-based demand
chain integration from supply chain integration.
They report that manufacturing and services firms
adopting both demand integration and supply
integration had the highest operational performance
in delivery time, transaction costs, profitability, and
inventory turnover.
Bowersox et al. assert that supply chain integration
through its interface with customer relationship
management system allows a firm to respond to
customer inquiries, track customer orders, and
provide better after-sale service. This capability of a
firm is directly related to its market performance
(Bowersox et al., 1999).
Supply chain capabilities can also potentially
improve a firm’s financial performance through a
cost advantage over competitors. Information
sharing in the supply chain may reduce demand
uncertainty, and the cost of inventories in the
process of matching supply with demand in the
supply chain network (Frohlich, 2002).
5 MANAGERIAL IMPLICATIONS
AND CONCLUSIONS
The traditional way of managing supply chains has
changed dramatically over the last decade. We study
the business value of information technology and
digitalization on supply chain management and
supply chain relationships. This paper intend
developing a ‘best fit’ model which can be used by
organizations to leverage their SCM capabilities in
order to enhance their overall performance and
competitive advantage. Essentially using the
conceptual model, we intend to empirically validate
in the near future, organizations’ SCM capabilities,
(IT infrastructure and Human IT) in influencing their
relationships both with suppliers and customers.
This then would benefit them immensely to improve
and enhance their financial, market and operational
performance. As supply chain networks involve
several stakeholders, the efficiencies gained by using
‘best practices’ would obviously translate into
benefits for all concerned.
The ultimate desired managerial implication of
successful validation of the proposed model would
be to provide to business organizations specific
guidelines for the management, change and resource
of the various components found to contribute
within the proposed conceptual framework to
organizational performance. As mentioned, the
model could also be extended to take in up and
down stream relationships and dynamics.
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Figure 1: An integrated conceptual framework: IT resources, e-SCM capabilities and Firm Performance.
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