Supply chain managementpractices in the electronics

industry in MalaysiaConsequences for supply chain performance

Veera Pandiyan Kaliani SundramDepartment of Business, Universiti Teknologi MARA, Segamat, Malaysia

Abdul Razak IbrahimDepartment of Business, University Malaya, Kuala Lumpur, Malaysia, and

V.G.R. Chandran GovindarajuMalaysian Industry-Government Group for High Technology,

Selangor, Malaysia

Abstract

Purpose – The purpose of this paper is to explore the effects of different dimensions of supply chainmanagement practices (SCMP) on supply chain performance (SCP) in the electronics industry in Malaysia.

Design/methodology/approach – The study employed the quantitative method whereconvenience sampling and self-administrated survey questionnaires were sent to 125 electronicsfirms in Malaysia. The research framework was tested using variance-based structural equationmodel, the partial least squares (PLS) method.

Findings – The empirical results of PLS indicate that six of the seven dimensions of SCMP have asignificant positive effect on SCP. Furthermore, agreed vision and goals shows a greater influence thanother dimensions of SCMP.

Research limitations/implications – This study took a narrow focus solely on the electronicsmanufacturing industry with a relatively small sample size of respondents. Also the data were only collectedfrom single respondents in an organization. However, being the first study to explore the dimensions ofSCMP and how those dimensions relate to SCP, the study shapes the pathway for future research.

Practical implications – The results offer insights to SCM practitioners and policy makers on theimportance of SCMP to increase the competitiveness of manufacturing industry in terms of SCP.

Originality/value – This study employs a newly developed framework based on existing theoreticalarguments to empirically examine the relationship between two important factors, the SCMP and SCP.This study is perhaps one of the first to address the effect of SCMP that includes combination ofcomprehensive practices and system approach towards the overall performance of the supply chain.

Keywords Supply chain management practices, Performance, Manufacturing industries,Partial least squares, Malaysia, Electronics industry

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1463-5771.htm

The authors are grateful to James Kunaratnam for his comments and editorial work. They alsothank IAMOT conference participants, the anonymous referees and the Editor of this journal fortheir valuable comments.

This article is part of the special issue: “Supply chain networks in emerging markets” guestedited by Harri Lorentz, Yongjiang Shi, Olli-Pekka Hilmola and Jagjit Singh Srai. Due to anadministrative error at Emerald, the Editorial to accompany this special issue is publishedseparately in BIJ Volume 19, Issue 1, 2012.

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Benchmarking: An InternationalJournalVol. 18 No. 6, 2011pp. 834-855q Emerald Group Publishing Limited1463-5771DOI 10.1108/14635771111180725

1. IntroductionGlobalization has driven many corporations to widen their resources and capabilityenhancement from internal environmental practices to greater heights. Attention isincreasingly shifting towards external collaboration and networking outside theboundaries of the organization. This requirement has became essential in order to becompetitive locally and across the borders (Oliver and Webber, 1982; Lambert et al.,1998). As to achieving this, organizations need to have strong upstream anddownstream integration of their elaborate network of business relationships. Therefore,there is an imminent need for supply chain management (SCM) in all sectors across eachvalue chain entities. SCM has drawn increasing attention from many practitioners andscholars in recent years (Bechtel and Jayaram, 1997; Burgess et al., 2006) due to thebenefits of SCM for operational success (Croom et al., 2000). In the corporate world, inorder to meet customer requirement, the integration of various business processes suchas demand planning and forecasting, procurement, manufacturing and assembly,distribution and return of effective and efficient management of flow of resources frompoint of origin to point of destination has become important parts of SCM (Lummus andVokurka, 1999; Mentzer et al., 2001; New, 1997). SCM also includes the total connectivitybetween the upstream (supply and manufacturing) and downstream (distribution) valuechain entities in order to achieve competitiveness (Hong and Jeong, 2006; Boddy et al.,2000). Similarly, Hong and Jeong (2006) referring to the works of Carmignani (2009),Lambert and Cooper (2000) and Zhao and Simchi-Levi (2002), defined SCM as:

[. . .] is a set of approaches utilized to effectively integrate suppliers, manufacturers, logistics,and customers for improving the long-term performance of the individual companies and thesupply chain as a whole.

As such, the primary role of SCM is to meet customer requirement in terms of providingcustomer with the right product (Dale et al., 1994) of right quality (Carmignani, 2009;Brewer and Speh, 2000) and quantity (Chan et al., 2001) from a right source (Carr andSmeltzer, 1999) at right price (Chin et al., 2004), and finally the utilizing the righttechnology (Boubekri, 2001; Basnet et al., 2003). The strategic nature of SCM practices(SCMP) will be able to explain the dual purpose of SCM namely to improve theperformance of an individual organization and to improve the performance of the entiresupply chain (Wong et al., 1999). In order to be highly competitive and to achievesustainable profitability growth, SCM seeks close integration of internal functionswithin firm and external linking with suppliers, customers, and other channel members.This could be achieved through effective construction of various SCMP (Kim, 2006).Literatures have highlighted on the need to understand SCMP, which is becoming anessential prerequisite, to staying in the competitive global race and to grow profitably(Power et al., 2001; Moberg et al., 2002; Sezen, 2008).

However, in spite of the key role of SCMP, far limited and scant scholarly investigationhas been undertaken to present a theoretical viewpoint, supported by empirical evidence(Basnet et al., 2003), on how SCMP yield performance gains at firm level and improve thetotal supply chain performance (SCP). In addition, although some organizationshave realized the importance of implementing SCMP, they often do not know exactlywhat to implement, due to a lack of understanding of what constitutes a comprehensiveset of SCMP (Li et al., 2006b) especilly in emerging markets. For instance, in the case ofthe semiconductor industry in Malaysia, Rajagopal et al. (2009a) discussed on why

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firms were reluctant to focus on supply chain partnering despite its importance forperformance. Furthermore, given the failure of so many SCMP efforts to yield the desiredimprovements in performance, the question remains whether SCMP can positivelyimpact performance (Handfield and Nichols, 1998; Tan et al., 1999) especially in countriesthat are still developing. This study describes a research effort that addresses thesequestions. The study has a single main underlying purpose that is to disclose theinterrelationships among the two main constructs; SCMP and SCP. Accordingly, themain research question is of whether the SCMP affect SCP.

The theoretical gaps this study addresses are of importance because the SCMPconstruct developed in this study incorporates combination of new dimensions ofSCMP. For instance, due to the lack of understanding on other dimensions of SCMP,Li et al. (2006b) suggest future research to use additional dimensions like agreed supplychain leadership. This study identified new dimensions of SCMP which combinescomponents of SCMP proposed by Li et al. (2006b) (comprehensive model) and Min andMentzer (2004) (system approach model). In addition, to our knowledge, there are onlya limited number of studies (Kim et al., 2006; Rai et al., 2006; Wu et al., 2006; Zolait et al.,2010) available for examining the issue using the resource-based view (RBV) thatemphasize the role of firms’ capability and competence. Studies using RBV in thecontext of SCM is also limited to examining only the link between informationtechnology (IT) and SCM performance ( Jean et al., 2008). Therefore, this study proposeslinking the SCMP and SCP using RBV as the underpinning theory.

In addition to the above motivation, apparently, studies on the issues for emergingcountries are limited and there is no published studies on comprehensive SCMP inMalaysia, particularly in manufacturing industry. To date, the limited research conductedin the area of SCMP were largely concerning countries such as New Zealand (Basnet et al.,2003), Pakistan (Bhutta et al., 2007), Hong Kong (Chin et al., 2004), the USA (Gowen andTallon, 2003; Hong and Jeong, 2006), the UK (Holt and Ghobadian, 2009), and Turkey(Koh et al., 2007). Despite lacking developing countries’ case study, there are severalother reasons that prompted this study to focus on Malaysia, specifically the electronicsindustry. The electronics manufacturing industry contributed over a quarter ofmanufacturing value added and over 50 percent of manufactured export in Malaysia overthe period of 1980-2005 (Chandran, 2010). Owing to a small domestic market, electronicsmanufacturing is always driven by the export market through global orientation. Sincethe 1970s, electronics industries in Malaysia have also managed to attract huge amount offoreign direct investment. Now with the relocation of multinational corporations (MNCs),learning among local firms with respect to SCMP has especially improved among firmsthat have desires to benefit by integrating into the global supply chain. However, despite along and steady reputation of electronics manufacturing, effort to embed high-techenvironment and large-scale innovation is still moderate and slow. Thus, the notion thatSCMP will significantly contribute to SCP should not be taken for granted withoutempirically testing the relationship. As such, Malaysia offers an interesting case for amiddle income economies to examine the SCMP and its relationship to the performance.

The remainder of the study is organized as follows. Section 2 outlines the mainconceptual issues on SCMP and SCP. Section 3 describes the research model andexplicates the theoretical basis for the hypotheses development. Sections 4 and5 describes the research methodology and reports the results, respectively. Section 6presents the discussion and the conclusions.

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2. Main conceptual issues2.1 SCM practicesSCMP are viewed from a variety of different perspectives and multi-dimensionalconcept. SCMP have been defined as the set of activities undertaken in an organizationto promote effective management of its supply chain. Pioneering research conductedby Donlon (1996) describes the SCMP to include supplier partnership, outsourcing,cycle time compression, continuous process flow, and IT sharing. Tan et al. (1998a)empirically assessed the inclusion of purchasing, quality, and customer relationsdimensions to represent SCMP. Tan (2001) also recommended that SCMP to include theflow of materials and information and postponement (POS) strategy and masscustomization. Similarly, Tan et al. (2002) identify six other dimensions of SCMPthrough factor analysis namely supply chain integration, information sharing (IS),supply chain characteristics, customer service management, geographical proximity,and just-in-time capability. Chen and Paulraj (2004) use supplier-base reduction,long-term relationship, communication, cross-functional teams, and supplierinvolvement to measure SCMP. In addition, Min and Mentzer (2004) identify theconcept SCMP through system approach which includes dimensions such as agreedvision and goals, IS, risk and reward (RR) sharing, co-operation, process integration,long-term relationship, and agreed supply chain leadership. Subsequently, realizingthe importance of the SCMP, Li et al. (2005) conceptualizes, develops, and validates sixdimensions (strategic supplier partnership (SSP), customer relationship (CR), IS,information quality (IQ), internal lean practices, and POS) of SCMP and conducteda test on its relationship with the firms competitive advantage and performance(Li et al., 2006b). In reviewing and consolidating the literature, two important conceptsare identified to develop the total SCMP which will be able to structure completemulti-dimensional practices, comprising seven constructs. The seven constructsconstitute the combination of comprehensive model (Li et al., 2006b, 2005) and systemapproach model (Min and Mentzer, 2004). In other words, the proposed total SCMP inthis study will cover all the important dimensions such as upstream (SSP) anddownstream (CR) sides of a supply chain, information flow across a supplychain (IS and IQ), internal supply chain processes (POS), and system approach(Min and Mentzer, 2004) that includes agreed vision and goals and risk and awardsharing.

2.2 Supply chain performancePerformance measurement has been defined as a systematic process of effectively andefficiently quantifying a concept or an action (Neely et al., 1997). In SCM, performancemeasurement enables collaborative integration among the supply chain partners. Inaddition, there are short-term objectives of SCM (enhance productivity and reduceinventory and lead time) and long-term objectives (increase market share andintegration) (Li et al., 2006b; Lyons et al., 2004). The traditional methods focus solely onwell-known financial measures, which are best, suited to measure the value of simpleSCM applications. Unfortunately, evaluation methods that rely on financial measuresare not well suited for newer generation of SCM applications. As such, a balancedapproach to evaluate SCP is needed to measure the short- and long-term objectives thatincludes financial and non-financial aspect. Based on this discussion, in this study,following Koh et al. (2007) wider approach is adopted to measures SCM-related

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organizational performance. The construct measurements incorporate items that relatesto sales growth, costing accuracy, and coordination between department, supplier, andcustomer.

2.3 SCMP and performanceKim et al. (2006) stated that supply chain efficiency can only be realized through thevarious interaction of SCMP. This view is supported by others studies (Dawe, 1994;Ballou, 1992) and consensus emerged in that SCMP should shift from function tointegrative in order to value its performance effectiveness. Specifically, Kim et al. (2006)provided empirical evidence to show how SCMP could potential enhanceorganization’s competitive capabilities such as cost leadership, customer service, andproduct differentiation. Recent studies (Koh et al., 2007; Li et al., 2005, 2006b) alsoindicated that the SCMP have a common goal of ultimately improving organizationalperformance. For instance, Koh et al. (2007) identified that SCMP have significantdirect positive impact on organizational performance event in small and mediumenterprises. As a whole, previous literature forms a strong consensus on the positivelink between SCMP and SCP.

3. Research model and hypothesesFigure 1 shows the framework of the study. The framework proposes thatimplementation of SCMP, in electronics manufacturing industry, to influence the SCP.The influence of seven critical dimensions of SCMP on SCP namely supplier strategic,CR, IS, IQ, POS, agreed vision and goals, and RR sharing were examined. Consequently,based on the extent literature, the following sections discus the RBVs, the proposedrelationships between SCMP and SCP, and the hypotheses of this study. Likewise,Section 4 discusses the construct measurements for the proposed framework.

Figure 1.Framework of study

SupplierStrategic Partnership

Supply ChainPerformance

InformationSharing

Risk & RewardSharing

InformationQuality

Postponement

CustomerRelationship

Agreed Vision& Goals

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3.1 RBV and SCMP capabilityThe underpinning theory for the research framework is the RBVs of firm.RBV emphasizes the role of the firms’ internal and external resources for performance(Barney, 1991). Firm resources include assets, capabilities, organizational processes,firm attributes, information, and knowledge (Barney, 1991). The unique bundle ofresources owned by firms that are heterogeneous is expected to explain the variation infirm performances (Penrose, 1959; Wernerfelt, 1995). These resources includeorganizational capability (Praest, 1998) as well as the firms’ basic competence anddynamic capability such as coordination of different types of knowledge and integrationof multiple flow of technology (Prahalad and Hamel, 1990). One important form ofcapability is the SCM capability, i.e. SCMP capability (Sari, 2008; Trkman et al., 2007;Maheshwari et al., 2006; Sanchez-Rodrıguez et al., 2005). Wu et al.(2006) stressed thatsupply chain capabilities as a unique set of organizational capabilities and proposed foursuch capabilities namely, information exchange, coordination with partners, integrationability, and supply chain responsiveness. In this context, supply chain capabilities isviewed as the ability of the firms in identifying, utilizing and assimilating information,and resources to facilitate the SCP (Wu et al., 2006).

In this study, similar to the RBV definition of capability, SCMP are viewed as thefirms’ ability or potential ability to form SSP, establish CR and ability to shareinformation, vision, goals, and risks. In other words, this study conceptualizes SCMPas the supply chain capability to include the seven main constructs mentioned in theproposed framework. These capabilities can also be viewed as business coordinationand integration processes that are important to utilize the resources. As such,organizations embarking on supply chain need to focus on the ability of organizationalskills and processes in practicing those elements of SCMP. Thus, organizations thathave better SCMP are likely to develop a competitive advantage. Recent studies usingRBV in the context of SCM include Kim et al. (2006), Rai et al. (2006), Wu et al. (2006)and Zolait et al. (2010). These studies, although limited in the context of emergingmarkets, provide interesting accounts on the use of RBV in the context of IT, supplychain capability, and SCP. These studies also confirm that IT capability facilitates theSCP. Our study emphasizes RBV from the capability centric lens that focuses mainlyon SCMP as the main capabilities of firms.

3.1.1 Strategic supplier partnership. SSP is defined as the long-term relationshipdesigned to leverage the strategic and operational capabilities of individualparticipating organization to achieve significant benefits to each party (Li et al.,2006b, 2005). A true supplier partnership, encourages mutual planning and problemsolving efforts (Gunasekaran et al., 2001), and is critical in operating a leading-edgesupply chain. Azar et al. (2009) have investigated the impact of supplier management onthe performance and have found that effective supplier management is directly related tohigher level of performance conformance. Similarly, Boddy et al. (2000) and Bordonabaand Cambra (2009) also viewed supply chain partnering (which is the broader concept ofsupplier strategic partnering) as crucial asserting that such strategic collaboration willdefinitely enhance performance among supply chain collaborative partners. From theRBV perspective, SSP is viewed as the firm’s ability to coordinate and integrateresources with their respective partners. Griffith and Harvey (2001) consideredthe ability to coordinate inter-organizational relationships effectively as one of theimportant resources of the firms. Wu et al. (2006) views SSP as one of the key supply

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chain capability and refers SSP to the ability in coordinating the partner’stransaction-related activities. These capabilities improve operational efficiency andperformance between the partners. Similarly, proponents of RBV viewed the ability tointegrate strategies in an effort to jointly execute a collective activity as an importantcapability (Grant, 1996). In a similar notion, SSP represents this ability. Hence, strategicpartnering with suppliers will be able to enhance the supply chain efforts to betterperformances. The following hypothesis was developed on this premise:

H1. The SSP has positive relationship with SCPs.

3.1.2 Customer relationship. CR is defined as the practice to manage customercomplaints, build long-term relationships with customers, and improve customersatisfaction (Tan et al., 1998b). Close CR allows an organization to differentiate itsproduct from competitors and dramatically extend the value it provides to its customersand sustain customer loyalty through customer satisfaction (Cox, 2004; Dadzie andWinston, 2007). RBV views dynamic capability of the firms in terms of reconfigurationof resources to meet evolving customer demands (Zahra and George, 2002). The abilityto learn from customers and integrate with customers is a unique form of firm capability.The ability to respond to customers’ changing demands also helps firms create newproducts and processes. Therefore, maintaining good CR and getting customer feedbackrepresents valid dimensions of SCMP. This construct also captures the capability notionof RBV. Analyzing the empirical data collected from Hong Kong, Chin et al. (2004) haveidentified that maintaining effective CR will be able to promote open communicationamong members of supply chain and eventually engage in joint problem solvingeffort with long-term commitment. Therefore, customer relation practices can bringsignificant impact in managing the total value chain entities across the supply chain inorder to improve the performance of the total supply chain. Based on the abovediscussion, this study consequently proposes the following hypothesis:

H2. The CR has positive relationship with SCPs.

3.1.3 Information sharing. IS refers to the extent to which critical and proprietaryinformation is communicated among supply chain members with regards to market,product, and customer information (Mentzer et al., 2001; Li et al., 2006a). The RBVemphasize on the ability of firms in generating new knowledge and ability in facilitatingIS. Knowledge acquisition, assimilation, transformation, and exploitation whichare termed as absorptive capacity in the RBV literature are important dimensions oforganizational capability. Therefore, IS with partners is considered as importantelements of supply chain capability. Wu et al. (2006) conceptualized informationexchange as one of the constructs representing supply chain capabilities. The effort inproviding information and making it visible to other parties in the supply chain allowsfor faster and accurate business decisions that translates as a source of competitiveadvantage (Moberg et al., 2002). As such, IS is regarded as the terminator of “bullwhipeffect” (Fiala, 2005) that reduces the total cost of the supply chain in delivering efficientSCP (Gavirneni, 2006). This study therefore proposes the following hypothesis:

H3. The IS has positive relationship with SCPs.

3.1.4 Information quality. IQ refers to the extent of which the information flow andexchange is accurate, timely, adequate, and credible (Li et al., 2006b). Numerous studies

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(Li et al., 2006a; Lyons et al., 2004; Moberg et al., 2002) have shown that well-managedIQ within and across the organization will directly lead to improved SCP. Further,Forslund and Jonsson (2007), through their recent research, have indicatedthat different IQ deficiency could impact the usefulness of forecast and its ability toinfluence SCP. Hence, this will also provide managers to make precise businessdecision for effective management of supply chain (Raisinghani and Meade, 2005).Based on this assumption, the following hypothesis was developed:

H4. The IQ has positive relationship with SCPs.

3.1.5 Postponement. POS is defined as the practice of moving forward one or severaloperations or activities to a much later point in the supply chain (Beamon, 1998). Fromthe RBV standpoint, POS capability characterize the organizational and strategicroutines of firms by which they achieve new resources configuration especially inpostponing manufacturing activities to meet changing market conditions. Increasingly,POS has become a manufacturing strategy at firm level (Yeung et al., 2007). POS enablesan organization to meet a high level of product customization through productionflexibility (Hoek et al., 2001). Inventories are kept undifferentiated for a certain perioduntil customer demand is certain. Hence, this enables an organization to be highlyresponsive towards change in customer demand (Li et al., 2005, 2006b). Yang et al. (2010)compared the translating implementation of manufacturing POS to service POS and itsbenefit to members of the supply chain in total. Overall, POS can reduce inventory costalong the supply chain and eventually increase SCP (Yang et al., 2007). Based on existingwork, this study consequently proposes the following hypothesis:

H5. POS has positive relationship with SCPs.

3.1.6 Agreed vision and goals. Successful and effective chain requires collaborationamong partners (Boddy et al., 2000; Lambert et al., 1998). This collaboration is obtainedthrough IS, trust, and commitment. Unfortunately, this cannot be achieved withoutagreed vision and common goals (VIGOAL) among members of the supply chain(Spekman et al., 1998). RBV emphasize the need to develop capability in the forms ofintegrating strategies and coordinating collective activities between partners. Agreedvision and goals capture such forms of capability. Several authors (Cooper andEllram, 1993; Cooper et al., 1997a, b) concur strongly on the fact that agreed vision andgoals are the key component of SCM. Therefore, agreed vision and goals are imminentto orchestrate the roles and responsibilities of the supply chain members. Subsequently,this will ensure the success of supply chain practices in capturing a high level of SCP(Wisner, 2003). As discussed, this study proposes the following hypothesis:

H6. Agreed vision and goals have positive relationship with SCPs.

3.1.7 RR sharing. The term risk is defined as the extent to which there is uncertaintyabout whether potentially significant or disappointing outcomes of decisions(Finch, 2004). What most definitions of risk have in common are the three dimensions(Juttner, 2005):

(1) likelihood of occurrence of a particular event or outcome;

(2) consequences of the particular event or outcome occurring; and

(3) causal pathway leading to the event.

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Previous studies (Cooper and Ellram, 1993; Cooper et al., 1997a, b) regarded the RRsharing among the supply chain partners as a collective effort in managing SCM. Thecapability to share RR will help to divide the level of risk and return between strategicpartners on technology, customer, or market-focused initiatives (Hall, 1999; Ritchie andBrindley, 2007) whereby, it provides trustworthy and coordinated relationshippartnering among members of supply chain. As a result, RR sharing practices act as animpetus for effective supply chain (Ellram and Cooper, 1990). Consequently, in the longrun, this will be able to improve the SCP (Towill, 2005). Therefore, the followinghypothesis was developed:

H7. RR sharing has positive relationship with SCPs.

4. Research methodology4.1 Development of the survey instrumentThe questionnaire for this study consisted of three main sections, namely thebackground of the company, the motivation, and implementation of SCMP and specificquestions designed to measure the SCP constructs. A total of seven-dimensionalconstructs (Table I) perceived to be important for effective SCMP were proposed torepresent the SCMP. Construct measuring SSP, CR, IS, IQ, and POS follows Li et al. (2005,2006a, b). As mentioned earlier, following Min and Mentzer (2004) and Bowersox et al.(1999), we included two other dimensions of SCMP namely, agreed vision and goals, andRR sharing.

Overall, this new SCMP are measured by considering SCMP from within the wholesystem of supply chain that includes upstream, downstream, internal process, acrosssupply chain, and system orientation. Hence, the new SCMP could be viewed as a morecomprehensive concept in comparison to the narrow view taken in previous researches(Alvarado and Kotzab, 2001; Basnet et al., 2003). All items of SCMP are measured usingseven-point scales ranging from “strongly disagree” to “strongly agree”. Likewise,construct measuring dimensions of SCP were adopted from Koh et al. (2007). We use aseven-point scale as a unit of measurement ranging from “definitely worse” to“definitely better” in relative to their major competitor.

The collective evidence from past literatures (Li et al., 2005, 2006b; Min and Mentzer,2004; Bowersox et al., 1999; Koh et al., 2007) suggested that the SCMP and SCP constructsdemonstrate good measurement properties. Table I summarizes the variables andnumber of measurement items and supporting literature for each measurementvariable[1]. In addition, the questionnaire was pre-tested by two professionals in practicefor accuracy and validity of the question interpretation (content validity). Based on theopinions of the professionals and significant support from the previous literatures wefind that the measurement fulfill the content validity and clarity of content.

4.2 The sampleA total of 600 electronics firms were randomly selected from the Information Service ofStatistical Department, Malaysia. The survey, through the mailed questionnaire, wascarried out for a period of six months in early 2009. As a measure to speed up andimprove response rate, follow-up calls with a promised presentation of findings torespective firms for managerial insights yielded encouraging results. However, onlywhen there is no significant difference between the initial respondents and respondents

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after the follow-up calls, will the findings be representation of the population. We testedfor such difference between the groups but were unable to find any significantdifferences[2]. Finally, after eliminating incomplete survey, there were 110 completeand useable responses, representing a response rate of 18 percent. Demographic datashowed in Table II depict that majority (60.3 percent) of the firms represent

Construct DescriptionNumbersof items Sample survey question Source

SSP A long-term relationshipdesigned to leverage thestrategic and operationalcapabilities of individualparticipating organizationto achieve significantbenefits to each party

6 We regularly solveproblems jointly with oursuppliers

Li et al.(2005, 2006a, b)

CR A practices to managecustomer complaints, buildlong-term relationships withcustomers, and improvecustomer satisfaction

5 We frequently measure andevaluate customersatisfaction

Li et al.(2005, 2006a, b)

IS IS refers to the extent towhich critical andproprietary information iscommunicated to amongsupply chain members withregards to market, product,and customer information

6 Our trading partners keepus fully informed aboutissues that affect ourbusiness

Li et al.(2005, 2006a, b)

IQ IQ refers to the extent ofwhich the information flowand exchange is accurate,timely, adequate, andcredible

5 Information exchangebetween our tradingpartners and us is timely

Li et al.(2005, 2006a, b)

POS POS is defined as thepractice of moving forwardone or several operations oractivities to a much laterpoint in the supply chain

4 We delay final productassembly activities untilcustomer orders haveactually been received

Li et al. (2005,2006a, b)

VIGOAL An effort to establishingcommonly agreed visionamong supply chainpartners to achieve specificcommon objectives

4 Our supply chain membershave common, agreed togoals for SCM

Min andMentzer (2004)andBowersox et al.(1999)

RR sharing A mutual sharing of riskfactors and reward factorsamong members of supplychain

3 Our supply chain membersshare risks and rewards

Min andMentzer (2004)andBowersox et al.(1999)

SCP A performance measurewhich enhances short-termgoals (reduce cost) and long-term goals (increase marketshare and integration)

5 How did your businessperform over the last threeyears relative to their majorcompetitors in terms ofincrease in sales?

Koh et al. (2007)

Table I.Variable measurement

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the component electronics industry. In terms of employment size the majority of thefirms are in the category of 251-500 workers and greater. Almost 73 percent of theselected firms have between 10 and 20 years of operational experience.

4.3 Analytical procedures and variable measurementsData processing involve two stages. In the first stage, descriptive statistics wasemployed to identify the characteristics of the sampled firms. The second stageinvolved estimating the measurements validity and reliability, structural parametersof the structural equation model, and testing the research hypotheses using the partialleast squares (PLS) method (Chin et al., 2003). PLS method were preferred over thebetter-known LISREL method because its structural equation model allowed us to testthe research model and, at the same time, assess the properties of the underlyingempirical model. PLS has enjoyed increasing popularity in recent years because of itsability to model latent construct under the conditions of non-normality and ability oftesting the theoretical framework partially without needing to fully crystallize themodel (Chin, 1998). PLS is known to be particularly advantageous in the initialdevelopment and assessment phase of theory building (Fornell and Bookstein, 1982).Furthermore, the PLS method is more robust since its does not require either a largesample or a normally distributed data (Fornell and Larcker, 1981).

Convergent validity indicates the extent to which the measures of a construct thatare theoretical related are also related in reality. Convergent validity can be evaluatedby inspecting the factor loadings of the measures on their respective constructs (Chin,1998; Hulland, 1999), and the reliability of the measures can be assessed usingcomposite reliability and average variance extracted (AVE). Table III shows the resultsof the psychometric properties of the measurements. Most of the factor loading aresatisfactory with the cutoff value above 0.7, except that the factor loading of two itemsare below the cutoff value but yet acceptable. Thus, overall measurement items haveadequate item reliability. Similarly, for convergent validity (also referred to ascomposite reliability), the AVE should be at least 0.5 and the CR should be greater than0.6 (Bagozzi and Yi, 1988). In all cases, the measurement model seems to have adequateconvergent validity and reliability.

Discriminant validity can be verified with the square root of the AVE for eachconstruct higher than any correlation between this construct and any other construct

Business description % Number of employees %Component 60.3 Fewer than 50 –Industrial electronics 22.3 50-100 13.2Consumer electronics 17.4 101-250 18.4

251-500 39.5501 or greater 28.9

Annual sales (million) % Operating experience (years) %Less than 1 – Less 1 –1-5 18.4 1-5 5.35-10 23.7 6-10 13.210-50 34.2 10-15 years 39.550-100 15.8 15-20 years 34.2More than 100 7.9 More than 20 years 7.8

Table II.Description of thesampled firms

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Construct and items Loading SE t-valueSSP, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.693Organization considers quality as number one criterion in selectingsuppliers 0.906 0.011 81.223Organization regularly solve problems jointly with its suppliers 0.900 0.009 90.345Organization helps its suppliers to improve their product quality 0.851 0.055 9.976Organization has continuous improvement programs that include itskey suppliers 0.615 0.125 6.991Organization include its key suppliers in its planning and goal settingactivities 0.775 0.068 7.773Organization actively involves its key suppliers in new productdevelopment processes 0.777 0.033 8.855CR, a ¼ 0.655, CR ¼ 0.787, AVE ¼ 0.692Organization frequently interacts with customers to set its reliability,responsiveness, and other standards 0.815 0.048 17.022Organization frequently measures and evaluates customer satisfaction 0.804 0.054 15.989Organization frequently determine future customer expectations 0.811 0.039 18.765Organization facilitates customers’ ability to seek assistance from it 0.885 0.044 17.567Organization periodically evaluates the importance of its relationshipwith its customers 0.877 0.066 14.897IS, a ¼ 0.774, CR ¼ 0.839, AVE ¼ 0.637Organization informs its trading partners in advance of changingneeds 0.913 0.023 36.659Organization’s trading partners share proprietary information withyour organization 0.768 0.065 18.222Organization’s trading partners keep your organization fully informedabout issues that affect its business 0.816 0.044 21.677Organization’s trading partners share business knowledge of corebusiness processes with your organization 0.749 0.066 18.678Organization and its trading partners exchange information that helpsestablishment of business planning 0.782 0.053 14.750Organization and its trading partners keep each other informed aboutevents or changes that may affect the other partners 0.668 0.095 9.878IQ, a ¼ 0.742, CR ¼ 0.825, AVE ¼ 0.707Information exchange between organization and its trading partnersis timely 0.825 0.055 12.544Information exchange between organization and its trading partnersis accurate 0.742 0.023 14.893Information exchange between organization and its trading partnersis complete 0.882 0.047 12.672Information exchange between organization and its trading partnersis adequate 0.767 0.036 14.436Information exchange between organization and its trading partnersis reliable 0.876 0.062 12.725POS, a ¼ 0.615, CR ¼ 0.773, AVE ¼ 0.834Organization’s products are designed for modular assembly 0.928 0.453 2.833Organization delays final product assembly activities until customerorders have actually been received 0.743 0.339 2.987Organization delays final product assembly activities until the lastpossible position (or nearest to customer) in the supply chain 0.777 0.375 2.118VIGOAL, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.611Supply chain members have common, agreed goals for SCM 0.711 0.044 17.342

(continued )

Table III.Psychometric properties

of measuresof independent and

dependent variables

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(Fornell and Bookstein, 1982; Fornell and Larcker, 1981). As shown in Table IV, eachconstruct shares a greater variance with its own measures than with any other construct.This reveals that each construct is more closely related to its own measures than to thoseof other constructs and thereby confirming the discriminant validity (Fornell andBookstein, 1982; Fornell and Larcker, 1981).

5. ResultsIn this section, we discuss the current SCMP among electronics firms in Malaysiafollowed by the empirical results. Limited studies are available on the current SCMPfor the electronics industry in Malaysia. Nevertheless, these studies reveal that SCMPare indeed significantly undertaken by MNCs and its suppliers especially in electricaland electronics industry. Rajagopal et al. (2009a) using a case study approachhighlighted the efforts in improving supplier’s relationship, IS, and CR in two MNCsand among its suppliers. However, the study also cautions that the level of SCMPdiffers between the MNCs. Lacking the empirical evidence on the detail SCMP for theentire electronics industry, we first discuss the current state of SCMP in the electronicsindustry in Malaysia. Table V reports the mean values of all dimensions of SCMP.

Supply chain members are actively involved in standardizing supplychain practices and operations 0.881 0.021 15.999Supply chain members clearly define roles and responsibilities of eachothers cooperatively 0.834 0.027 15.611Know which supply chain members are responsible for what activitywithin the supply chain 0.772 0.032 16.912RR sharing, a ¼ 0.819, CR ¼ 0.864, AVE ¼ 0.654Supply chain members share risks and rewards 0.838 0.439 6.839Supply chain members share research and development costs andresults with each other 0.745 0.375 7.566Supply chain members help each other financial capital investment 0.766 0.411 7.198SCP, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.803More accurate costing 0.917 0.023 28.871Increase in coordination between departments 0.967 0.009 34.082Increase in coordination with suppliers 0.866 0.016 31.593Increase in coordination with customers 0.867 0.021 29.822Increase in sales 0.948 0.011 30.899Table III.

SSP CR IS IQ POS VIGOAL RR SCP

SSP 0.832CR 20.129 0.832IS 0.201 0.083 0.7981Q 0.178 0.037 0.372 0.841POS 0.377 0.016 0.267 0.400 0.913VIGOAL 0.307 20.134 0.378 0.277 0.299 0.781RR 0.276 0.177 0.114 0.267 0.323 0.416 0.809SCP 0.112 20.023 0.247 0.223 0.369 0.488 0.487 0.927

Note: The italics items on the diagonal represent the square roots of the AVE, and off-diagonalelements are the correlation estimates

Table IV.Correlations betweenconstructs

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The results indicate that mean scores of SSP, IQ, and IS are much higher compared toother dimensions of SCMP. Relatively, mean scores of CR and PST were the lowest,indicating a lack in the use of such practices. However, consumer electronics firmshave relatively higher CR scores than component and industrial electronics firms. Thisis consistent with previous studies (Rajagopal et al., 2009a; Omar et al., 2009;Sambasivan and Jacob, 2008) that highlighted the significant use of many of the SCMPamong electronics firms in Malaysia. As a whole, we can conclude that electronicsfirms in Malaysia are inclined to engage in SCMP. The electronics industry in Malaysiais driven by few large MNCs that are export oriented. These MNCs increasingly engagein SCMP to form a global supply chain (Sambasivan and Jacob, 2008) and also requireits suppliers (including local suppliers and producers) to do the same. Indeed, SCM isseen as a tool to cope with intense competition and pressure to bring the product tomarket faster (Rajagopal et al., 2009a). The government’s incentives and support alsoprepares local industries to adopt SCM in Malaysia (Rajagopal et al., 2009b).

We used a bootstrapping procedure to test the effects and the statistical significanceof the parameters using t-test in the structural model (Chin, 1998). The varianceexplained (R 2) and the significance of the path coefficient indicates the quality of PLSmodel (Chin, 1998; Saade, 2007). Table VI shows the results of the model. The R 2 valuewas 0.469 and it indicates that the model explains a good amount of variance in SCP. Theresults provide significant support for some of the hypotheses proposed in this study.SSP, IS, IQ, POS, agreed vision and goals, and RR sharing were found to have significantpositive effects on SCP. However, CR, although positive, lacks the significance.Managing CR require firms to extensively invest in enabling technology that supports

Electronics(overall) Component Industrial Consumer

Construct Mean SD Mean SD Mean SD Mean SD

SSP 5.84 0.56 5.84 0.54 5.85 0.65 5.80 0.55CR 3.92 0.76 3.92 0.78 3.73 0.89 4.10 0.46IS 5.20 0.99 5.15 0.91 5.24 1.25 5.27 0.94IQ 5.97 0.85 6.05 0.71 5.75 1.15 5.91 0.91POS 3.68 0.83 3.71 0.73 3.45 0.95 3.83 0.25VIGOAL 5.41 0.29 5.39 0.57 5.43 0.90 5.46 0.56RR 5.17 0.98 5.20 1.15 4.94 0.96 5.33 0.43SCP 5.28 0.87 5.24 0.84 5.37 1.14 5.30 0.57

Table V.SCMP in electronics

industry in Malaysia

Dimensions Path coefficient (b) t-value Hypotheses

SSP 0.104 * 2.216 SupportedCR 0.013 0.355 Not supportedIS 0.176 * * 2.745 SupportedIQ 0.125 * * 2.978 SupportedPOS 0.014 * 0.598 SupportedVIGOAL 0.377 * * * 7.459 SupportedRR 0.144 * * 2.416 Supported

Note: *p-value , 0.01, * *p-value , 0.05, and * * *p-value , 0.001, respectively

Table VI.Results of the PLS

analysis (pathcoefficients, t-values)

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customer interactions with firms ( Jean et al., 2008). Challenges in effectiveimplementation of such technology may have limited the building of better CRs thatreduces its significance. Moreover, CR may also have an indirect effect on SCP moderatedby technological initiatives ( Jean et al., 2008). Indeed, Rajagopal et al. (2009a) lucidlyargued on the role of technology in enabling SCMP in two electronics MNCs in Malaysia.In fact, it should be noted that the benefits of all SCMP, in this study, could have beenpotentially more significant if firms pose considerable IT capabilities ( Jean et al., 2008).We suggest that future studies in emerging markets consider the impact of IT infacilitating the SCMP towards achieving greater performance.

Agreed vision and goals (b ¼ 0.377, p , 0.001), are the most influential factors indetermining the SCP suggesting that VIGOAL is a powerful predictor of SCP.For instance, in Malaysia several firms share common goals like enabling thenotification of shipping documentation via RosettaNet. This has enabled members ofthe supply chain to electronically correspond shipping documentation to the localcustoms officials. The established mutual goals benefited all within the system. Agreedgoals also create mutual participation via planned collaboration and co-operation.When one firm moves to achieve its goals, the other member of the supply chain shoulddo the same. Other factors having greater effects include IS (b ¼ 0.176, p , 0.01),RR sharing (b ¼ 0.144, p , 0.01), and IQ (b ¼ 0.125, p , 0.01). Similar to previousstudies ( Jayaram et al., 2000; Mason-Jones and Towill, 1999), IS and IQ are found to besignificant factors in enhancing the SCP of electronics firm in Malaysia. Additionally,Zhou and Benton (2007), also supported the proposition that good informationmanagement can lead to right supply chain practices and eventually create an effectiveand efficient supply chain. The findings of this study also concurs with the studiesfrom Cooper and Ellram (1993), Cooper et al. (1997a, b) that there is significantrelationship between RR sharing practices and performance.

6. Discussion and conclusionThis study has provided empirical justification for a framework that identifies sevenconstructs of SCMP and describes the relationship among SCMP and SCP within thecontext of electronics manufacturing in Malaysia. Previous studies supporting theimportance of SCMP mostly used case studies and relate SCMP to organizationalperformance and not SCP. The major contribution of the present study is thedevelopment of a set of SCMP constructs through comprehensive combination and,accordingly, examining its impact on SCP. Based on a survey data of 110 electronicsmanufacturing firms, the research framework was tested using PLS method, which is avariance-based structural equation modeling approach. This study carries more weightespecially for generalization purpose due to the limited quantitative approach in theextant literatures. As a whole, effective SCMP have important implications for SCP.

This study offers a number of managerial implications. First, it provides SCMmanagers with an impeccable formula for evaluating the effectiveness of the newcombination of SCMP. Second, the analysis also indicates that SCMP mightdirectly influence SCP. Theoretically, this study offers empirical evidence suggestingthat even in emerging markets better SCMP can yield good performance. Thesefindings offer scholars new avenues for future research and consequently providemanagers important insights on the effectiveness of SCMP. In the long term, thesuccess of electronics manufacturing firms in Malaysia are heavily dependent on its

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strategic supply chain factors such as agreed vision and goals, RR sharing, IS, and IQ.As such this study, inline with (Chandra and Kumar, 2000) concludes that the entirevalue chain along the upstream and internal process of the supply chain has to beeffective. Since there are practices which are not consistent in their impact towardsSCP, for instance customer relation, there is a need to test this practice for any indirectimpact on SCP. However, this test will need to take consideration of the role ofmediating effects of other variables such as IT initiatives, supply chain integration,or supply chain competitiveness. Apart from this, future research can also considerstudying the synergies between total quality management practices and knowledgemanagement as well as measuring how practices of other disciplines in combinationwith SCMP could affect the performances of supply chain. Future research can alsofocus on expanding the research scope to different industries or investigate thecomparative implementation situations between different industries in terms of typesof business operations, ownership, and firm sizes.

Among the limitations of this study is the use of only one informant per firm, whichmight be a cause for possible response bias. Thus, caution should be exercised wheninterpreting the results. Future research should endeavor to collect data from multiplemembers across the supply chain. Furthermore, this study reports from a questionnairesurvey at one point in time and lacks trends or changes. Since only the electronics industrywas considered, the conclusive evidence reported in this study is also industry specific.Despite these limitations, however, the new insights of this study could potentially inspirefurther empirical work within this area especially in emerging markets.

Notes

1. Details of the items measuring each construct are reported in Table III.

2. Data not reported due to space constraint but can be made available upon request.

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Corresponding authorV.G.R. Chandran Govindaraju can be contacted at: vgrchan@gmail.com

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