You are on page 1of 23

Supply Chain Management Practices: Malaysian Perspective

Arun Kumar Tarofder


Faculty of Business Management, Binary University College
arun@binary.edu.my
Mr. Ashiquzzaman
Faculty of Management, Universiti Tun Abdul Razak
ashiqprime@gmail.com
Abstract

Supply chain management (SCM) is a new concept involving the integration of all
the value creating element in the supply chain, manufacturing, and distribution
processes: from raw material extraction, through the transformation process, to end
user consumption. The advent of information technology and intense global
competition has enticed many world class manufacturers and service providers into
adopting an integrated strategic approach to supply chain management. Although
many supply chain management efforts have failed to achieve the desired results, it
has become a significant strategic tool for firms striving to achieve competitive
success. Using a survey of senior top management professionals in the Malaysia,
the study tries to determine the contemporary practice and concerns of supply chain
management.
Our results reveal that fourteen activities, which can be improved by supply chain
performance, are related mostly with time based customer needs and demand,
communication with members. It proves that by the supply chain functions firms
can be more effective in operational activities along with providing more
satisfaction to their customers. Lack of trust and lack of cooperation are the main
hindrance for implementing SCM among Malaysian organizations according to our
results. Results regarding IT solutions show a clear shift to areas which involve
networking with business partners. More precisely, the future areas of operations
for IT solution include web technologies, distribution networking planning, lot
tracking, and freight cost management. In our study, we found that most of the
organizations are involved in outsourcing activities especially, warehousing and
transportation. And they involve these activities due to lower cost.

Key Word: Supply Chain Management, Malaysia


Introduction
Today’s businesses have extremely complex. The interplay of three Cs’, namely,
Consumers, Competition, and Convergence, have thrown open new challenges for
organizations all over the world. The competitive pressure leads product changes,
super change by shorting products and technologies development lifecycles.
Convergence shifts the balance of power in favor of consumers thereby giving way
to globalization of business and integration of economics. To combat these risks
and challenges, organizations round the globe are re-organizing and streamlining
their supply chain.
Supply Chain Management (SCM) is a new concept involving the integration of all
the value creating element in the supply, manufacturing, and distribution processes
from raw material extraction, though the transformation process, to the end user
consumption. SCM activities are insisted by the ideals of customer service,
compression of lead time, and inventory reduction.
Supply Chain Management concept has begun to surface in the late 1980s (George
et. al. 2005). The first is the essential of the never satisfied customer—a consumer
who wants more options, flexibility, better quality and so on at a lower price. The
second emergence is the shrinking product life cycle, which is typically driven by
constantly changing technology. The third important development in SCM’s
evolution is the emergence of newer, faster, and cheaper computer software and
hardware. Advancement of technologies has enabled firms to link and integrate not
only internal activities but also the activities of suppliers and customers (George et.
al. 2005). All of these three developments lead the concept of SCM by encouraging
managers to rethink their reliance on owing and controlling operations internally.

Market Report
IDC recently concluded a study on the competitive analysis of server vendors in
Malaysia, entitled “Malaysia Server 2005 – 2009 Vendor Analysis: A Competitive
Vendor Analysis”. In this study, IDC notes that a total of 24,306 units of servers --
high-end, midrange, and volume servers -- valued at US$186 million were shipped
in Malaysia in 2004. The total Malaysian server market grew marginally by 0.8%
in unit shipment and increased by 6.3% in revenue from 2003 to 20041. Using the
IDC Leadership Grid, the study reveals the expected positions of each vendor
within the enterprise server market. Market sizing and forecasts are also presented
to provide better knowledge of potential markets by server range within the
enterprise server area. The Leadership Grid places IBM and HP as the most capable
companies among three high-end server vendors in Malaysia. Similarly, it also
places these two companies as the most capable companies among the midrange
server vendors in the country. There are five notable volume enterprise server
vendors in the Malaysian market; with three multinational vendors taking the
leadership positions while two other notable local players are placed in the crisis
potential corner. This IDC study provides a market sizing of and a five-year
forecast on the Malaysia enterprise applications market, which consists of
enterprise resource management (ERM), customer relationship management
(CRM), and supply chain management (SCM) applications. It also includes a
segmentation of the market by vendor ranking, vertical, channel, and customer size.
This study also examines the major market trends, accelerators, and inhibitors that
are emerging in the country. "The Malaysia enterprise applications market grew
2.8% year on year in 2003 to stand at US$96.69 million. Most vendors reported
that 2002 was a difficult year in terms of customer acquisition. In 2003, both CRM
and SCM applications recorded comparatively higher growth rates," says Jun-Fwu
Chin, senior analyst, IDC Malaysia2.

Research Objectives
This research study is takes up to address the concerns raised by managers, expert
professionals and academicians on issues of supply chain at the national level.
However, this study is under taken the following objectives

1
(http://www.idc.com.my/PressFiles/ServerShipments.asp)
2
(http://www.idc.com/getdoc.jsp?containerId=MY381144L)
• To know the current practices of supply chain management
followed in Malaysian Organizations.
• To identify the drivers of enhanced supply chain practice among
them.
• To identify the barriers of supply chain activities among theses
organizations.

Significance of the Research


With the characteristics of supply transformation and demand, a supply chain is
simply a network of material processing (Davis 1993). Therefore, SCM is as a
strategic tactic to acquire a sustainable competitive advantage by reducing
investment without compromising with customer satisfaction (Lee and Billington,
1992). SCM very much focuses leveraging the skills, expertise, and capabilities of
the firm who comprise this competitive network referred to while reduced cost are
typically a result. While many studies have been conducted of supply chain
management practice in specific countries and regions (Gilmour et. al., 1995;
Hanfield and Withers, 1993; Ainworth and Gold, 1995; Byrne and Markham, 1993;
Cilliers and Nagel, 1994; McMullan 1996; Cox, 1999), no study to data has
examined in it’s entirely. This study presents the result of recently conducted
nation-wide research survey on supply chain management practice among
Malaysian Organizations.

Literature Review
In the 1950s and 1960s, most manufacturers emphasized mass production to
minimize unit production cost as the main operation strategy, with little products or
process flexibility. Development of new products was slow and dependent
exclusively on in-house technology and capacity. It was very risky to share
technology with the stakeholders even imaginable, thus little emphasis was placed
on cooperative and strategic buyer-supplier partnerships. MRP had been developed
in the mid of 1970s and managers realized the effect of huge work-in-progress
inventories on manufacturing cost, quality product development, and delivery lead-
time. The concept of globalization and competition forced organization to offer
lower cost without considering quality with greater design flexibility. Therefore,
manufacturers utilize Just-in-time and other available management programs to
improve manufacturing efficiency and cycle time. All of these made top
management to rethink about the potential benefits and importance of strategic and
cooperative buyer-supplier relationships. And the concept of Supply Chain
Management had emerged.
The advent of SCM continued into the 1990s as organizations further extended best
practice in managing corporate resources to include strategic suppliers and the
logistic functions. Novack et. al. (1995) and Tyndall et. al. (1998) concerned that
SCM is integrated and synchronized “operational efforts” to improve flow of
materials and products. Some other authors (LaLonde, 1997; Ross, 1998;
Davenport, 1993) consider that SCM is a “management process.” Handfield and
Nichols (1999) define Supply Chain as “….... encompasses all activities associated
with the flow and transformation of goods from the raw materials stage
(extraction), through to the end users as well as information flows.”
Harwick (1997) stated that SCM is a philosophy that extends traditional internal
activities by embracing an inter-enterprise scope, bringing trading partners together
with the common goal of optimization and efficiency. Harland et. al. (1999)
suggested a four stage supply chain typology, outlining four primary usages for the
term Supply Chain Management.
• Integrates the internal Supply Chain business functions involved in
the flow of information and material from start to end such as inbound to
outbound ends of the business,
• The management of two party relationships with immediate
suppliers.
• The management of a chain of business including all stakeholders.
• The management of a network of interconnected businesses
involved in the ultimate provision of product and service package required
by end customers.

Classification of Supply Chain Management


Saunders (1997) describes supply chain management as containing different
relationships between suppliers and as controlling supplies in the supply chain. He
stresses that supply chain management does not form company organizations.
Monczaka et al. (1998) in turn see that a strategic view in supply chain
management is important. The chain has to contain elements that guarantee a fast
information flow between each of the member elements. The whole supply chain
must also be agile and flexible in order to compete effectively and to respond
quickly to changing customer demands. Kuglin (1998) has found that supply chain
management varies from one enterprise to another. His definition of supply chain
management for a manufacturer stresses the concept of extended enterprise, which
means that a company produces a product and/or service that is, low-cost of high-
quality and delivered quickly to the marketplace. In this way customer-centred
supply chain management extends the concept to cover the whole life cycle of the
product and service, as well as customer satisfaction. The different definitions and
views of supply chain management mentioned above do not cover all supply chain
management descriptions but a final and overall description has not yet been made
(Croom et al. 2000, Saunders 1995, Cooper et al. 1997, Cox 1997). However, they
all give us a possibility to find important constructs behind supply chain
management. According to our analysis the impact of the supply chain management
seems to lie on two constructs: The Knowledge Level of the Supply Chain
(Commercial Challenge) and the Utility Level of Technology in the Supply Chain
(The Technological Challenge). These constructs form the basis of our research
dimensions.
The Knowledge level of the Supply Chain -construct describes the knowledge
level in the supply chain. If the knowledge level is high all the individual members
of the supply chain are conscious of their own position in the supply chain and they
know how to add value to the supply chain. A low level means that the member
companies do not know or understand the meaning of the supply chain concept (see
Figure 1).

The Utility Level of Technology in the Supply Chain -construct describes what
state of technological readiness the members of the supply chain possess. If the
level of readiness is high, the use of IT between the members is formalized and
structured (e.g. extranet, EDI etc.). If the utility level is low a single member may
possess good technological readiness but no uniform system or policy for the use of
IT exists between the various functions in the supply chain. By using these two
constructs as factors, it was possible to roughly classify supply chain management
into four different management categories, i.e. Functional Management,
Information Network Management, Technical Network Management, and Dynamic
Network Management (Figure 1).
Functional Management - Companies that follow Functional Management are
companies that do not use long- term contracts and do not like to build
partnerships. This means that they do not co-operate with other companies and that
their business activities are mostly based on the “ad hoc” - principle. These
companies are not used to utilize IT in their normal external activities and they do
not belong to any formalized business network.

Information Network Management - According to our evaluation the


Information Network Management area contains the companies whose
purchasing and supply chain management is already very well developed on the
conceptual level. The companies have formed an active network, which has clear
and consistent objectives. Every member in the supply chain has a structured and
qualified position in the network, where all member companies know the needs of
their end customers. Moreover most agreements between different companies are
based on the “win-win” principle. In this area integrated use of IT is still low.
Typically the companies have their own IT systems, but they do not have special
applications, e.g. EDI or Extranet, to be used for horizontal and vertical integration
in the supply chain (Figure 1).

Technical Network Management


The companies which, in general, have a very well developed IT system, for
example EDI, Extranet and Internet, belong to the Technical Network
Management area. The companies use IT to move their own business processes to
another company but only temporarily. The companies do not commit themselves
to the network or supply chain, so the barrier to entrance into and exit from the
supply chain or the network is low (Figure 1).

Dynamic Network Management - The demands of the Dynamic Network


Management area come from the concepts of extended enterprises and virtual
supply chains. In the virtual supply chain companies have organized material,
information, product, service and funds flows for example according the model of
Cristopher (1998). The system creates a common information “highway”, which
the companies control by means of IT, i.e. with different EDI, Intranet, Extranet
and Internet applications.

Development of Supply Chain Management


By using the above mentioned two constructs and four categories, it is now possible
to find a new challenge on supply chain management. This new potential area of
supply chain management is illustrated in Figure2. The company reaches the
Dynamic network management area in its supply chain management by adding
knowledge, information, and utilizing of technology to the company’s purchasing
and supply functions. As Figure 1 illustrates, both development activities are
needed and they should be in balance. In the development process the above
mentioned features should be utilized. The features used are chosen so that they fit
the company’s business situation in the best possible way. It is important that the
company forms a measurement system. With the aid of this measurement system,
the company can control the development process.
Figure 1: Classification of Supply Chain Management

Source: Cristopher. 1998

Figure 2: Development of Supply Chain Management

Source: Cristopher. 1998


SCM Techniques Used in Industry
Researchers in the operations research community have contributed a substantial
amount of analysis of the supply chain management strategies actually utilized by
businesses and industry. Lee and Billington (1992) discuss commonly-made pitfalls
in supply chain management practices. Tayur et al. (1999) review quantitative
approaches to supply chain modeling. Their discussion primarily focuses on
mathematical and computational analysis of supply chain models. They discuss the
design and evaluation of supply contracts, the impact of information on decision-
making performance, management of product variety, and future research
challenges. Biswas and Narahari (1999) classify supply chain problems into three
categories based on the expected timeframe of the decisions: strategic, tactical, and
operational. Strategic decisions affect the long-term performance of the supply
chain, tactical decisions affect medium-term performance, and operational
decisions affect short-term performance. Operational decisions are under the
additional constraint that they must be made in real-time. They further classify
supply chain decisions into four functional categories: procurement, manufacturing,
distribution, and logistics. They also give a list of measures that can be used to
quantify the performance of a supply chain. These measures are useful as metrics
for real-world supply chain situations, but are also useful as measures of the
performance of TAC SCM agents. The measures suggested by Biswas and Narahari
include:
• Customer satisfaction
• Product quality
• Supply chain lead time
• Order-to-delivery lead time
• Order fill rate
• Probability of on-time delivery
• Financial costs

Research Construct
In the competitive global arena, by more effectively managing all internal and
external value-adding activities, organizations have focused on core competence,
and attempted to achieve competitive advantage. To effectively manage
relationship with strategic suppliers, many firms have reduced their supply base
(Tully 1995). Some literatures indicate that buying firms are developing mutually
beneficial relationships with suppliers and viewing suppliers as virtual extensions
of their firm (Mason 1996; Copacino, 1996). Tan et. Al. (1998) described ten SCM
practices, and showed that some of the practices affected firms’ performance. On
the other hand, many SCM models have been suggested, these has been a lack of
knowledge on actual industry practice for implementing effective SCM, and their
relationship to firms’ performance. Thus, in our study we have proposed 23
commonly cited SCM practices from the literatures review. These include practices
related to supply and materials management issues, operations, customer service,
delivery services, information technology and sharing and so on. Due to the
exploratory study in nature, we did not attempt to make any categories or group of
these activities.
In spite of recognizing beneficial the specific practice that result in successful SCM
implementation, it is also essential to understand the primary concerns obstructing a
successful supply chain. The key goal of realizing these hindrances is to provide
parishioners with a list of issues that adversely impact firms’ performance and
appropriate actions that could be taken. Thus, in our study we have included nine
commonly cited concerns that restrain successful SCM are identified based on
literature review (Keah, 2002). This concern included information capability,
ability of managing inventories, competition, geographical distance for both
suppliers and customers and so on. And again we did not categorized or group for
this concern in survey instrument.
Ellram and Pearson (1994) identify that despite the increased concern on
integrating purchasing into overall corporate strategy, the key activities of
purchasing remained a clerical role of negotiating price items. While many SCM
strategies models have been proposed and studied (Frohlich et. Al. 1997; watts et.
Al. 1992; Freeman and Cavinato 1990; Reck and Long 1988) to link the crucial
role of SCM in overall strategic corporate planning, they failed to suggest any
action model that is useful to practitioners. Despite the significant and theoretical
development of SCM, there is little empirical research on how practitioners define
and incorporate SCM practice into over all corporate strategy (Keah 2002).
Whereas SCM efforts at some companies have resulted in improved
competitiveness, similar results in other organizations have remained elusive. Little
is known about the specific practices or concerns of a successful SCM
implementation. This study investigates these issues by means of empirical data.

Research Methods
Descriptive method of study is more appropriate for the given objectives of the
study. Hence it is decided to undertake descriptive research study. Descriptive
research is not merely data gathering, it may include the investigation of any
possible relationship between two or more variables or objects and prediction of
future events (Peterson and Lewin, 1982). The methodology requires a research
design because it provides a framework for carrying out investigation on the subject
matters. Research design as defined by Churchill (1988) is a framework or plan for
a study used as a guide in collecting and analyzing data. In descriptive design
information sought may come from various sources. Two of the most commonly
used methods are survey type and case study method. For the purpose of this
research, a survey method has been used because it provides an in-depth
examination of a given situation.

Questionnaire Design

Many researchers in this area are based on questionnaire survey (Yusuff, 2004).
Though there are weaknesses in this methodology, it was deemed for this study as
it is exploratory in nature, less time consuming and can target a larger population.
Therefore, a survey instrument in the form of a questionnaire was designed based
on the construct previously described. Respondents were asked to indicate, using a
five point Likert scale, the perception of the 23 practices (1- strongly disagree, 5-
strongly agree) in their firm’s SCM efforts. For questions regarding the obstacles of
implementing SCM in Malaysia, respondents were asked to indicate, on a similar
five point Likert scale, the chance that the nine issues increase difficulties for their
firm from implementing successful supply chain management. Likert scale also
used to measure the importance of the supply chain management’s objectives.
Some other information such as IT uses for their SCM, purpose of IT uses, what are
the operations that they are covered, position of their firm in the SCM and
demographic information were also presented in the questionnaire. The survey
instrument has been pre-tested by managers in supply chain and production
operations for content validity. Where necessary, questions were reworded to
improve validity and clarity. The pretest questionnaires were not used for sub-
sequent analysis.

Sampling Procedure
To make the study free from bias, the designing of the samples and the techniques
that may be applied for collecting and using those samples are made in the
appropriate manner so as to ensure the reliability of the data. Thus, the selection of
the study area, the selection of the respondents etc. are made in the following order:

Selection of the Sample Size


In determining the sample size, factors such as precision and confidence,
population size, time and cost constraints have been taken into considerations.
Further more, according to Roscoe (1975), sample sizes larger than 30 and less than
500 are appropriate for most researches. The revised survey instrument was sent to
1153 top managers, mostly production and distribution managers, identified from
the directory of Federation on Malaysian Manufacturers (FMM) and directory of
Malaysian Industrial Development Authority (MIDA). The questionnaires were
mailed on May 1 2008, and followed up post cards were mailed two times. First,
remind was sent after three weeks and last remind was sent after 6 weeks. Mailings
and a follow up reminders yielded 72 usable returned surveys.

Selection of Respondents
This research targets single respondent from each target firm, without collecting
and cross validating responses from second information from the same firm. Some
researchers argue that relying on single information to answer complex social
judgment about organizational characteristics increases random measures error.
Hence, strong assessment of convergent validity cannot be made. However, the cost
associated with using multiple informants from each organization is prohibitive
(Keah, 2002). Therefore, this study used data from a single respondent while
attempting to minimize the extent of common method variance by targeting the
surveys to top management especially operation manager. It was assumed that the
operation managers were more objective and knowledgeable with respect to the
firms’ operations.

Respondents’ Profile
The survey questionnaires were mailed to 1153 target organizations in various
industry segments in Malaysia. The target population was drawn from the list of
Federation of Malaysian Manufacturers (FMM) and Malaysian Industrial
Development Authority (MIDA) across all industry segments in Malaysia.
Responses are received from 72 companies, giving low response rate; there is a
possibility of non-response bias in the mail surveys (Sahay & Mohan, 2003). But
almost 93 percent of the organizations receiving the survey questionnaires did not
respond, raising the issue of a non-response bias in this study. That is, do the results
reported in this research misrepresent the true experience and opinions of supply
chain management practice in Malaysian industries? We tested this issue by using
chi-square test with 95 percent confidence level and find that
The distribution of response group by industry category shows no different pattern
relative to the population data.
Second, there is no significant difference in response received before reminders
after reminders. We send reminders because we do not get adequate response to do
any analysis at the first mailing. The aim of reminders is to get more responses as
to ensure representations of all major industry and to provide data relating to any
non-response bias in the original surveys. This helps do analysis and also increased
the number of response in each industry (Sahay & Mohan, 2003). Eventually, the
representativeness of the response group is improved. This reminder does assist in
obtaining a reasonable overall response rate of 6.23 percent and obtain a
representative picture of supply chain practice in Malaysian industries.
Therefore, validity was provided for the results of representative sample size and
eliminating the non-response bias. The 72 responding organizations belonged to
over 12 industry segments including engineering, automotive, consumer durable,
textile, telecommunication, pharmaceutical, oil/gas, computer hardware, service,
agri-product, Transportation, and Retail. However, the majority of the respondents
were found from service, retail, computer hardware, agri-products, oil/gas,
pharmaceuticals, & automotive (Figure 3). However, results of the study may not
been extrapolated for all individual industry segments because of sample size not
being representative for individual categories.

Figure 3: Industry Segment


Industry Wise

9
8
7
6
5
4
3
2
1
0
g

on

al
le

t
as
e

il e

ail
ti o
in

uc
ar

ic
ab
iv

t ic
ati

G
er

xt

rv

et
dw

od

ta
ot

ur

eu

il/
ic
ne

R
Te

Se

or
om

Pr
D

ar
O
ac
un
gi

sp
rH
ut

i
m
er

m
En

gr

an
A

ar
m
um

te

Tr
Ph
co

pu
ns

le

m
co

Te

Co

Source: Data Analysis

94.4 percent respondents of this study are using supply chain concept for their
business activities. In terms of their position in supply chain, the distribution of the
respondents was given in Figure 3.2. From the Figure 4, we can see that most of the
respondents’ positions in SCM for this study were final product manufacturing
followed by component manufacturing, distribution and finally raw material
manufacturing.
Figure 4: Position in SCM
Position of Supply Chain

Raw Material
Component
Final Product
Distribution

Source: Data Analysis


The respondents report the following components of their supply chain in their
SCM efforts as shown in the Table 1. The highest proportion is involved with
recycling and miner/raw material extractors consistent with final product
manufacturing, raw material manufacturing, physical distribution and retailers.
Very few of the respondents were involved in wholesaling.
Table 1: Component of SCM
Name of the Component Percentage
Physical Distribution 43.1
Miners/Raw Material 94.4
Raw Material Manufacturing 56.9
Final Product Manufacturing 59.7
Wholesalers 5.6
Retailers 31.9
Final Consumer 5.6
Recycling 94.4

Results and Discussion


This study designed to examine the barriers and practices of SCM in Malaysian
organizations. This section provides a description of the outcomes of the
descriptive tests done on the major barriers and practices variables among
Malaysian organizations. Before describing the test analysis, we present the
reliability results for the two main constructs. The reliability of the scale for the
supply chain activities and hindrances for implementing supply chains was
evaluated using Cronbach’s alpha (α). Therefore, α for the supply chain activities
was .814 (Table 2), which suggested that the scales were reliable. For the
hindrance, the value of α was .8737 (Table 2), which also suggest that the scale are
reliable. The hindrance to implement SCM scale, which consisted of 9 questions,
was the most reliable between the two measurement scales.

Table 2: Reliability Test


Cronbach Alpha (α) Value
Supply Chain Activities .814
Hindrance for implementation .873

Supply Chain Activities


How extensively is SCM adopted in Malaysian organizations? Businesses
competing globally are under more intense competitive pressure to gain efficiency
and efficacy in their supply and logistics systems. To answer this question, the
respondents were presented with 23 SCM activities, and asked to evaluate their
importance in their businesses. Mean responses for the 23 SCM activities shown in
Table 3 ranged from 3.28 to 4.41, with a median 4.05. Although activities with a
higher mean value could not be interpreted as statistically more important than the
others, the fourteen highest-ranked activities are determining the use of informal
information sharing with suppliers and customer, creating a greater level of trust
among the supply chain members, reducing response time a cross the supply chain,
participating in the marketing effort of the customers, increasing the firm’s JIT
capabilities, communicating own firm’s future strategic needs to the suppliers,
creating a compatible communication system with the suppliers and customers,
establish more frequent contact with members of supply chain, contacting the end
users of the product/services to get feedback on performance, and on-time delivery
of own firm’s product/service directly to the customer point of use, determine
customers’ future needs, improving the integration of activities across the supply
chain, communicating customers’ future strategies needs among the entire supply
chain. The 14 activities, which can be improved by supply chain performance,
mostly are related with time based, customer needs and demand, communication
with members and so on. Surprisingly, geographical proximity (locating closer to
your customers, creating SCM teams that include members from different
companies) is not rated at the top of the list. Keah (2002) also identified the same
result. One would expect geographical proximity between supplies and buyers to be
critical for integrating a successful supply chain. The use of formal information
sharing is ranked below the median, suggesting that while the literature focuses
information sharing through electronic data interchange (EDI) to be a significant
component of SCM, these activities can not be improved simply by supply chain
activities. But result shows that supply chain activities can improve the activities of
sharing informal information, which is in the top of the rank.
Another interesting identification is the conflict of our result and literature, the
significance of the extending supply chain beyond immediate suppliers and
customers (3.99) and adding the suppliers to increase their JIT capabilities below
the median. It suggested that these activities can not be improved by supply chain
activities. But Keah (2002) mentioned that SCM involved with second and third-
tier suppliers and customers. But some data (Tan et. al. 1998) suggested that
businesses just focus on immediate suppliers and customers and thus ignore the
theoretical total cost reduction opportunities of SCM along the chain. A general
summarization is that supply chain activities can help to improve mostly time
related activities of a firm. They also help to improve in communication process
with the members, creating trust, and customer service activities. Thus, by the
supply chain, firms can be more effective in operational activities along with
providing more satisfaction to their customers.

Hindrance for Implementing SCM


While SCM is beneficial to recognize the specific practices that result in successful
SCM implementation, it is also helpful to recognize the main concerns hindering a
successful supply chain. To identify these hindrances, respondents were presented
with 9 commonly site concerns, and asked to evaluate the importance in their
businesses. Mean response to questions on hindrances to implement SCM in
Malaysia ranged from 3.57 to 4.33 with median of 3.85 (Table 4). While lack of
ability in managing inventories throughout the entire supply chain receives highest
mean score, several other concerns also received high scores. Based on the mean
value, the lack of cooperation (4.22) and trust (4.03) among supply chain members
were ranked higher hindrance than lack of interest (3.88) and competitors from
other supply chain. In this study, competitors from another supply chain were
ranked a low hindrance, other studies suggest that it will increase and intensify as
SCM develops and evolves into the next century (Morgan & Monezka 1996).

Table 3: SCM activities


Std.
Mean Deviation
On time delivery 4.14 .657
on time delivery from firm's point of view 4.11 .640
future needs 4.11 .545
JIT capabilities 4.36 .484
integration activities 4.08 .746
get feedback on performance 4.17 .751
new ways of integrate 3.99 .682
more frequent contract 4.29 .659
communicating firm's strategy 4.36 .589
reducing response time 4.44 .500
informal information sharing with 4.63 .488
greater level of trust 4.51 .671
aiding the suppliers to increase JIT 3.69 1.460
participating in marketing efforts 4.37 .846
communicating customer future 4.08 1.071
creating compatibility 4.33 .475
formal information sharing 3.76 .813
finding additional supply chain 3.38 .895
improving all the memebers 3.96 .895
sourcing decision 3.61 .491
creating SCM team 3.28 .938
extending SC to include 3.99 .831
locating closer to the customer 3.71 .458
Source: Data Analysis

Surprisingly, our results show that sophisticated information system was not that
much problem for the firm, although geographical distance and firms’ lack of
leverage within their supply chain were ranked as the lower respectively.
Therefore, from the above result, we can say that even though Malaysian
businesses were aware of the SCM philosophy, their actual activities in this
direction were very limited. Mostly they concern with on-time delivery from the
immediate suppliers, and to the immediate customers. To achieve this goal they
emphases on communications, but still they think there is lack of ability to manage
inventories throughout the entire supply chain, cooperation, and trust among supply
chain members to implement successful supply chain. This may lead to the
management to give emphasis on communication processes among the supply
chain members.

Table 4: Hindrance for Implementing SCM


Mean Std. Deviation
Lack of sophisticated IS 3.64 1.052
Geographical distance 3.64 1.179
Lack of ability in managing 4.33 .949
inventories
Lack of trust 4.03 1.162
Lack of cooperation 4.22 .791
Firm’s lack of leverage 3.57 .668
Competition from other SC 3.68 .470
Customer geographical distance 3.72 1.213
Lack of interest 3.88 .473
Source: Data Analysis

IT Usages in SCM
Dramatic economic and strategic changes brought about by recent advances in
technology, including the Internet and World Wide Web (WWW) has expanded the
scope. These changes have been more evident than in supply chain function
inventory control, logistic and so on. The dramatic growth of the importance of IT
is a testimony to the impact of information sharing, which has significant impact in
gathering and analyzing these to take decisions. Information has a deep effect on
each part of supply chain to maximize total supply chain profitability. It acts as a
connection between various stages of supply chain and facilitating then to
coordinate their activities.
Present use of IT applications
From the result we revealed that every respondents of this study were using an of
the software package for their business activities. A total of 87.5 (Table 5) percent
of respondents are using Enterprise Resource Planning (ERP)/ Manufacturing
Resource Planning (MRPII) in Malaysian environment. Next most usages IT
application was Material Accounting in this study, 69.44 (Table 5) percent of
respondents were using this IT application. 59.72 (Table 5) percent of respondents
were using Supply Chain Management, which showed that the prospect and usages
were pretty good among the Malaysian organizations. Software package for
Warehouse Management and Sales and Distribution were used by 55.55 and 43.05
(Table 5) percent respectively. Very few respondents were using Computer Added
Design, Computer Aided process planning and Manufacturing Execution System,
Engineering Data Management, Demand Management, Process Control and
Optimization and Shop Scheduling and loading application were yet to percolate in
Malaysian organizations.

Table 5: Present Use of IT application


IT applications Percent
ERP/MRP 87.5
Material Accounting 69.44
Supply Chain Management 59.72
Warehouse Management 55.55
Sales and Distribution 43.05
CAD/Drafting 20.83
Computer Aided Process Planning 13.88
Manufacturing Execution Systems 9.72
Source: Data Analysis

IT application for Supply Chain


Existing IT solution encompass the business operations covering web technology,
EDI with carriers, EDI with customers, facility network planning, EDI with
suppliers, Automatic freight payment, distribution requirement planning, bar
coding, freight cost management, distribution networking planning, lot tracking,
monitoring cost performance, sales return, warehouse management, order
fulfillment, inventory management. Surprisingly, all of the respondents had either
using or were implementing any of the IT solutions. However, all the respondents
were using bar coding and most of the respondents were using EDI with suppliers
(93.05 percent) and Inventory management (84.72 percent) Table 6. Moreover, they
were also using EDI with carriers (54.16 percent), EDI with Customers (43.05
percent), Warehouse management (48.61 percent) Freight cost management (33.33
percent), Lot tracking (29.16 percent), Distribution network planning (19.44, Web
technologies (26.38 percent) Table 6. However, the proposed IT solutions showed a
clear shift to areas which involve networking with business partners. The future
areas of operations for IT solutions include Web technologies, EDI with customers,
distribution networking planning, lot tracking, and freight cost management. (Table
6).

Alignment of Supply Chain strategies with business strategies


Our result showed similarity with the result of Sahay et. al. (2003). Enhancing
customer service got the highest score all other objectives in terms of their
effectiveness to the supply chain management. Beside this, reducing inventory cost,
lowest product cost, improving on-time delivery and highly reliable product
followed closely in terms of supply chain priorities. The entire there objectives
stated in the table 7 were the most important for any supply chain strategies (Sahay
et. al. 2003). Thus, improvement in these has direct effect on the bottom line of the
organizations. Most of respondents had given emphasis to enhance customer
service as the most important objectives for effectiveness of supply chain
management.

Table 6: IT application for SCM


Current
Web technologies 26.38
EDI with carriers 54.16
EDI with customers 43.05
Facility Network Planning 13.88
EDI with suppliers 93.05
Automatic Freight Payment 0
Distribution networking planning 19.44
Bar Coding 100
Freight Cost Management 33.33
Lot tracking 29.16
Monitoring cost performance 0
Sales return 13.88
Warehouse management 48.61
Order fulfillment 0
Inventory Management 84.72
Source: Data Analysis

Managerial Implementation
After analyzing and findings of the research data, this study proposed some
suggestions for perfecting the supply chain. Supply chain management had made
inroads in the operation of Malaysian organizations. A lot of them had evolved
their supply chain strategies and were now in the phase of implementing them. To
meet the competitive business challenges Malaysian organizations need to
synchronize supply chain strategy with the business strategy. Currently, the
majority of Malaysian organizations had a weak coordination of supply chain
strategy with their business strategy. This is because they have failed to follow a
process oriented function style. Still organizations were stiffly structured along
functional lines with department specific performance measure. Thus, Malaysian
organizations need to resolve the performance measurement issues so that they can
synchronize supply chain objectives with their business objectives. By synchronize
one-to-one alignment of the three dimensions of both the supply chain strategy and
business strategy; organizations can have optimal strategic solution.
According to our result, it is clear that Malaysian organizations have positive
perception toward supply chain activities. They have realized that supply chain
activities must be straightened up for profitability. But, unfortunately many of them
are not taking any serious movement on this. Thus, Malaysian organizations need
to change the way people think about supply chains- the burden of which falls on
the top management.
It is imaginable to carry out all the activities in the demand fulfillment process by
single entity. However, supply chain management provides the capability to capture
demands from the market, quickly translate it to supplier requirement and
eventually fulfill consumer needs (Sahay & Mohan, 2003). The entire exercise
involves building alliance with the supply chain partners. Thus, Malaysian
organizations should collaborate with their supply chain partners for all the
activities which involve in the demand management. A truly collaborative supply
chain needs huge commitment by all the members of the chain. it consists of a dual
strategy of breeding trust as well as optimizing resource, performance, and gain
across the supply chain.

Table 7: Alignment of Supply chain Objectives and business objectives


Focal area Business Supply Chain Objectives Important to
Objectives the
Respondents
High: Customer Maximize Enhance customer 4.23
Service customer service/satisfaction 4.67
satisfaction Highly reliable product 4.10
Best product performance 4.70
Improving On time
delivery
Medium: Profit Maximize profit Expanding profit 4.34
Maximization Delivery value Reducing inventory cost 4.73
to shareholders Reducing lead time 3.84
Increase Lowest product cost 4.53
turnover Reducing order to delivery 4.13
Increase return cycle time 4.23
Reducing transportation 4.05
cost
Reducing warehousing cost
Low: Increasing Flexibility of production 4.38
Operational earning per volume 4.01
excellence share Flexibility product mix 4.20
Innovating new 3.96
product/service 3.57
Expanding width/depth of
distribution
Offer broad product line
Source: Data Analysis
Currently, in the business arena technology has become a mandatory element for
doing business activates. This technology helps businesses to analysis their
customer requirements, forecast demands for future, and differentiate products and
services, design new products and services and so on. Therefore, IT can achieve
breakthroughs in the area of supply chain design configuration and planning. From
the result we can reveal that Malaysian organizations are using handful IT tools for
their businesses. Fewer of the companies are using EDI, although very less
respondents are using web technology for their supply chain functions. To compete
in today’s environment IT tools are main weapon for the businesses no matter the
size of the organizations; and technology cost has also been reduced so that even
the smallest organization can now afford them (Sahay et. al. 2003).
All the above mentioned steps are neither easy nor a simple task to achieve. But
many companies across the world have been benefited by doing this. They have
drastically reduced logistics cost and inventory investment, at the same time
increased customer value and enhanced response speed of order fulfillment.
Consequently, they increase handful wealth for doing business and providing value
for all stakeholders continuously. And those who ignore this epitome will see their
customers disappear in the face of competition (Sahay et. al. 2003).

Limitation of this research


Limitation like many other researches that have been conducted, this research also
can not escape from its own limitation that may have affected the results either in
one way or the other. One significant limitation of this study is that the researchers
only managed to get response of 72 companies. Their perceptions and opinions
might not reflect the actual practice of supply chain among Malaysian
Organization. But the direction of SCM practices in Malaysian organizations is in
appropriate direction for future growth in a competitive manner.

Further Research
This exploratory research motivates the way for other in-depth studies of some of
the critical processes identified for supply chain practice. It should also encourage
researches to compare current status of SCM in Malaysian with other developed
and developing countries such as Singapore, U.S.A. In fact, further research can be
carried out using a specific case to synchronize supply chain strategy with business
strategy. Finally, research could be on the impact of Internet in supply chain
practice.

Conclusion
This study is an effort to assess the proximity of current supply chain practices
among the Malaysian organizations. The results reveal that Malaysian
organizations have started their journey toward world class supply chain systems.
However, there are areas in which further improvements are necessary, such as
cooperation among supply chain partners, managing inventories, and trust among
partners. They need continuous improvement by enhancing their strength and
eliminate their weaknesses to achieve world class supply chain. They can also use
benchmarking to evaluate their ability to compete in the world market. By
continuously assessing their practice with best practice through benchmarking the
organizations can obtain insights into the level of competitiveness (Yusuff 2004).
This paper has outlined the supply chain practices followed by Malaysian
organizations. And we recommend that Malaysian organizations should
synchronize supply chain strategy with business strategy to provide more value to
their stakeholders, collaborate with partners in order to minimize inventory,
operational cost and maximize profit. This study can help the Malaysian industry to
benchmarking their supply chain practice vis-à-vis supply chain practice in other
developing countries.

References

Ainsworth, W.A. and Gold, S.Y. (1995), Logistics Management and Technology:
1995 Benchmarking Study, KPMG Peat Marwick LLP, Chicago, IL.

Babbie, E. R., (1990), Survey Research Methods, California, Wardsworth


Publishing Company, Inc. 2nd edition.

Byrne, P.M. and Markham, W.J. (1993), ``Global Logistics: Only 10 percent of
companies satisfy customers’’, Transportation and Distribution, Vol. 34 No. 12, pp.
41-5.

Christopher, M, (1998), Logistics and Supply Chain Management. Strategies for


Reducing Cost and Improving Service. 2nd Edi., Financial Times Professional,
London.

Churchill, G. A. (1988), Basic Marketing Research, Chicago, Dryden Press, USA.

Cilliers, W.W. and Nagel, P.J.A. (1994), ``Logistics trends in South Africa’’,
International Journal of Physical

Cooper, M.C., and Ellram, L.M. (1993). “Characteristics of Supply Chain


Management and the Implications for Purchasing and Logistics Strategy.” Intl. J.
Log. Mgmt., 4 (2) 13-24.

Cooper, M.C., Lambert, D.M., Pagh, J.D. (1997) Supply chain management, more
than a new name for logistics. The International Journal of Logistics Management 8
(1), 1-13.

Copacino, W.C. (1996), “Seven Supply – Chain Principles,” Traffic Management,


Vol. 35, No. 1, p. 60

Cox, A. (1997) Business Success. Earlsgate Press, Midsomer Norton, Bath.

Cox, A. (1999), ``A research agenda for supply chain and business management
thinking’’, Supply Chain Management: An International Journal, Vol. 4 No. 4, pp.
209-12

Cristopher, M. (1998) Logistics and Supply Chain Management – Strategies for


Reducing Cost and Improving Service. Financial Times Management

Croom, S., Romano, P., Giannakis, M. (2000) Supply Chain Management: an


Analytical Framework for Critical Literature Review. European Journal of
Purchasing & Supply
Davenport, T.H. (1993), Process Innovation, Reengineering, Work through
Information Technology, Harvard Business School Press, Boston, MA.

Davis, T. (1993), ``Effective supply chain management’’, Sloan Management


Review, pp. 35-46.
Ellram, L.M. and Pearson J.N. (1993), “The Role of the Purchasing Function:
Toward Team Participation,” International Journal of Purchasing and Materials
Management, Vol. 29, No. 3, pp.3-9

Fernie, J. (1995), “International Comparisons Supply Chain Management in


Grocery Retailing,” The Service Industries Journal, Vol. 15, No. 4, pp. 134-147

Fisher, M.L. (1997), “What is the Right Supply Chain for Your Product?” Harvard
Business Review, March-April, pp. 105-116

Freeman, V.T. and Cavinato, J.L. (1990) “Fitting Purchasing to the Strategies Firm:
Frameworks, Processes, and Value,” Journal of Purchasing and Materials
Management, Vol. 26, No. 1,

Frohlich, M. Dixon, J.R. and Arnold, P. (1997), “A Taxonomy of Supply Chain


Strategies,” Proceedings of the 28th Annual Meeting of the Decision Science
Institute.

George, A. Zsidisin, Gary L. Rogatz, and Steven A. Metnyk (2005), “The Dark
Side of Supply Chain Management.” Supply Chain Management Review, March,
pp. 46-52

Gilmour, P., Drive, H. and Hunt, R. (1995), ``Future directions for logistics in
Australia’’, International

H. L. Lee and C. Billington. Managing supply chain inventory: pitfalls and


opportunities. Sloan Management Review, 33(3):65–73, 1992.

Handfield, R. and Withers, B. (1993), ``A comparison of logistics management in


Hungary, China, Korea and Japan’’, Journal of Business Logistics, Vol. 14 No. 1,
pp. 81-109.

Handfield, R.B. (1994), “U.S. Global Sourcing: Patterns of Development,”


International Journal of Operations and Production Management, Vol. 14, No. 6,
pp. 40-51

Handfield, R.B., Nichols, E. L. (1999) Introduction to Supply Chain Management.


Prentice-Hall International

Harland, C.M., Lamming, R.C. and Cousins, P.D. (1999), “Developing the Concept
of Supply Strategy”, International Journal of Operation and Production
Management, Vol. 19, No. &, pp. 650-673
Harwick, T. (1997), “Optimal Decision-Making for the Supply Chain,” APICS –
The Performance Advantage, Vol. 7, No. 1, pp. 42-44

Hewitt, F. (1994), “ Supply Chain Redesign.” The International Journal of


Logistics Management, Vol. 5, No. 2, pp. 1-9

J. Collins, W. Ketter, and M. Gini. A multiagent negotiation testbed for contracting


tasks with temporal and precedence constraints. International Journal of Electronic
Commerce, 7(1):35–57, 2002.

J. E. Collins. Solving Combinatorial Auctions with Temporal Constraints in


Economic Agents. PhD thesis, University of Minnesota, June 2002.

Journal of Physical Distribution and Materials Management, Vol. 25 No. 3, pp. 24-
32.

Keah Choon Tan (2002), “Supply Chain Management: Practice, Concern, and
Performance Issues.” Journal of Supply Chain Management, Vol. 38, No. 1, pp. 42-
53

Koskela, L. (1992). Application of the New Production Philosophy to Construction


Technical Report 72, Center for Integrated Facility Engineering, Department of
Civil Engineering, Stanford University, CA.

Kuglin, F. A. (1998) Customer-Centered Supply Chain Management. Amacom

Kumar, K. (2001), “Technology for Supporting Supply Chain Management.”


International Communications of the ACM, Vol. 44, No. 6, pp. 58-61

La Londe, B.J. (1997), ``Supply chain management: the myth or reality?’’, Supply
Chain Management Review, Vol. 1, Spring, pp. 6-7.

Lamb, J.J. (1995), “An Evaluation Idea,” World Trade, (8:7), pp. 40-46

Lee, H. and Billington, C. (1992), ``Managing supply chain inventories: pitfalls and
opportunities, Sloan Management Review, pp. 65-73.

M. Ettl and M. Schwehm. Determining the optimal network partition and kanban
allocation in JIT production lines. In J. Biethahn and V. Nissen, editors,
Evolutionary Algorithms in Management Application, pages 139–152. Springer-
Verlag, 1995.

MacDonald, M.E. (1991), “Integrate or Perish!” Traffic Management, (30:10), pp.


31-36
Management 6 (2000) 67-83.

Mason, T. (1996), “Getting Your Suppliers on the Team,” Logistics Focus, Vol. 4,
No. 1, pp. 10-12
McMullan, A. (1996), ``Supply chain management practices in Asia Pacific
today’’, International Journal of Physical Distribution & Logistics Management,
Vol. 26 No. 10, pp. 79-95.

Monczka, R., Trent, R., Handfield, R. (1998) Purchasing and Supply Chain
Management.
International Thomson Publishing
Novack, R.A., Langley, C.J., Jr and Rinehart, L.M. (1995), Creating Logistics
Value: Themes for the Future, Council of Logistics Management, Oak Brook, IL.

Peterson, R. A., 1982, Marketing Research, Business Publication, Inc. Plano,


Texas, USA.

Reck, R.F. and Long B.G. (1988), “Purchasing: A Competitive Weapon,” Journal
of Purchasing and Materials Management, Vol. 24, No. 3,

Ross, D.F. (1998), “Computing Through Supply Chain Management Creating


Market –Winning Strategies Through Supply Chain Partnerships.” Kluwer
Academic Publishers, Boston, MA et. al.

Ross, D.F. (1998), Competing through Supply Chain Management, Chapman &
Hall, New York, NY.

S. Biswas and Y. Narahari. Object oriented modeling for decision support in supply
chain networks. In Proceedings of POMS-99, International Conference on
Operations Management for Global Economy, December 1999.

S. Jain, C.-C. Lim, B.-P. Gan, and Y.-H. Low. Criticality of detailed modeling in
semiconductor supply chain simulation. In Proceedings of the 1999 Winter
Simulation Conference, 1999.

S. Tayur, R. Ganeshan, and M. Magazine,(1999) editors. Quantitative Models for


Supply Chain Management. Kluwer Academic Publishers.

Sahay B.S. and Mohan Ramneesh (2003), “Supply chain management practice in
Indian industry”, International Journal of Physical Distribution and Logistics
Management, Vol. 33, No. 7, pp. 582-606

Sahay B.S. Cavale Vasant and Mohan Ramneesh (2003), “Insight from industry:
The “Indian” supply chain architecture” Supply chain Management: An
International Journal, Vol. 8, No. 2, pp. 93-106

Saunders, M. (1995) Chains, pipelines, networks and value stream: the role, nature
and value of such methaphors in forming perception of the task of purchasing and
supply chain management. First Worldwide Research Symposium on Purchasing
and Supply Chain Management. Tempe, Arizona, pp. 476-485.

Saunders, M. (1997) Strategic Purchasing and Supply Chain Management. Pitman


Publishing
Scott, C. and Westbrook, R. (1991), “New Strategies Tools for Supply Chain
Management: The Basic for Professional Development,” International Journal of
Purchasing and Material Management, Vol. 21, No. 1, pp. 23-33

Tan. K.C., Kannan, V.J. and Handfield, R.B. (1998), “Supply Chain Management:
Supplier Performance and Firm Performance,” International Journal of Purchasing
and Materials Management, Vol. 34, No. 3, pp. 2-9

Taylor, D. (1999) Global Cases in Logistics and Supply Chain Management.


International Thomson Business Press

Taylor, D.H. and Probert S. (1993), “European Logistics Systems Employed by


U.K. Manufacturing Companies,” International Journal of Physical Distribution
and Logistics Management, Vol. 23, No. 2, pp. 37-47

Tully, S. (1995), “Purchasing New Muscle.” Fortune, Vol. 20, pp. 76

Turner, J.R. (1993), “Integrated Supply Chain Management: What’s Wrong with
This Picture?’ Industrial Engineering, Vol. 25, No. 12, pp. 52-55

Tyndall G., Gopal, C., Partsch, W. and Kamauff, J. (1998), Supercharging Supply
Chains: New Ways to Increase Value Through Global Operations Excellence, John
Wiley & Sons, New York, NY.

Watts, C.A. Kim, K.Y. and Hohn C.K. (1992), “Linking Purchasing to Corporate
Competitive Strategy,” International Journal of Purchasing and Materials
Management, Vol. 28, No. 4, pp. 2-8

Whiteoak, P. (1994), “The Realities of Quick Response in the Grocery Sector: A


Supplier Viewpoint,” International Journal of Physical Distribution and Logistics,
Vol. 24, No. 1, pp. 11-17

Yusuff, Mhod. Rosnah (2004), “Manufacturing Best Practice of Electric and


Electronic Firms in Malaysia.” Benchmarking: An International Journal, Vol. 11,
No. 4, pp. 361-369