Information System Utilization in Supply Chain Integration e Orts

int. j. prod. res., 2002, vol. 40, no.
18, 4585±4609
2-2, LR
Information system utilization in supply chain integration e orts
SOO WOOK KIMy and RAM NARASIMHA Ny*
This paper investigates a set of advisable strategies for information systems

utilization in supply chain integration initiatives. Through an analysis of struc-
tural relationships among the ways in which information systems are utilized for
supply chain integrationÐi.e. Infrastructural Support, Value Creation
Management, Logistical OperationsÐand supply chain management perfor-
mance, we argue that there might be a recommended sequence in using informa-
tion systems for supply chain integration. Tests of hypotheses relating to
information systems utilization using empirical data from manufacturing ®rms
indicate that, as the stage of integration moves from independent operation to
internal and on to external integration, the focus of information systems utiliza-
tion should shift from infrastructural support to value creation management and
logistical operations, and this change of IS utilization focus can lead to sustain-
able competitiveness.
1. Introduction
The introduction of information systems (IS) in supply chain management was
originally limited to the automation of clerical functions. Information systems were
viewed as providing infrastructural support to the value chain and they had an
indirect impact on the competitiveness of a product. Companies were able to save
costs through information systems, but their use was not felt in a major way by
customers. With intensi®cation of competition, ®rms started to utilize information
systems to in¯uence directly the processes comprising the value chain (Rushton and
Oxley 1994, Williams et al. 1997). Through the utilization of such information
systems, companies have been able to integrate similar functions spread over di er-
ent areas as well as curtail unnecessary activities, thus enhancing their capability to
cope with the sophisticated needs of customers and meeting the quality standards of
products (Bardi et al. 1994, Carter and Narasimhan 1995).
The introduction and utilization of information systems can have a direct in¯u-
ence on value creation by integrating a ®rm’s supply chain and, if utilized properly,
can lead to higher quality products, enhanced productivity, e cient machine utiliza-
tion, reduced space and, ultimately, increased logistics e ciency and ¯exibility
(Gross 1984, Kaltwasser 1990). This means that IS utilization for routine data pro-
cessing may be useful for cost reduction e orts in conjunction with the ®rm’s strat-
egy of cost leadership, but IS utilization for supply chain integration (SCI) can lead
to di erential and sustainable competitive advantage. Therefore, it is necessary to
understand better how IS utilization in conjunction with SCI can lead to superior
competitive advantage.
Revision received September 2001.

{ Department of Marketing and Supply Chain Management, Eli Broad Graduate School
of Management, Michigan State University, East Lansing, MI 48824, USA.
* To whom correspondence should be addressed. e-mail: narasimh@pilot.msu.edu
International Journal of Production Research ISSN 0020±7543 print/ISSN 1366±588X online # 2002 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/0020754021000022203
4586 S. W. Kim and R. Narasimhan
This research analyses the characteristics of information systems utilized in

supply chain management, and prioritizes the utilization of functional information
systems by identifying the structural relationship between these information system
characteristics and SCM performance. We explicitly consider the `supply chain inte-
gration stage,’ and develop a set of guidelines for strategic utilization of information
systems.
2. Literature review
Supply chain integration links a ®rm with its customers, suppliers, and other
channel members by integrating their relationships, activities, functions, processes
and locations. Such integration supports the current movement from conventional,
arms-length and often con¯ict-laden relationships to cooperative, long-term business
partnerships and strategic alliances (Morash and Clinton 1998).
Bowersox (1989) asserts that the process of supply chain integration should
progress from the integration of internal logistics processes to external integration
with suppliers and customers, and such internal and external integration can be
accomplished by the continuous automation and standardization of each internal
logistics function and by e cient information sharing and strategic linkage with
suppliers and customers. This notion implies that IS utilization may play an impor-
tant role in each stage of supply chain integration. Stevens (1989), Byrne and
Markham (1991), and Hewitt (1994) express the same view as Bowersox in that
they assert that the improvement of each internal function, in the internal integration
stage of supply chain integration, should precede the external connection with
suppliers and customers in the external integration stage, and that IS utilization
may be a crucial factor. Stevens, who suggests four developmental stages in
supply chainsÐindependent operation, functional integration, internal integration,
external integrationÐcontends that the extent of progress depends on IS utilization
in each developmental stage. Further, he asserts that a staged approach to SCI can
remove the barriers between functions or organizations, and that IS utilization can
strengthen the linkage among functions and organizations. Byrne and Markham
(1991) who classify ®rms into three stages depending on the level of SC integration,
note that ®rms in the ®nal stage of integration have the most advanced information
systems, which facilitate the development of di erential competitive advantage.
Hewitt (1994) emphasizes the necessity of a system-wide information network
within a ®rm or between ®rms for maximizing the e ciency and e ectiveness of
supply chain management and processes.
To understand better the role of IS utilization for supply chain integration, the
following fundamental research question needs to be considered: how should the role
of IS be di erent depending on the stage of supply chain integration?
Porter and Miller (1985) assert that management of information systems can no
longer be the sole province of the EDP function such as accounting and record
keeping, focused on cost control and reduction. The use of advanced information
systems in value chain activities allows companies to enhance competitive di eren-
tiation as well as attain cost leadership and consequently gain sustainable competi-
tive advantage. In other words, the ability to pursue cost reduction and
di erentiation simultaneously should be a criterion for IS utilization. Earl (1989)
asserts that IS must have the potential to be a strategic weapon in at least one of the
following: (1) gaining competitive advantage; (2) improving productivity and per-
formance; (3) enabling new ways of managing and organizing; (4) developing new
Information system utilization 4587
businesses. These views suggest that the utilization of IS in strategic and managerial
activities is more important than their use in operational contexts. A similar view is
expressed by McFarlan and McKenney (1984) in their presentation of `the IT stra-
tegic grid,’ when they assert that the role of IS should change from operational
supporter to strategic enabler for competitive success. Closs (1994) asserts that IS
application for supply chain management must be extensively reengineered to shift
its focus from a functional to a process perspective. In his view, newer applications
must focus on the reengineering of processes to create competitive advantage, and
existing applications should be a starting point for the reengineering process.
Daugherty (1994) supports the theory of Porter and Miller indirectly by emphasizing
the limitation of EDI capabilities, a representative IS utilization for information
processing, in that EDI provides the basis for establishing strategic linkages, but
its technical aspects alone are not su cient to achieve strategic linkage along the
value chain. Accordingly, IS application beyond basic EDI, is necessary to achieve
strategic linkages and ultimately create di erential competitive advantages for the
®rm.
Earl (1989) classi®ed the scope of information technology into the following
categories according to whether information technology is widely used in the
value chain or selectively used for only information processing, and whether it is
applied for value creation or applied for the connection of value-adding activities: (1)
information technology to automate or improve the physical aspect of every activity;
(2) information technology physically to connect each value activity or control those
activities at the connecting point; (3) information system to facilitate the implemen-
tation, support and management of value activities; and (4) information system to
optimize or adjust the connection of each value activity. The utilization scope is not
only applicable to the internal value chain of a ®rm, but it can also be extended to the
company’s supply chain, linking suppliers and customers.
Porter and Miller (1985) argue that the utilization of information technology has
a signi®cant in¯uence on the relationships among value chain activities as well as on
the physical aspects of individual value chain activities, in creating and maintaining
the competitiveness of a company. Based on the concept of value chain, the follow-
ing propositions can be made: (1) competitiveness comes from creating value for
customers; (2) the value creating activities of a company, including procurement,
manufacturing and sales, are not independent, but interdependent in the form of
value chain; (3) ®rms can optimize or integrate their value chains through informa-
tion technology to improve their competitiveness; and (4) accommodation of infor-
mation technology creates a new value chain. Porter and Miller concluded that the
proper use of information technology minimizes costs while maximizing value, opti-
mizes value activities and guarantees competitive advantages.
The works of Earl, and Porter and Miller on the strategic utilization of informa-
tion technology have two major points in common. First, in order for a ®rm to
enhance its competitiveness , it has to raise the role of information systems from
mere information processing to utilization of technology in order to change the
existing value chain or create a new value chain. Second, in its application to the
value chain, information technology should not only automate and improve the
physical aspect of value adding activities, but also optimize the structural connec-
tions among supply chain activities. It should be noted that the physical aspect of
value adding activities should be appropriatel y con®gured in order to optimize the
connections among supply chain activities. As the stage of integration moves from
independent operation to internal and external integration, the role of IS should shift
from infrastructural support (through information processing) to value creation
management for improving the physical aspect of value activities and from value
creation management to logistical operations for optimal connection of value activ-
ities. These issues have signi®cant implications for IS utilization strategy in supply
chain integration.
In summary, IS utilization for internal and external connection of value chain
activities beyond existing information processing is required to reengineer the value
chain and gain di erential competitive advantage . Enhanced ability to pursue cost
leadership and di erentiation simultaneously, and the supply chain integration stage,
may be the criteria for prioritizing the three di erent roles of IS application in supply
chain infrastructural support, value creation management, and logistical operations.
As the backdrop to this discussion, this paper investigates IS utilization strategy for
supply chain integration.
3. Research model and hypotheses

Figure 1 represents the research model of this study. The research model
comprises two parts. The ®rst part relates to the relationship among the three dif-
ferent functions of IS utilized in a supply chain, and the second part pertains to the
relationship between IS utilization and supply chain performance under di erent
stages of supply chain integration.
Figure 1. Research model.

This model is derived from prior studies (McFarlan and McKenney 1984, Porter
and Miller 1985, Bowersox 1989, Stevens 1989, Earl 1989, Byrne and Markham
1991, Hewitt 1994, Closs 1994, Daugherty 1994) as discussed in the literature
review section. These studies indicate that IS for information processing, including
EDI, provides a foundation for establishing strategic linkages, and when integrated
into the value chain, IS utilization makes it possible to achieve strategic competitive
advantage. On the relationship between IS utilization and supply chain performance,
the literature also indicates that the introduction and utilization of IS in value chain
processes would eventually enhance the company’s supply chain competitiveness by
e ciently linking and integrating various supply chain activities. However, the extent
to which information systems a ect performance may vary depending on the inte-
gration stage of the supply chain. Earl, and Porter and Miller suggest that, as the
stage of integration moves from independent operation to internal and external
integration, the focus of IS utilization would shift from information processing to
value creation and from value creation to value connection. The following hypoth-
eses are derived from this discussion.
H1 : IS utilization for infrastructural support has a relatively high in¯uence on
supply chain performance in the independent operation stage.
H2 : IS utilization for value creation management has a relatively high in¯uence on
supply chain performance in the internal integration stage.
H3 : IS utilization for logistical operations has a relatively high in¯uence on supply
chain performance in the external integration stage.
4. Research methodology
4.1. Sampling
Consistent with the purpose of this study, some manufacturin g corporations
carrying out all the value chain activities in a supply chain were sampled. The
data were collected through questionnaire s sent to supply chain managers or top-
level executives in large manufacturing corporations among Korea’s listed and regis-
tered corporation s and Japan’s major national logistics professional association
members. The questionnaire s were transmitted by individual visit, fax and mail to
Korean ®rms, and by fax and mail using the countrywide mailing list of the associa-
tion for Japanese ®rms. The respondents were, in the main, supply chain managers;
in cases where a separate organizational entity for supply chain management (SCM)
did not exist, a response was requested from a top-level executive of the sales,
production, or planning department who was responsible for, or well acquainted
with, supply chain policies and corporate strategies of the ®rm. In order to increase
the reliability of measurement, respondents were requested to consult with others in
the SCM department or functional executives as appropriate when answering ques-
tions. The reliability of responses on objective measures was con®rmed through
comparison with data collected from the annual reports of the companies. A total
of 668 completed responses (Korea: 265; Japan: 403) were returned and, of these 668
responses, 45 incomplete responses (Korea: 21; Japan: 24) were discarded.
Accordingly, the analysis that follows and all reported statistics are based on a
sample of 623 manufacturing organizations (Korea: 244; Japan: 379). Table 1
summarizes the sample characteristics for each country according to industry type
and size. As can be seen in table 1, the sample ®rms in this study encompass a
Korea
Type of Industry
Consumption Basic industrial Electronic and

industryy material industryz machinery industry} Total
No. of ®rms 99 (40.7%) 81 (33.1%) 64(26.2%) 244

The means of sales 342 million $ 560 744 520
The means of asset 428 million $ 775 963 684
Japan
Type of industry
Consumption Basic industrial Electronic and

industryy material industryz machinery industry} Total
No. of ®rms 137 (36.1%) 73 (19.3%) 169 (44.6%) 379

The means of sales 958 million $ 1290 1522 1273
The mean of asset 1198 million $ 1609 2137 1696
y consumption industry: food processing, sweetmeats, pharmaceuticals, footwear, clothes, wood,
furniture.
z basic industrial material industry: textile, organic chemical, inorganic chemical, petrochemical,
cement, paper, tire, fertilizer, fabric, pulp, metal.
} electronics and machinery industry: computer, home appliances, communication equipment,
electronic parts, automobile, automobile parts, machinery.
Table 1. Sample characteristics.
diversity of industry types and sizes. The diversity of the sample should strengthen
the external validity of these study results.
4.2. Measurements
4.2.1. Functional Information Systems
Based on prior research (see table 2), which classi®es logistics activities in inte-
grated supply chain management and functional information systems for logistics
management, nine traditional uses for information systems in supply chain manage-
ment were identi®ed:
. plant and warehouse location selection,
. order processing,
. resource management,
. production plan and process control,
. inventory and warehouse management,
. distribution and transportation management,
. sales and price management,
. consumer service and customer management,
. forecasting,
and, by adding three more sub-functional information systems (network planning
and design system, o ce information system, and accounting information system)
which provide infrastructural support for the e ective utilization of information
systems in the above nine major functions, a total of 12 functions were identi®ed.
The classi®cation of function information

The classi®cation of logistics activities systems for logistics management
Cooper and Physical Activities Ballou 1. Facility Location

Ellram 1. Production (1985) 2. Inventory Control
(1993) 2. Transportation 3. Order Entry
3. Inventory 4. Vehicle Scheduling
Transaction Activities 5. Warehousing Layout Planning
1. Order Cycle Management 6. Freight Rate Retrieval
2. Transportation/Distribution 7. Product/Shipment Tracing
Ballou Core Activities Robeson 1. Facility Location
(1985) 1. Transportation and House 2. Inventory Control
2. Inventory (1985) 3. Transportation Scheduling
3. Customer Service 4. Production Scheduling
4. Order Execution 5. Total Physical Distribution
5. Information Flow 1: Facility Location
Supporting Activities 2: Terminal Analysis
1. Warehouse Management Mentzer et al. 3: Carrier Routing=Scheduling
2. Resource Management (1990) 4: Logistic System Design
3. Packaging
4. Product Planning
5. Facility Locations
Bowersox Production Logistics Function Stenger 1. Transaction System
(1989) 1. Manufacturing (1986) 2. Short-term Scheduling &
2. Scheduling Inventory Replenish System
3. Quality Control 3. Flow Planning System
4. Process Control 4. Network Planning/Design
5. Inventory Management 1: Forecasting
6. Warehouse Management 2: Planning
Connection Logistics Function 3: Budgeting
1. Facility Location 4: Inventory Management
2. Resource Management 5: Production Planning=Control
3. Order Processing 6: Procurement
5. Packaging 7: Processing=Invoicing
6. Transportation 8: Customer Service
7. Forecasting 9: Transportation Management
Sales Logistics Function 10: Facility Management
1. Market Research
2. Sales Promotion
3. Price Decision
4. Product Mix
5. Sales Information
Management
6. Customer service
Table 2. Prior research.
The IS utilization level in each of these 12 functions was measured at two di erent
time framesÐthree years ago and current time periodÐby a seven-point Likert scale.
Growth in the utilization level of information systems was derived by comparing
data for these two time frames.
4.2.2. SCM performance

In this research, supply chain management performance was comprehensively
captured using multi-dimensional indices ranging from ®nancial factors re¯ecting
the level of cost reduction to non-®nancial factors re¯ecting the level of di erentia-
tion. This approach to measuring SCM performance by dividing it into ®nancial and
non-®nancial measures has been used by previous researchers (Shapiro 1984, Sterling
and Lambert 1985, Bowersox 1989, Germain 1989, Mentzer and Konrad 1991). In
this study, purchasing cost, operation cost, inventory cost, warehouse cost, sales
cost, and distribution/transportation cost were used as ®nancial indices related to
supply chain management. Non-®nancial measures consisted of on-time delivery of
materials from suppliers, percentage of acceptable materials, the speed of suppliers’
order processing, the reduction degree of response time in processing requests for
materials returns, product innovation level, process innovation level, ¯exibility
(responsiveness), the accuracy of order processing for customers, the reduction
degree of the product return ratio, the speed of order handling, and the reduction
degree of response time in processing requests for product returns or after-service
(Lummus et al. 1998, Birou et al. 1998, Tan et al. 1998, Zaheer et al. 1998). Cost
reduction performance was derived by comparing the costs three years ago to the
current level, according to each company’s annual ®nancial data. Non-®nancial
performance dimensions of each sample ®rm were measured by a subjective rating
Stage Characteristics
Stage 1: ° Business functions such as sales, manufacturing, planning, material

Independent control, purchasing are operated on an almost separate basis.
operation of each ° This stage is characterized by organizational boundaries, whereby
function purchasing might control the incoming material ¯ow to raw
material stocks, manufacturing and production control then cover
raw material through the processes which convert it into ®nished
goods, and further along the chain, sales and distribution divide the
outward supply chain and inventories.
Stage 2: ° Limited integration between adjacent functions such as shipping
Functional and inventory or purchasing and raw material management is
integration accomplished.
° This stage is characterized by an emphasis on cost reduction rather
than performance improvement; discrete business functions, each
of which is bu ered by inventory; elements of internal trade-o
between, for example, purchase discount and the level of inventory
investment, high plant-utilization and batch sizing; and reactive
customer service.
Stage 3: ° All internal functions from raw material management through
Internal integration production, shipping, and sales are connected and integrated
real-time.
° This stage is characterized by full systems-visibility from
distribution through to purchasing; medium-term planning; a focus
on tactical rather than strategic issues; an emphasis on e ciency
rather than e ectiveness; and reaction to customer demand rather
than managing the customer.
Stage 4: ° Full supply chain integration extending the scope of integration
External integration outside the company encompassing suppliers and customers is
accomplished.
° This stage is characterized by the supply of high quality products
shipped direct to the line on time; completely shared information
on products, processes and speci®cation changes; technology
exchange and design support; a focus on strategic rather than
tactical issues; and above all long-term commitment, which usually
means the elimination of multiple-sourcing.
Source: Stevens (1989).
Table 3. Four integration stages of supply chain management.
relative to its major industry competitors on a seven-point scale. A total of 11 items

for di erentiation were measured with endpoints labelled `1 ˆ Worst in Industry’
and `7 ˆ Best in Industry’.
4.2.3. Developmental stage of supply chain integration

The prevailing views of integrated supply chain management were employed in
this study to de®ne supply chain integration stages. Several studies in the existing
literature (Stevens 1989, Heskett 1989, Byrne and Markham 1991, Ellram 1992,
Hewitt 1994, Narasimhan 1997) on the integration of supply chain management
emphasize that it should be accomplished sequentially from internal integration to
external integration. In particular, Stevens (1989) presents the integration process of
supply chain management comprehensively starting with the integration of related
functions, followed by internal integration and then external integration. In this
research, respondents were asked to indicate the stage of supply chain integration
their ®rms were at by utilizing the conceptual de®nition of the four integration stages
of supply chain management discussed by Stevens. Table 3 describes the de®nition
for the four supply chain integration stages.
5. Results
5.1. The classi®cation of the characteristics of IS utilized for supply chain

management
Factor analysis with Varimax rotation was implemented to extract factors from
the 12 measures associated with IS utilization. Table 4 shows the results of factor
analysis after the Varimax rotation of factors.
Factor
IS for
IS for value IS for
logistical creation infrastructural
operations management support
Measurement item …¬ ˆ 0:8425 †y …¬ ˆ 0:8903† …¬ ˆ 0:8212 †
Forecasting system 0.805 ¡0.127 0.188

Plant and warehouse location selection system 0.755 0.456 0.005
Transportation management system 0.736 0.154 0.227
Resource management system 0.681 0.414 ¡0.006
Automatic ordering system 0.672 0.179 0.194
Sales and price management system 0.215 0.776 0.223
Production plane and process control system 0.223 0.753 0.218
Inventory and warehouse management system 0.484 0.666 0.090
Consumer service and customer management 0.498 0.648 ¡0.019
system
Network plane and design system 0.267 0.180 0.752
O ce information system 0.128 0.099 0.691
Accounting information system 0.198 0.091 0.660
Eigenvalue 3.3802 2.5343 1.7088
Pct of Var 0.2817 0.2112 0.1424
y ¬: result of Cronback ¬ test.
Table 4. Factor analysis.

As shown in the table, the 12 uses of IS can be divided into three major utilization
areas. The ®rst is IS utilization for value creation management, which focuses on
automation and improvement of the physical aspects of individual value chain activ-
ities (production/process control, inventory/warehouse management, sales/price
management, and consumer service/customer management). The second is IS utili-
zation for logistical operations, which focuses on the connection among value chain
activities within and outside of a corporation (plant/warehouse location selection,
resource management, order processing, distribution/transportation management,
and forecasting). The third is IS utilization for infrastructural support, which pro-
vides an infrastructural foundation for the e ective operation of value chain activ-
ities (network planning and design system, o ce information system, and accounting
information system).
The above classi®cation into three clusters of IS utilization areas has validity in
the light of the previous studies (Ballou 1985, House and Robeson 1985, Stenger
1986, Bowersox 1989, Mentzer et al. 1990, Cooper and Ellram 1993, Lambert and
Stocks 1993, Gustin 1994) on the classi®cation of logistics activities and use of
information systems in logistics management. The functional information systems
comprising each factor have high factor loadings on that factor, thus re¯ecting a
high construct validity. As can be seen in table 4, all signi®cant factor loadings
exceed 0.65 and Cronbach ( values for the three factors exceed 0.8, indicating high
reliability. The eigenvalues for the rotated factors exceed 1.0 and the percentage of
variance explained ranges from 14.2% to 28.17%.
5.2. Structural equation model

The structural equation modelling technique was used to model the interrelation-
ships among the latent variables. The hypothesized interrelationships are shown in
®gure 2.
This model is predicated on the assumption that IS utilization for infrastructural
support can bring about a change in the level of IS utilization for value creation
management and logistical operations, and IS utilization for value creation manage-
ment would precede IS utilization for logistical operations. This assumption is based
on the fact that IS for infrastructural support plays a foundational role in IS utiliza-
tion in supply chains. This assumption also implies that IS utilization for infrastruc-
tural support may have an indirect impact on SCM performance by aiding IS
utilization for value creation management or logistical operations.
In order to investigate more speci®cally the relationship between IS utilization
and the stage at which SCI e orts are in the ®rm, the posited structural equation
model was tested using LISREL (Joreskog and Sorbom 1993). For this, 623 sample
®rms were grouped into three subsamples corresponding to Independent Operation
(n ˆ 167), Internal Integration (n ˆ 252), and External Integration (n ˆ 204) based
on the responses.
In order to analyse a LISREL model, the sample size should be large enough to
estimate reliably the parameter values. Boomsma (1982) notes that sample size must
be at least over 200, and Bagozzi (1991) asserts that, if the value after subtracting the
degree of freedom lost due to parameter estimation from sample size is over 50, the
maximum likelihood method can be used. Bentler and Chou (1987) assert that
sample size must be over ®ve times the number of unknown parameters. In the
case of the subsample relating to an independent operation stage (n ˆ 167), the
sample size does not come up to Boomsma’s recommendation. However, we can
Figure 2. Structural equation model.
use the maximum likelihood method, generally recognized as being superior

(Boomsma 1982, Bagozzi and Yi 1989) for the estimation of unknown parameters,
because the sample size can be deemed adequate according to both Bagozzi’s
(95 > 50) and Bentler and Chou’s criteria (167 > 165). We did not run separate
analyses for Korean and Japanese data because of the insu ciency of sample size.
This research employed the matrix of covariance among measurement variables as
input data for LISREL analysis.
5.3. IS utilization under independent operation stage

The Goodness of Fit for the hypothesized structural equation model on the
subsample for the independent operation stage shown below indicates that the
model does not ®t the data well.
2
À ˆ 165:16 …P ˆ 0:000 †; df ˆ 72; GFI ˆ 0:897; AGFI ˆ 0:850; NNFI ˆ 0:89;
NFI ˆ 0:86; RMSR ˆ 0:072:

The results of the modi®cation index and normalized residual suggested modi®-
cations to the model that would improve the Goodness of Fit. That is, the modi®ca-
tion index of ®31 (IS for infrastructural support ! SCM performance link), which
was ®xed at a value of zero in the initial model, was 84.66. This means that, if ®31 is
allowed to be a free parameter and estimated from data, the value of ® 2 will decrease
Overall Fit Measure

2
Value df GFI a AGFI b RMSR c NNFI d NFI e
78.50 71 .950 .926 .108 .99 .93

(P=.366)
Focused Fit Measure
Normalized Residuals The Largest Value is 1.775
(The Slope of Q-plot 1)
Modification Index The Largest Value is 3.275
SMC f or COD g of Every Variable is over .3

Measurement Model
SMC or COD of Acceptable

Structural Model
a
GFI : Goodness of Fit Index, AGFI : Adjusted Goodness of Fit Index, c RMSR : Root Mean Square
b
Residual, d NNFI : Non-Normed Fit Index, e NFI : Normed Fit Index, f SMC : squared multiple
correlations, g COD : coefficient of determination.
Figure 3. Causal relationship between latent variables (independent operation stage).
by at least 84.66, and Goodness of Fit will improve in consequence. Accordingly, the
model was modi®ed by setting ®31 to be a free parameter.
Figure 3 shows the Goodness of Fit results and the structural relationship among
the latent variables of the modi®ed model.
As shown in the ®gure, most indices except Root Mean Square Residual (RMSR)
satisfy the standards of Goodness of Fit, indicating that the data ®t the model well.
In addition, the model leaves nothing to be desired as judged by the modi®cation
indices. It can be noted that the RMSR value of 0.108 does not meet the generally
accepted standard (0.05). However, the RMSR cannot be the decisive factor in
judging the Goodness of Fit of the model because the matrix of covariance was
employed as input data for LISREL analysis. Considering all the goodness of ®t
indicators, the modi®ed structural equation model can be judged to ®t the data very
well.
The overall Goodness of Fit measures for the modi®ed model, when compared
to those for the initial model, show an obvious di erence. The result of a À2
di erence test between the modi®ed model and the initial model
…¢ À2 ˆ 165:16 ¡ 78:50 ˆ 86:66; ¢ df ˆ 72 ¡ 71 ˆ 1† rejects the null hypothesis
that the di erence in goodness of ®t between the two models is not di erent from
zero, and therefore the selection of the modi®ed model is advisable.
Table 5 shows the results of the validity test of the measurement model and the
structural model among latent variables.
Figure 3 indicates that IS utilization for infrastructural support has a direct
impact on SCM performance, while IS utilization for value creation management
and IS utilization for logistical operations do not have a direct impact on SCM
performance even though both are signi®cantly in¯uenced by IS utilization for infra-
structural support. This means that IS utilization for infrastructural support has a
relatively high in¯uence on supply chain performance in the stage of independent
operation, and also it is reasonable to expect that the e ect of IS utilization for value
creation management and logistical operations would not be felt under the stage of
independent operation where business functions within a ®rm operate independently.
This supports our contention that there is a relationship between the stage of supply
chain integration and IS utilization. Accordingly, the ®rst hypothesis of this paper is
A. Structural model
Total e ect Indirect e ect T-value Test result
®11 0.477 3.252 **

®21 0.285 0.048 2.775 **
®31 0.631 0.062 4.138 **
21 0.101 1.592
31 0.101 0.008 1.309
32 0.075 0.546
B. Measurement model
Maximum likeihood T-value
LX11 1.000 Reference variable

LX21 0.897 6.534 **
LX31 1.255 8.599 **
LY11 1.000 Reference variable
LY21 1.029 10.704 **
LY31 0.936 7.375 **
LY41 1.347 7.997 **
LY62 1.387 12.405 **
LY72 1.154 9.676 **
LY82 0.838 6.519 **
LY92 0.977 8.868 **
LY113 1.065 9.532 **
** Statistically signi®cant at p µ 0:05.
Table 5. The validity test of structural model and measurement model (independent
operation stage).
supported. The result that there is no signi®cant relationship between IS utilization

for value creation management and IS utilization for logistical operations can also be
explained by the low level of supply chain integration due to independent operations
of business functions within a ®rm.
5.4. IS utilization under internal integration stage

Figure 4 shows the LISREL results for the hypothesized structural equation
model on the subsample for the internal integration stage.
As can be seen in ®gure 4, most of the overall and focused goodness of ®t
measures, except the Root Mean Square Residual (RMSR), satisfy the standards
Overall Fit Measure

a
2
Value df GFI AGFI b RMSR c NNFI d NFI e
74.93 72 .962 .945 .065 .99 .94

(P=.453)
Focused Fit Measure

Measurement Model

Structural Model
a
GFI : Goodness of Fit Index, b AGFI : Adjusted Goodness of Fit Index, c RMSR : Root Mean Square
Figure 4. Causal relationship between latent variables (internal integration stage).

for Goodness of Fit, indicating a high Goodness of Fit of the model. In addition, the
model leaves nothing to be desired as judged by the modi®cation indices.
Accordingly, the proposed structural equation model can be judged to ®t the data
very well.
The interpretation of the above model is divided into three aspects.
First, IS for infrastructural support, as shown in ®gure 4, does not have a direct
impact on SCM performance unlike the model for the independent operation stage.
However, IS utilization for infrastructural support has a direct e ect on IS utiliza-
tion for value creation management, and IS utilization for value creation manage-
ment has a direct e ect on SCM performance. This means that IS utilization for
infrastructural support may play an indirect role in enhancing SCM performance
through IS utilization for value creation management in the internal integration
stage.
The second aspect pertains to the structural relationship among the three IS
latent variables characterizing IS utilization in a supply chain. That is, IS utilization
for value creation management has a signi®cant in¯uence on IS utilization for logis-
tical operations, unlike in the independent operation stage. This suggests that IS
utilization for infrastructural support enhances the utilization level of IS for
A. Structural model
®11 0.647 4.319 **

®21 0.630 0.505 1.673
21 0.781 4.955 **
31 0.961 0.128 5.676 **
32 0.164 1.702
Maximum likeihood T-value

LX21 0.127 9.055 **
LX31 1.045 6.946 **
LY21 0.799 5.886 **
LY31 0.903 6.883 **
LY41 1.242 8.998 **
LY62 0.968 6.945 **
LY72 1.354 10.973 **
LY82 0.892 6.118 **
LY92 1.064 7.764 **
LY113 1.995 7.582 **
Table 6. The validity test of structural model and measurement model (internal integration
stage).
value creation management which, in turn, brings about utilization of IS for logis-
tical operations (infrastructura l support ! value creation management ! logistical
operations).
The third aspect is the relationship between IS utilization for logistical operations
and SCM performance. The results of SEM analysis show that the path coe cient
associated with the link leading from IS utilization for logistical operations to SCM
performance is not statistically signi®cant. This suggests that the bene®ts of IS
utilization for logistical operations on SCM performance are not supported in the
subsample. A partial explanation for this result can be found in the items that were
used in this study to capture SCM performance. An overwhelming majority of the
items were related to aspects of the supply chain over which the logistics function
does not exercise direct control. This linkage merits further examination in a future
study. Another explanation could be that IS utilization for logistical operations and
its in¯uence could be related to the stage of SC integration that a ®rm is in. For
example, it can be speculated that IS utilization for logistical operations is more
bene®cial in ®rms that are pursuing external integration than in ®rms that are
pursuing internal integration. The above three interpretations support the second
hypothesis of this paper.
5.5. IS utilization under external integration stage

Figure 5 shows the LISREL results for the hypothesized structural equation
model for the subsample under the external integration stage.
As shown in the ®gure, most of the overall and focused goodness of ®t measures
satisfy the standards of Goodness of Fit, indicating a high Goodness of Fit of the
model. In addition, the model is deemed appropriate as judged by the modi®cation
indices. Accordingly, the proposed structural equation model can be judged to be
valid.
The relationship model of ®gure 5 shows that only IS utilization for logistical
operations has a signi®cant e ect on SCM performance. This implies that IS utiliza-
tion for logistical operations has a positive functional relationship with the external
integration stage, thus con®rming the validity of the proposition that IS utilization
for logistics operations is more bene®cial in ®rms that are pursuing external integra-
tion than in ®rms that are pursuing internal integration. Accordingly the third
hypothesis of this paper is also supported.
In addition, ®gure 5 indicates that IS utilization for infrastructural support has a
signi®cant e ect on IS utilization for value creation management, and IS
utilization for value creation management has a signi®cant in¯uence on IS
utilization for logistical operations. This means that, as mentioned in the
preceding section, the structural relationship of infrastructura l support ! value crea-
tion management ! logistical operations is supported. This also emphasizes that IS
for infrastructural support and IS for value creation management may play an
indirect role in enhancing SCM performance, even though they do not have direct
e ects on SCM performance, and thus they should precede the external connection
with suppliers and customers in the external integration stage through IS utilization
for logistical operations.
In conclusion, the above results of analysis of SEM in three di erent stages of
supply chain integration show that, as the stage of integration moves from indepen-
Overall Fit Measure

a
2
Value df GFI AGFI b RMSR c NNFI d NFI e
72.68 72 .971 .958 .047 .99 .94

(P=.508)
Focused Fit Measure

Measurement Model

Structural Model
a
GFI : Goodness of Fit Index, AGFI : Adjusted Goodness of Fit Index, c RMSR : Root Mean Square
b
Figure 5. Causal relationship between latent variables (external integration stage).
dent operation to internal and external integration, the focus of IS utilization would
shift from information processing to value creation and value connection to logistics
operations, and this change of IS utilization focus would make it possible for IS
utilization to have a direct e ect on supply chain competitiveness. This result accords
well with the views expressed in prior studies (Bowersox 1989, Stevens 1989, Byrne
and Markham 1991, Hewitt 1994).
5.6. IS utilization for sustainabl e supply chain competitiveness

In order to analyse more speci®cally the relationship between the change in IS
utilization focus and supply chain competitiveness, we implemented canonical cor-
relations between measurement variables of IS utilization for infrastructural support
and SCM performance in the independent operation stage, IS utilization for value
creation management and SCM performance in the internal integration stage, and IS
A. Structural model
®11 0.653 3.943 **

®21 0.655 0.525 1.599
21 0.804 4.955 **
31 0.747 0.585 1.844 **
32 0.728 5.783
Maximum likeihood T -value

LX21 1.009 11.022 **
LX31 0.989 9.993 **
LY21 0.867 5.942 **
LY31 1.103 8.144 **
LY41 1.065 7.664 **
LY62 1.322 12.131 **
LY72 1.154 8.898 **
LY82 0.994 6.922 **
LY92 1.890 6.048 **
LY113 1.235 10.039 **
Table 7. The validity test of structural model and measurement model (external integration
stage).
utilization for logistical operations and SCM performance in the external integration
stage. Table 8 shows the results of canonical correlation.
As shown in the table, in the relationship between IS utilization for infrastruc-
tural support and SCM performance in the independent operation stage, all three
measurement variables of IS for infrastructural support have signi®cant e ects on
cost reduction, but none of the three measurement variables had any in¯uence on
di erentiation as indicated by the signi®cance probabilities. This validates our con-
tention, expressed earlier in the paper, that IS utilization for routine data processing
cannot lead to di erential and sustainable competitive advantage.
The results of canonical correlation between IS utilization for value creation
management and SCM performance in the internal integration stage, indicate that
the production control system and the inventory management system have
statistically signi®cant e ects on cost reduction, while the production control
system, sales management system, and customer management system have
statistically signi®cant in¯uences on di erentiation. This means that IS utilization
for value creation management may make it possible to pursue cost leadership and
di erentiation simultaneously, thus proving the validity of Porter and Miller’s
assertion that the use of advanced information systems in value chain activities
allows companies to enhance di erentiation as well as attain cost leadership and
consequently gain sustainable competitive advantage.
Independent Dependent
2
Stage variable variable R T -test results
Costy Di erz

Independent IS for SCM 0.353* Network plan and **
operation infrastructural performance design system
stage support O ce information system *
Accounting information system *
Cost Di er
Internal IS for SCM 0.446** Production plan and ** *
integration value performance process control system
stage creation Inventory and warehouse *
management management system
Sales and price **
management system
Consumer service and **
customer management system
Cost Di er
External IS for SCM 0.471** Plant and warehouse location ** *
integration logistical performance selection system
Information system utilization
stage operations Automatic ordering system ** **

Resource management system *
Transportaion management * **
system
Forecasting system * **
* p µ 0:05; ** p µ 0:01:
y Cost: the level of cost reduction.
z Di er: the level of di erentiation.
Table 8. Canonical correlation results.

4603
The result of canonical correlation between IS utilization for logistical operations

and SCM performance in the external integration stage shows that nearly all aspects
of IS utilization are signi®cantly related to both dimensions of SCM performance.
As shown in the table, except for the resource management system, which has a
statistically signi®cant relationship just with cost reduction, other measurement
variables of IS utilization for logistical operations have signi®cant e ects on both
cost reduction and di erentiation. From the viewpoint that the ability to pursue cost
leadership and di erentiation simultaneously can lead to sustainable competitive
advantage, this means that IS utilization for logistical operations in the external
integration stage may bring an incremental supply chain competitiveness beyond
IS utilization for value creation management, thus con®rming the necessity for
changing the IS utilization focus depending on the supply chain integration stage.
6. Implications and conclusions

This research, within the general rubric of supply chain integration, suggests an
IS utilization model that calls for a sequential IS utilization approach starting with
infrastructural support, followed by value creation management and ending with
logistical operations, on the basis of the structural relationships examined. The
proposed model is based on the empirical test of several hypotheses by explicitly
considering the `stage of supply chain integration’ and its in¯uence on the hypothe-
sized relationships.
It is generally recognized that IS application on the processes comprising the
value chain beyond the basic EDP (electronic data processing) function, such as
accounting and record keeping, is necessary to achieve strategic linkages and
ultimately create di erential competitive advantage s for the ®rm. However, previous
studies have neglected the speci®c discussion on how direct IS utilization for the
value chain can have an in¯uence on performance improvement and sustainable
competitiveness , how the role of IS utilization for EDP function should change in
the era of integrated supply chain management, and how such roles of IS should be
di erent depending on the stage of supply chain integration. To our knowledge, this
research is the ®rst attempt to suggest speci®c answers to these questions. We do this
through the empirical veri®cation of the structural relationships among direct IS
utilization areas for the value chain, IS application for basic EDP functions, and
SCM performance, and by examining the e ect of the `supply chain integration
stage’ on the proposed relationships.
This research is also di erent from previous work in the light of the following
methodological points. First, all previous works covering the hypothesized relation-
ships this paper investigated simply suggest conceptual frameworks or focus on the
examination of direct relationships between independent and dependent variables via
regression analysis of all independent variables entered into one regression equation.
This research identi®ed the existence of indirect e ects among variables other than
direct relationships, through the LISREL analysis of the proposed structural equa-
tion model and, further, identi®ed the dynamic shift in structural relationships
among three major IS utilization areas and SCM performance by analysing the
proposed SEM on subsamples under each stage of supply chain integration.
Second, viewed in the light of IS classi®cation, previous studies su er from at
least one of two shortcomings: IS classi®cation is too abstract to re¯ect precisely the
various characteristics of IS utilization in supply chain management, or it is too
speci®c to show at a glance the causal relationships among functional areas of IS
utilization. In order to avoid these, this research derived a total of 12 IS utilization

functions in supply chain management based on prior research (see table 2), which
classify logistics activities in integrated supply chain management and functional
information systems for logistics management. We then extracted three major IS
utilization areas in supply chain management through factor analysis with Varimax
rotation on these 12 IS utilization functions. The results of factor analysis and
reliability tests indicated in table 4 show that the classi®cation into three IS utiliza-
tion areas has considerable construct and content validity.
Third, most previous studies utilizing the structural equation modelling method
mainly focus on a con®rmatory approach, intended to verify the measurement model
structure hypothesized, and simply interpret the Goodness of Fit of the hypothesized
model. However, in this research, we have adopted an exploratory approach, which
looks for the most plausible model by utilizing the modi®cation index and normal-
ized residual of all parameters provided from LISREL analysis on the initial model.
The LISREL analysis carried out under the `independent operation stage’ in
2
this research is an example of such an exploratory approach. The result of a À
di erence test between the modi®ed model and the initial model
2
(¢ À ˆ 165:16 ¡ 78:50 ˆ 86:66, ¢ df ˆ 72 ¡ 71 ˆ 1 †, indicating that the Goodness
of Fit of the modi®ed model is signi®cantly higher, shows the value of co-utilization
of exploratory and con®rmatory approaches. Assessing the model’s statistical purity
utilizing both approaches is advisable for suggesting a model that is more plausible
than the one initially proposed.
The LISREL results for the hypothesized structural equation model on subsam-
ples under each stage of the supply chain integration shows that IS utilization for
infrastructural support in the independent operation stage, IS utilization for value
creation management in the internal integration stage, and IS utilization for logis-
tical operations in the external integration stage have signi®cant e ects on SCM
performance. In addition, IS utilization for infrastructural support has a signi®cant
e ect on IS utilization for value creation management, and IS utilization for value
creation management has a signi®cant in¯uence on IS utilization for logistical opera-
tions in both the internal integration stage and external integration stage, except for
the independent operation stage in which there is no signi®cant relationship between
IS utilization for value creation management and IS utilization for logistical opera-
tions because of the low level of supply chain integration due to independent opera-
tions of business functions within a ®rm.
The above LISREL results suggest an important theoretical implication for the
framework of a total supply chain network based on an integrated database. The
development of an integrated supply chain network unifying all of the supply chain
activities within and outside of a company encompassing suppliers and customers is
essential to achieve sustainable competitive advantage (Rushton and Oxley 1994).
The results from this study emphasize that, as the stage of integration moves from
independent operation to internal and external integration, the focus of IS utilization
should shift from infrastructural support to value creation management and from
value creation management to logistical operations (infrastructural support ! value
creation management ! logistical operations). This suggests a sequence for IS utili-
zation to be followed for the development of an integrated supply chain network.
This sequence merits further examination in a future study. The identi®cations of the
underlying dimensions of IS used for value creation and value connection functions
is another contribution of this paper.
The results of this study have some practical implications for managers. First,
most of the existing literature is unclear as to how ®rms should simultaneously
pursue cost reduction and di erentiation. As can be seen in table 8, the results of
canonical correlation indicate that, as the stage of SC integration moves from
independent operation to internal and external integration, the signi®cant e ect of
IS utilization on both cost reduction and di erentiation increases. Interpreting this
result in the light of the proposed sequence of IS utilization in this paper (infra-
structural support ! value creation management ! logistical operations), this
implies that appropriate changes in IS utilization focus can allow companies
concurrently to pursue cost reduction and di erentiation, and consequently gain
sustainable competitiveness . This empirical result provides some measure of validity
to Porter and Miller’s (1985) assertion regarding the same point. Consequently, this
emphasizes the managerial importance of precisely understanding the structural
relationships among the three major IS utilization areas.
As can be seen in ®gures 3±5, IS utilization for infrastructural support enhances
the utilization level of IS for value creation management which, in turn, brings about
utilization of IS for logistical operations, as SC integration enters internal and
external integration stages. Such a causal relationship among the three major IS
utilization areas implies a dynamic relationship among the 12 IS functional areas.
That is, infrastructural functions such as o ce computerization, the feedback of
performance results, and the establishment of a system-wide network-based commu-
nication system, provide operational foundations for automation and improvement
of the physical aspects of value creation functions, such as production/process con-
trol, inventory/warehouse management, and sales/customer management. In addi-
tion, such physical improvement of value creation functions facilitates the linkage or
integration of all the supply chain functions within a company and with external
suppliers and consumers. This integration, in turn, enables the systematic utilization
of logistical operation functions such as plant and warehouse location selection,
order processing, resource management, distribution/transportation management,
and forecasting. Even though additional empirical veri®cation is required to char-
acterize more precisely the structural relationships among the 12 IS functional areas,
the proposed model can suggest ®rm-level strategic guidelines for the creation of an
e ective supply chain network encompassing cross-functiona l areas within a ®rm.
In addition, the above argument implies a meaningful principle for the progres-
sion of manufacturing practice. As can be seen in ®gures 4 and 5, even though IS
utilization for value creation management has a signi®cant in¯uence on SCM per-
formance in the internal integration stage, it does not have a direct e ect on SCM
performance in the external integration stage. Also, the results of canonical correla-
tion in table 8 indicate that IS utilizations for production plan/process control and
inventory/warehouse management have more signi®cant e ects on cost reduction
relative to di erentiation in the internal integration stage. These results re¯ect the
fact that a cost leadership-oriented manufacturing strategy may not be compatible
with performance improvement in the external integration stage. This means that, in
the era of integrated supply chain management , a manufacturing strategy that
neglects the systematic linkage with other functions within a ®rm or external partners
may see its quality decline or it cannot ful®l e ectively the various demands of
customers and logistics partners related to responsiveness and ¯exibility.
Consequently, the ®rm will not be able to realize sustainable competitiveness.
Therefore, it is necessary to pursue value creation and cost reduction from the
perspective of not just manufacturing practice but from an overall supply chain
perspective encompassing all functions within a ®rm, suppliers and customers. In
other words, the manufacturing strategy should recognize performance orientation
as well as process orientation across the supply chain. The observation of John
Gossman (1997), vice-president of materials management at AlliedSignal: `competi-
tion is no longer company to company, but supply chain to supply chain’, empha-
sizes the importance of the strategic shift into such a process-e ciency oriented
manufacturing strategy. The results of this study show that, in the external integra-
tion stage, IS utilization for logistical operations has a signi®cant e ect on both cost
reduction and di erentiation. Such IS utilization for logistical operations is in¯u-
enced by IS utilization for value creation management. This implies that a manu-
facturing strategy in the era of integrated supply chain management should focus not
on the direct e ect on short-term cost performance but on the e ect on overall
supply chain e ciency through the organic linkage with logistical operations func-
tions. Such empirical clari®cation of the role of manufacturing strategy in the new
era of integrated supply chain management strengthens the value of this research.
This research focused on verifying the structural relationships between three
major IS utilization areas and SCM performance while taking into consideration
the `stage of supply chain integration’. The e ect of other intervening variables on
the relationship between IS utilization and SCM performance deserves further inves-
tigation. In addition, in order to realize the proposed structural relationship, the
identi®cation of the structural relationships in the dimension of 12 sub-functional
areas consisting of three major IS utilization areas should be followed. Further, for
the generalization of the model suggested in this research, the cross-validation pro-
cess applying the model to new data and evaluating its goodness of ®t has to be
performed. For this, a replication of the study described in this paper with a sample
of US and European ®rms would be helpful. These issues will undoubtedly be
addressed in future research.
References
B AGOZZI, R. P., 1991, Evaluating structural equation models with unobservable variables and
measurement error: a comment. Journal of Marketing Research, 18, 375±381.
B AGOZZI, R. P. and Y I, Y., 1989, On the use of structural equation models in experimental
designs. Journal of Marketing Research, 26, 271±284.
B ALLO U, R. A., 1985, Business Logistics Management (Englewood Cli s, NJ: Prentice-Hall).
B ARDI, E. J., R AG H UN ATHAN , T. S. and B AG CHI, P. K., 1994, Logistics information systems:
the strategic role of top management. Journal of Business Logistics, 15(1), 71±85.
B ENTLER, P. M. and C H OU, C., 1987, Practical issues in structural modeling. Sociological
Methods & Research, 16, 78±117.
B IROU, L. M., F AWCETT, S. E. and M A GNAN, G. M., 1998, The product life cycle: a tool for
functional strategic alignment. International Journal of Purchasing and Materials
Management, 34(2), 37±51.
B OOMS MA, A., 1982, The robustness of LISREL against small sample size in factor analysis
models. In K. G. Joreskog and H. Wold (eds), Systems Under Indirect Observation:
Causality, Structure, Prediction (Amsterdam: North-Holland).
B OWERS OX, D. J., 1989, Logistics in the integrated enterprise. Proceedings of the Annual
Conference of the Council of Logistics Management, St Louis, MO.
B YRNE, P. M. and M ARK HA M, W. J., 1991, Improving Quality and Productivity in the Logistics
Processes: Achieving Customer Satisfaction Breakthroughs (Oak Brook, IL: Council of
Logistics Management).
C ART ER, J. R. and N ARA SIMHAN, R., 1995, Purchasing and Supply Management: Future
Directions and Trends (Tempe, AZ: Center for Advanced Purchasing Studies).
C LOS S, D. J., 1994, Positioning information in logistics. The Logistics Handbook (New York:
The Free Press), pp. 699±713.
C OOPER, M. C. and E LL RAM, L. M., 1993, Characteristics of supply chain management and
the implications for purchasing and logistics strategy. The International Journal of
Logistics Management, 4(2), 13±22.
D AUGH ER TY, P. J., 1994, Strategic information linkage. The Logistics Handbook (New York:
The Free Press), pp. 757±769.
E ARL, M. J., 1989, Management Strategies for Information Technology (Englewood Cli s, NJ:
Prentice Hall).
E LLRA M, L. M., 1992, Partners in international alliances. Journal of Business Logistics, 13(1),
1±25.
G ERMA IN, R., 1989, The e ect of output standardization on logistical structure, strategy, and
performance. International Journal of Physical Distribution and Materials Management,
19(1), 20±29.
G OSS MAN, J., 1997, Presentation to Supply Chain Management Council Meeting, Kellogg
Center, Michigan State University.
G ROS S, J. L., 1984, Component can be added gradually by locally mapping out present, future
uses. Industrial Engineering, 16(6), 28±37.
G US TIN, C. M., 1994, Distribution information system. The Distribution Management
Handbook (New York: McGraw-Hill).
H ESK ET T, J. L., 1989, Leadership through integration: the special challenge of logistics
management. Annual Conferences Proceedings of the 1988 Council of Logistics
Management.
H EWITT, F., 1994, Supply chain redesign. The International Journal of Logistics Management,
5(2), 1±8.
H OUSE, R. G. and R OBESO N, J. R., 1985, The Distribution Handbook (New York: Free Press/
London: Collier Macmillan).
JO RES KO G, K. and SORBOM, D., 1993, LISREL 8: Structural Equation Modeling with the
SIMPLIS Command Language (Hillsdale, NJ: Lawrence Erlbaum Associates).
K ALTWASS ER, C., 1990, Know how to choose the right CIM systems integrator. Industrial
Engineering, 22(7), 27±29.
L AMBER T, D. M. and STO CKS, J. R., 1993, Strategic Logistics Management, 3rd edn
(Homewood, IL: Richard D. Irwin).
L UMMU S, R. R., V OK URKA, R. J. and A LBER, K. L., 1998, Strategic supply chain planning.
Production and Inventory Management Journal, 39(3), 49±58.
M C FA RLAN, F. W. and M C K ENNEY, J. L., 1984, Information technology changes the way you
compete. Harvard Business Review, 62(5), 98±103.
M EN TZER, J. T. and K ONRA D, B. P., 1991, An e ciency/e ectiveness approach to logistics
performance analysis. Journal of Business Logistics, 12(1), 33±62.
M EN TZER, J. T., SCH USTER, C. P. and R OBE RTS, D. J., 1990, Microcomputer versus mainframe
usage in logistics. Logistics and Transportation Review, 26(2), 115±132.
M OR ASH, E. A. and C LIN TO N, S. R., 1998, Supply chain integration: customer value through
collaborative closeness versus operational excellence. Journal of Marketing Theory and
Practice, 6(4), 104±120.
N ARASIMH AN, R., 1997, Strategic supply management: a total quality management imperative.
Advances in the Management of Organizational Quality, 2, 39±86.
PORTER, M. E. and M ILLER, V. E., 1985, How information gives you competitive advantage.
Harvard Business Review, 63(4), 149±160.
R USH TON, A. and O XLE Y, J., 1994, Handbook of Logistics and Distribution Management
(London: Kogan Page), pp. 248±249.
SH APIRO, R. D., 1984, Get leverage from logistics. Harvard Business Review, 62, 119±126.
ST ENGER, A., 1986, Information system in logistics management: past, present, and future.
Transportation Journal, Fall, 65±82.
ST ERLING, J. U. and LA MBER T, D. M., 1985, A methodology for identifying potential
cost reductions in transportation and warehousing. Journal of Business Logistics, 5(2),
1±13.
ST EVEN S, G., 1989, Integrating the supply chain. International Journal of Physical Distribution
and Materials Management, 19(8), 3±8.
T AN , K. C., K AN N AN, V. R. and H ANDFIELD, R.B., 1998, Supply chain management: supplier
performance and ®rm performance. International Journal of Purchasing and Materials
Management, 34(3), 2±9.
W IL LIAM S, L. R., N IB BS, A., IR BY, D. and F INLEY, T., 1997, Logistics integration: the e ect of
information technology, team composition, and corporate competitive positioning.
Journal of Business Logistics, 18(2), 31±41.
Z AHEER, A., M C E VILY, B. and PER RONE, V., 1998, The strategic value of buyer-supplier
relationships. International Journal of Purchasing and Materials Management, 34(3),
20±26.

Information System Utilization in Supply Chain Integration e Orts

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Information System Utilization in Supply Chain Integration e Orts

Uploaded by

Copyright:

Available Formats

int. j. prod. res., 2002, vol. 40, no.

Information system utilization in supply chain integration e orts

SOO WOOK KIMy and RAM NARASIMHA Ny*

This paper investigates a set of advisable strategies for information systems

Revision received September 2001.

This research analyses the characteristics of information systems utilized in

3. Research model and hypotheses

Figure 1. Research model.

Consumption Basic industrial Electronic and

No. of ®rms 99 (40.7%) 81 (33.1%) 64(26.2%) 244

Consumption Basic industrial Electronic and

No. of ®rms 137 (36.1%) 73 (19.3%) 169 (44.6%) 379

Table 1. Sample characteristics.

The classi®cation of function information

Cooper and Physical Activities Ballou 1. Facility Location

Table 2. Prior research.

4.2.2. SCM performance

Stage 1: ° Business functions such as sales, manufacturing, planning, material

relative to its major industry competitors on a seven-point scale. A total of 11 items

4.2.3. Developmental stage of supply chain integration

5.1. The classi®cation of the characteristics of IS utilized for supply chain

Forecasting system 0.805 ¡0.127 0.188

Table 4. Factor analysis.

5.2. Structural equation model

Figure 2. Structural equation model.

use the maximum likelihood method, generally recognized as being superior

5.3. IS utilization under independent operation stage

NFI ˆ 0:86; RMSR ˆ 0:072:

Overall Fit Measure

78.50 71 .950 .926 .108 .99 .93

Modification Index The Largest Value is 3.275

SMC f or COD g of Every Variable is over .3

SMC or COD of Acceptable

Figure 3. Causal relationship between latent variables (independent operation stage).

Total e ect Indirect e ect T-value Test result

®11 0.477 3.252 **

Maximum likeihood T-value

LX11 1.000 Reference variable

supported. The result that there is no signi®cant relationship between IS utilization

5.4. IS utilization under internal integration stage

Overall Fit Measure

74.93 72 .962 .945 .065 .99 .94

Modification Index The Largest Value is 3.098

SMC f or COD g of Every Variable is over .3

SMC or COD of Acceptable

Figure 4. Causal relationship between latent variables (internal integration stage).

Total e ect Indirect e ect T-value Test result

®11 0.647 4.319 **

Maximum likeihood T-value

LX11 1.000 Reference variable

5.5. IS utilization under external integration stage

Overall Fit Measure

72.68 72 .971 .958 .047 .99 .94

Modification Index The Largest Value is 2.753

SMC f or COD g of Every Variable is over .3

SMC or COD of Acceptable

Figure 5. Causal relationship between latent variables (external integration stage).

5.6. IS utilization for sustainabl e supply chain competitiveness

Total e ect Indirect e ect T-value Test result

®11 0.653 3.943 **

Maximum likeihood T -value

LX11 1.000 Reference variable

Costy Di erz

Information system utilization in supply chain integration e orts

Total e ect Indirect e ect T-value Test result

Total e ect Indirect e ect T-value Test result

Total e ect Indirect e ect T-value Test result

Costy Di erz

stage operations Automatic ordering system