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Impact of just-in-time (JIT) JIT’s impact on


SCDR
on supply chain disruption risk:
the moderating role of supply
chain centralization 1665
Yuxiao Ye Received 9 September 2021
Revised 30 January 2022
College of Management and Economics, Tianjin University, Tianjin, China 22 March 2022
Mohammed Ali Suleiman Accepted 27 April 2022

School of Management, Zhejiang University, Hangzhou, China, and


Baofeng Huo
College of Management and Economics, Tianjin University, Tianjin, China

Abstract
Purpose – The relationship between just-in-time (JIT) and supply chain disruption risk is unclear from the
existing literature. This paper aims to investigate the impact of supplier JIT and customer JIT on supplier
disruption risk (SDR), internal disruption risk (IDR), and customer disruption risk (CDR) and explore the
moderating role of supply chain centralization.
Design/methodology/approach – Based on survey data collected from 213 manufacturing firms in China,
this study employs structural equation modeling with SmartPLS 3.0 to test the main proposed model and
applies an ordinary least square regression to test the moderating effect.
Findings – The results demonstrate that supplier JIT is positively related to SDR and negatively associated
with IDR. Customer JIT is positively associated with CDR but has no significant effect on IDR. The results also
show that SDR and CDR lead to IDR and mediate the relationship between supplier JIT, customer JIT, and IDR.
In addition, supply chain centralization amplifies the positive impacts of supply chain JIT on SDR and IDR.
Originality/value – This study makes two main contributions. First, the study provides a comprehensive
analysis of the relationship between supply chain JIT and disruption risk. Second, the study addresses that
implementing JIT in a supply chain with a centralized decision-making structure leads to a higher level of
disruption risk.
Keywords JIT, Supply chain disruption risk, Supply chain centralization
Paper type Research paper

1. Introduction
In todays’ turbulent and uncertain environment, firms are more and more likely to be exposed to
disruptions (Sreedevi and Saranga, 2017; Tse et al., 2016). More importantly, as supply chains are
becoming complex and inter-connected, the risk tends to propagate throughout supply chain
partners, leading to a high level of supply chain disruption risk (Basole and Bellamy, 2014;
Christopher and Lee, 2004; Dolgui and Ivanov, 2021; Ojha et al., 2018; Scheibe and Blackhurst,
2018). The China-US trade war and the outbreak of COVID-19 are examples of major crises that
have shocked focal firms and disrupted supply chains with unquantifiable losses (Singh et al.,
2021). Unquestionably, supply chain disruptions are a significant threat that jeopardizes firms’
ability to survive in the market (Kwak et al., 2018). This study focuses on supply chain disruption
risk (SCDR), defined as the likelihood of disruptions in the supply chain and the potential
magnitude of hazards associated with the disruptions (Ellis et al., 2010; Habermann et al., 2015). It
is mainly managers’ perceived likelihood of disruptions stemming from internal, supplier-side
and customer-side relationships (Habermann et al., 2015; Li et al., 2021). Industrial Management & Data
Systems
Vol. 122 No. 7, 2022
pp. 1665-1685
This research was supported by National Natural Science Foundation of China (#72002150, #72091210/ © Emerald Publishing Limited
0263-5577
#72091214, #71961137004). DOI 10.1108/IMDS-09-2021-0552
IMDS The ability to minimize SCDR lies in understanding what affects the rising of the
122,7 disruption risk and the propagation of the risk along the supply chains (Bode and Wagner,
2015; Scheibe and Blackhurst, 2018). While some studies focus on external environmental
conditions causing higher SCDR (e.g. Tse et al., 2016), other studies suggest that the inherent
design of supply chains and the practices adopted to manage supply chain relationships are
critical reasons (e.g. Bode and Wagner, 2015; Habermann et al., 2015). Indeed, some firms or
supply chains are more vulnerable to SCDR. A classic example is that when a fire accident
1666 occurred in the Philips Electronics plant, two major customers that source cellphone chips
from the critical plant (i.e. Ericsson and Nokia) were affected differently. While Ericsson
suffered 200 million dollars losses, Nokia could source from different suppliers and minimize
the negative impact (Chopra and Sodhi, 2014). Along the lines, extant studies have probed
into supply-chain level factors leading to higher odds of supply chain disruptions (Ellis et al.,
2011). For instance, Schmitt et al. (2015) found that a centralized inventory system makes a
supply chain more prone to disruption risk. Habermann et al. (2015) indicated that supply
chain design decisions, such as the dispersion and the distance of supply chain partners, are
crucial determinants of SCDR. Scheibe and Blackhurst (2018) suggested that the supply chain
structure and dependence nature are related to the occurrence and spreading of disruptions in
supply chains. Bode and Wagner (2015) showed that complex supply chain designs predict
the likelihood of supply chain disruptions.
In this study, we advance the line of the rationale and consider important drivers of SCDR
from a supply chain perspective. Specifically, we focus on Just-in-Time (JIT) practices, one of
the most commonly adopted supply chain strategies, and explore how the practices adopted
internally, in the supplier and customer sides, give rise to SCDR. JIT is essential to the lean
philosophy, which facilitates delivering the right product at the right time in the right
quantity (Chen and Hua Tan, 2013; Hernandez-Matias et al., 2019). The benefits of JIT
implementation have been fully investigated in the extant literature (Ruiz-Benıtez et al., 2018;
Suleiman et al., 2021). When applying JIT to the supply chain, the central firms are likely to
reap the maximum benefits because JIT simplifies the focal firm’s operational processes and
transfers those costly burdens to supply chain partners (Dowlatshahi and Taham, 2009).
Many firms, such as Dell, emphasize using JIT practices in their supply chains to increase
efficacy. However, we indicate that the adoption of JIT may also disperse disruption risk to
supply chain relationships. Supply chain JIT practices increase firms’ dependence on a few
suppliers and customers, so their supply chains are likely to be vulnerable and fragile
(Schmitt and Singh, 2012; Wagner and Neshat, 2010).
We also examine whether the supply chain decision-making structure, indicated by the
level of centralization, would take effect along with the JIT practices. A centralized decision-
making structure is often accompanied by JIT adoption because the focal firm needs the
authority to directly control the supply chain and make decisions for their partners to ensure
the successful implementation of JIT (Giannoccaro, 2018; Koufteros and Vonderembse, 1998).
Based on the sense-making theory, we posit that the essence of the supply chain JIT-SCDR
puzzle lies in firms’ decreased capability to resolve equivocality (i.e. the complex and
ambiguous environment) (Ellis et al., 2011). A centralized decision-making structure further
limits firms’ information flows and inhibits firms’ capability to flexibly alter JIT
arrangements in the face of risk (Ellis et al., 2011). Thus, as decisions are more centralized,
the adoption of JIT is more likely to cause SCDR propagation.
Our study differentiates from existing studies in two aspects. First, we analyze the
structural relationship between supply chain JIT and SCDR. While existing studies have
indicated that JIT makes firms vulnerable to disruptions (Danese et al., 2012; Jadhav et al.,
2015; Suleiman et al., 2021), they have not fully uncovered the comprehensive relationships
between internal, inbound, and outbound disruption risk and different dimensions of supply
chain JIT. This leads to the first research question:
RQ1. How does supply chain JIT influence SCDR? JIT’s impact on
Second, we consider the decision-making structure (i.e. the level of centralization) in the study SCDR
to shed light upon the possible mechanism leading to SCDR. We draw from the sense-making
theory to depict how JIT implementation in a centralized supply chain might expose firms to a
greater likelihood of supply chain disruptions. We posit the second research question.
RQ2. How does supply chain centralization moderate the relationship between supply
chain JIT and SCDR? 1667
Overall, this study is fruitful for understanding the antecedents of SCDR by incorporating the
roles of supply chain JIT and centralization.
This paper is organized as follows: We reviewed various literature underpinning SCDR,
supply chain JIT, and supply chain centralization and developed research hypotheses. We
then elaborated on the research methodology. Subsequently, we presented the results,
discussed the findings, and summarized the theoretical and managerial contributions.
Finally, we provided the conclusion, limitations and suggestions for future studies.

2. Literature review
2.1 Supply chain disruption risk
Supply chain disruptions are typically viewed as unexpected events that disrupt the normal
flow of materials and goods in the supply chain (Kleindorfer and Saad, 2005). Most scholars
who have studied supply chain disruption risk focused on the notion that present supply
chains are fragile and undergo a higher risk of disruptions than those in the past (Kleindorfer
and Saad, 2005; Parast and Subramanian, 2021; Park et al., 2016). SCDR is defined as the
likelihood of having a disruption in the supply chain and potential hazards associated with
the disruption (Habermann et al., 2015; Macdonald et al., 2018). Our definition is based on the
managerial perception that disruptions would emanate in the supply side, customer side, or
firm internal operations (Habermann et al., 2015), leading to subjected total potential loss in
the supply chain (Ellis et al., 2010). Three dimensions of SCDRs are included in this study (i.e.
SDR, CDR and IDR). SDR is defined as the likelihood that the normal flow of materials
upstream will be interrupted (Tse et al., 2016). CDR is defined as the likelihood that the normal
flow of products downstream will be interrupted. IDR is perceived as the likelihood of
breakdown triggered by the failure of firm internal operations (Habermann et al., 2015).
Extant literature has investigated the SCDR in two streams. The first stream examined
SCDR as a multi-dimensional concept triggered by several internal and external drivers
(Kleindorfer and Saad, 2005; Parast and Subramanian, 2021; Tse et al., 2016). Table 1 presents
the summary of drivers of SCDR that are identified in the past literature. Another stream of
research focused on the mitigation strategies of SCDR (Craighead et al., 2007; L€ucker et al., 2019;
Tomlin, 2006). This paper addresses the gap in the literature by evaluating the antecedent of
SCDR from the angle of supply chain design and the sense-making perspective, which are less
understood in the previous literature (Bode and Wagner, 2015). Accordingly, our paper
provides a better understanding of how SCDR spreads and propagates in supply chains.

2.2 Supply chain JIT


Existing studies have indicated the need for firms to embrace JIT in supply chains to enhance
competitive advantages (Chen and Hua Tan, 2013; Ruiz-Benıtez et al., 2018). Supply chain JIT is
defined as the practice aiming to eliminate waste, improve efficacy, and enhance resource
utilization throughout the supply chain (Green et al., 2014). Our study adopts the classification
commonly used in previous studies and categorizes supply chain JIT into (1) supplier JIT and
(2) customer JIT (Danese et al., 2012; Green et al., 2014). Specifically, supplier JIT also termed
IMDS Reference Title Drivers
122,7
Parast and An examination of the effect of supply Demand risk, supply risk, process risk
Subramanian chain disruption risk drivers on and environment risk
(2021) organizational performance: evidence
from Chinese supply chains
Tse et al. (2016) Unlocking supply chain disruption risk Demand uncertainty, quality uncertainty,
1668 within the Thai beverage industry logistics uncertainty
Habermann et al. Keep Your Friends Close? Supply Chain Inbound material flow (supply side),
(2015) Design and Disruption Risk internal production processes (internal),
and the outbound material flow (customer
side)
Lavastre et al. Supply chain risk management in French Process risk, control risk, demand risk,
(2012) companies supply risk and environment risk
Thun and Hoenig An empirical analysis of supply chain risk Purchasing risk, demand risk
(2011) management in the German automotive
industry
Tuncel and Alpan Risk assessment and management for Supplier risk, Inbound/outbound logistics
(2010) supply chain networks: A case study risk, manufacture, customers risk
Zsidisin and Do perceptions become reality? The Supply risk (Shortage of parts, incomplete
Wagner (2010) moderating role of supply chain resiliency and delayed deliveries
on disruption occurrence
Kleindorfer and Managing disruption risks in supply Economic disruption (equipment
Saad (2005) chains malfunctions and systemic failures,
abrupt discontinuity of supply), natural
hazards earthquakes, hurricanes, and
storms, terrorism and political instability
Table 1. J€
uttner (2005) Supply chain risk management Supply risk, process and control sources,
Summary of the prior Understanding the business requirements demand risk, environmental risk
research on from a practitioner perspective
antecedents of supply Christopher and Building the resilient supply chain Process risk, control risk, demand risk,
chain disruption risk Peck (2004) supply risk, and environment risk

“JIT purchasing,” aims to synchronize material flows from the major supplier to the focal firm
(Giunipero et al., 2005). Customer JIT, also known as “JIT selling,” refers to delivering the right
product in the right volume at the desired place to the customer (Green et al., 2011).
Extant research has provided several advantages that firms can obtain by adopting
supply chain JIT practices, such as improved product quality, costs reduction, lowered
inventory, shortened lead time, stabilize production, and increased responsiveness (Buer
et al., 2020; Negr~ao et al., 2017; Suleiman et al., 2021). Supply chain JIT is one of the lean
bundles with the objective of achieving supply chain excellence (Negr~ao et al., 2017). Yang
et al. (2021) argue that the core principle of supply chain JIT is to reduce waste, streamline
purchasing, production and distribution, and enhance the effective flow of materials and
goods at the pace of customer demand.
Some literature has also discussed the pitfall of supply chain JIT in different ways. For
example, Suleiman et al. (2021) indicated that supply chain JIT makes firms overly lean due to
the deliberate choice of keeping minimal inventories, making the entire system at risk when
unexpected events disrupt the normal flow of materials. Another pitfall of supply chain JIT is
the sourcing strategy and structure used to facilitate the frequent delivery of materials
required. The single-sourcing approach undermines firm capabilities to cope with market
changes (Giunipero et al., 2005; Zsidisin and Wagner, 2010). Although some research
suggests that supply chain JIT increases risk in the manufacturing firm, the findings are
general to conclude the relationships. To fill this research gap, we conduct a comprehensive
empirical study to examine the impact of supply chain JIT on supply chain disruption risk.
2.3 Supply chain centralization JIT’s impact on
Supply chain centralization is the degree to which the locus of authority to make decisions SCDR
concerning supply chain activities is concentrated at higher levels of the hierarchy (Davis-
Sramek et al., 2015). In centralized supply chain structures, communication is vertical in
nature and information is passed from those who have relevant information (i.e. customers
and suppliers) to the focal firm with decision-making rights (Pertusa-Ortega et al., 2010).
Davis-Sramek et al. (2015) argue that a centralized supply chain decision structure tends to
impose high risk to the firm because the process of passing information to the hierarchy is 1669
subjected to distortion. From the sense-making perspective, as supply chain firms rely on a
hierarchical structure of information and decision flows, they are hampered in taking timely
response action (Giannoccaro, 2018).

3. Linking supply chain JIT with SCDR


3.1 The effects of supplier JIT and customer JIT on IDR
As today’s supply chains are characterized by complexity, ambiguity, and uncertainty, many
firms have embraced supply chain JIT to optimize manufacturing operations, shorten lead
time, and reduce production costs (Bond et al., 2020; Yang et al., 2021). We indicate that supply
chain JIT minimizes the chance of focal firms’ exposure to IDR. First, adopting supply chain
JIT (i.e. supplier JIT and customer JIT) improves firms’ operational efficiency (Danese et al.,
2012; Namdar et al., 2018). According to Bevilacqua et al. (2017), adopting supply chain JIT
builds stable relationships between supply chain partners through frequent and reliable
parts deliveries, improving the firm’s operational responsiveness, facilitating smoother
operations, reducing costs and the risk of breakdown. Second, firms adopting supply chain
JIT need a re-design of their supply chain structures, such as sourcing from a small pool of
suppliers and co-locating with their customers (Habermann et al., 2015). To develop the
supply chain structure, firms adopting supply chain JIT need to smooth operational
processes via integrating functions and the synchronization of line-operating decisions
(Danese et al., 2012; Green et al., 2011). The associated benefits include improving
communication, coordination, and flexibility. In turn, these practices ensure operational
visibility and reduce the chance of internal disruption (Birkie and Trucco, 2020). Therefore,
we propose that:
H1a. Supplier JIT is negatively related to internal disruption risk.
H1b. Customer JIT is negatively related to internal disruption risk.

3.2 The effects of supplier JIT and customer JIT on SDR and CDR
Although adopting supply chain JIT has direct benefits to the focal firm, it also entails a dark
side in the supply chain dyads. Supply chain JIT is viewed as the main component of the lean
system (Bond et al., 2020). The system is fragile because it gives few options to handle an
unexpected situation (Jabbarzadeh et al., 2018). The pitfall of supply chain JIT is elaborated
from the perspective of suppliers and customers. We indicate that supplier JIT would induce
SDR in two ways starting with the supplier side. First, as supplier JIT emphasizes single
sourcing and close collaboration with a few suppliers to ensure frequent deliveries in small
lots, the practice increases reliance over others. It makes firms vulnerable to the practice of the
suppliers and the turbulences in the supply side (Zsidisin and Ritchie, 2008). For instance,
Blome and Henke (2009) argued that although single-sourcing benefits are indisputable, it is a
risky approach when unexpected turbulences happen. It leaves firms with few alternatives to
cope with uncertainties.
Second, firms implementing supplier JIT would minimize inventories in production
processes (Jadhav et al., 2015). Despite the economic rationale of reducing inventories, it
IMDS increases the hazard of supply disruption (Ahmed and Huma, 2021). Whitney et al. (2014)
122,7 argued that when a firm holds few inventories for production, it bears a high chance of supply
disruptions once the components fail to arrive on time. In a similar vein, supplier JIT focuses
on reducing inventories in safety capacity, lead time, and stocks. The resulting risk is that a
firm would be less prepared for any contingencies (Birkie, 2016; Suleiman et al., 2021; Zsidisin
et al., 2005). Thus, we conjecture that supplier JIT makes firms vulnerable to SDR and propose
the following hypothesis:
1670
H2a. Supplier JIT is positively related to supplier disruption risk.
On the other side, the risk of adopting customer JIT can be explained in two aspects. First,
customer JIT practices enlarge a firm’s responsibility to serve its customers and induce a
greater need for intensive coordination, collaboration, and integration among departments
(Banerjee et al., 2007). In other words, customer JIT requires commitment and involvement
from the focal firm and customers. Therefore, any point of failure in the pull delivery practices
(such as not delivering the right products in the right volume to the customer’s desired place)
could trigger disruption on the customer side (Hernandez-Matias et al., 2019). Second,
customer JIT practices require predictable sales planning that relies on the customer’s
historical orders. An error in the sales planning and demand forecasting may lead to a
disruption risk in the downstream supply chain (Jadhav et al., 2015). Therefore, we formulate
the following hypothesis:
H2b. Customer JIT is positively related to customer disruption risk.

3.3 The effects of SDR and CDR on IDR


From a supply chain perspective, the manufacturing firm is the focal point that connects the
upstream and downstream supply chain partners. We argue that the two types of SCDR
influence IDR. Due to the inter-connectedness of supply chain nodes, either upstream or
downstream disruptions can propagate and disperse the negative impact on the focal firm
(Scheibe and Blackhurst, 2018; Shekarian and Mellat Parast, 2021). Ojha et al. (2018) warned
that a high level of connection patterns at any node of the supply chain could influence the
spread of risk to the focal firm, hence, inducing a disruption to the firm’s internal
operations.
Specifically, SDR affects a supplier’s ability to deliver materials to the focal firm (Jadhav
et al., 2015). Under a high level of SDR, the supplier may fail to meet the focal firm’s required
quantity and interrupt its production capacity. Prior studies contend that supply disruptions
may bring an imbalance between forecasted and actual demand of materials, thus, leading to
interruption in production schedule (Zsidisin and Wagner, 2010). For example, Ellis et al.
(2011) denoted that supply disruption results in delayed orders of components and parts that
destabilize the normal operation mode of the firm. Therefore, SDR unfolds the disruption
upstream and triggers IDR.
CDR stems from interruptions of outbound flow in the downstream supply chain
(Habermann et al., 2015). Previous studies have confirmed that CDR causes delays in the
distribution of products and leads to a mismatch of firm projections and actual demand
(J€
uttner, 2005; Wagner and Bode, 2008). For instance, Tse et al. (2016) show that CDR would
lead to a poor connection with key supply chain partners downstream and affect timely
information processing. CDR would have cascading effects on firm internal information
sharing and interrupt the production processes. Based on the discussion above, we propose
the following hypotheses:
H3a. Supplier disruption risk is positively related to internal disruption risk.
H3b. Customer disruption risk is positively related to internal disruption risk.
3.4 The mediating effects of SDR and CDR JIT’s impact on
We propose that SDR and CDR mediate the effects of supplier JIT and customer JIT on IDR. SCDR
While implementing supply chain JIT has direct merits to the focal firm, it is indirectly related
to IDR. JIT (i.e. supplier JIT and customer JIT) creates tightly coupled supply chains. This
type of supply chain typically has vulnerability to SDR and CDR, thus showing a higher IDR
level of IDR (Jadhav et al., 2015). In other words, supply chain JIT practices create a fragile
supply chain, and such vulnerability nature of a supply chain will lead to internal operations
obstacles. The dark side of supply chain JIT will propagate and ultimately disrupt the focal 1671
firm operations. The arguments suggest that SDR and CDR mediate the relationship between
supplier JIT, customer JIT and IDR (see Figure 1). Therefore, we hypothesize the following:
H4a. SDR mediates the relationship between supplier JIT and IDR.
H4b. CDR mediates the relationship between customer JIT and IDR.

3.5 The moderating role of supply chain centralization


Supply chain centralization refers to the degree to which a focal firm takes control of the
decision-making process for the supply chain partners (Davis-Sramek et al., 2015). It is an
important decision-making structure that eases coordination difficulties, aggregates
information flows, and facilitates quick solutions (Davis-Sramek et al., 2015). Firms with a
centralized supply chain structure concentrate the power and obtain a higher control over
supply chain partners, which is well-coordinated with JIT practices. However, we posit that
when the supply chain decision responsibilities are centered at the focal firm, the dark side of
supply chain JIT would be magnified.

SJIT1

SJIT2

SJIT3
Supplier JIT
SJIT4
H1a
H2a
SDR1

SDR2 IDR1
Supplier
SDR3
disruption risk IDR2
H3a
SDR4
Internal
IDR3
disruption risk
CDR1 H3b
Customer
IDR4
CDR2 disruption risk

CDR3 IDR5

CDR4 H2b
Internal
H1b JIT
CJIT1
Customer JIT
CJIT2

CJIT3 Figure 1.
Conceptual framework
CJIT4
IMDS We draw from the sense-making perspective to indicate that supply chain centralization
122,7 amplifies the dark side of supply chain JIT and results in a higher likelihood of risk
propagation among supply chain members (Ellis et al., 2011). As we have elaborated, firms
adopting JIT rely on their supply chain partners to maintain efficient products, information,
and cash flows. They are subject to the behavior of supply chain partners and fragile to
environmental turbulence. In this sense, supply chain JIT induces equivocality as firms are
inhibited from understanding the overall environmental conditions (Ellis et al., 2011;
1672 Giannoccaro, 2018). The situation is especially exacerbated when firms have a centralized
decision-making structure with supply chain partners. Although the information processing
need is reduced in a centralized supply chain, centralization further restricts firms to familiar
areas and hampers their searching for valuable information outside existing supply chain
relationships when unexpected issues occur (Flynn et al., 2016; Joseph et al., 2016). In addition,
suppliers and customers may be discouraged from seeking solutions for JIT-induced
problems when they are rendered low authority. As the responsibility to cope with SCDR may
fall upon the focal firm solely, the risk is more likely to propagate quickly along the supply
chains. In that case, we argue that firms having a centralized decision-making structure in the
implementation of JIT will increase SCDR. Therefore, we posit the following hypotheses:
H5a. Supply chain centralization positively moderates the relationship between supply
chain JIT and SCDR.
H5b. Supply chain centralization positively moderates the relationship between SDR,
CDR and IDR.

4. Methodology
4.1 Questionnaire design
The constructs were developed after a comprehensive review of previous literature. For
content validity, all items were reviewed by experts and went through in-depth interviews
with supply chain managers. The questionnaire was also pre-tested through a pilot study
conducted in 25 manufacturing firms. Additional inputs were added to the revised
questionnaire to ensure that the questions were understandable and practicable in China. The
questionnaires were developed in English, translated into Chinese, and then translated back
into English for cross-checking (Flynn et al., 2010). Supplier JIT and customer JIT were
measured using four items for each, adapted from McKone et al. (2001). SDR and CDR were
measured using four items adapted from (Ellis et al., 2010). IDR consists of five items adapted
from Ellis et al. (2010). The four items of supply chain centralization were adopted from
Huang et al. (2010). All items were measured using a 7-point Likert scale (see Table 2).

4.2 Sampling and data collection


The data used in this study were collected from manufacturing firms in China. The stratified
sampling method was applied to randomly select sample firms from five economic zones,
including Yangtze River Delta (YRD), Pearl River Delta (PRD), Bohai Bay Economic Rim
(BER), and medium, west, and central zone (MWCZ). The selected zones were representative
as they have a good manufacturing base and intensive industrial activities in China (Flynn
et al., 2010).
Our research team randomly selected sample firms based on the directory from the
National Bureau of Statistics (NBS) of China. A key informant knowledgeable of supply chain
management activities was selected. The phone calls were made to introduce the project
objectives, questionnaire content and expected benefits before mailing questionnaires to the
key informants. Upon voluntary agreement with informants, questionnaires and instructions
Construct Item Mean SD Loading
JIT’s impact on
SCDR
Supplier JIT
(α 5 0.906, CR 5 0.933, SJIT1: We apply the JIT model to source raw 3.413 1.810 0.869
AVE 5 0.780) materials from major suppliers
SJIT2: Our major suppliers contact us through JIT 3.244 1.812 0.948
SJIT3: Our firm helps major suppliers improve the 3.277 1.839 0.950
application of JIT production model capability 1673
SJIT4: Our major suppliers contact us with a “pull 3.817 1.703 0.749
system” of ordering
Supplier disruption risk
(α 5 0.857, CR 5 0.903, SDR1: There is a high probability that major 4.272 1.467 0.706
AVE 5 0.702) suppliers will suffer losses from daily interruptions
SDR2: Our supply chain is highly likely to 3.587 1.456 0.863
breakdown into major suppliers
SDR3: There is a high level of risk in the operation of 3.521 1.352 0.911
major suppliers
SDR4: The normal product flow, service flow, and 3.836 1.522 0.857
information flow in our supply chain are easy to
breakdown due to the main supply breaking in the
business’s mistake
Customer JIT
(α 5 0.918, CR 5 0.942, CJIT1: Our firm applies the JIT mode of delivery to 3.211 1.817 0.919
AVE 5 0.804) our major customers
CJIT2: Our major customers contacts us through JIT 3.113 1.830 0.954
CJIT3: Our firm helps major customers improve the 3.207 1.857 0.955
application of JIT
CJIT4: Our major customers contact us with a “pull 3.972 1.805 0.741
system” of ordering
Customer disruption risk
(α 5 0.868, CR 5 0.910, CDR1: There is a high probability that major 4.376 1.607 0.698
AVE 5 0.719) customers will suffer losses from daily interruptions
CDR2: Our supply chain is highly likely to 3.545 1.442 0.915
breakdown in major customers
CDR3: There is a high level of risk in the operation of 3.592 1.525 0.883
major customers
CDR4: The normal product flow, service flow, and 3.681 1.505 0.879
information flow in our supply chain are easy to be
breaking in the user’s mistake of the business
Internal disruption risk
(α 5 0.911, CR 5 0.934, IDR1: Daily break in our internal operations has 3.925 1.691 0.760
AVE 5 0.780) caused us losses
IDR2: Our supply chain is highly likely to break in 3.319 1.505 0.880
internal operations
IDR3: Our internal operations have a high level of risk 3.343 1.544 0.924
IDR4: Normal process in our supply chain is easy due 3.315 1.424 0.873
to internal operation errors breaking Table 2.
IDR5: Our internal operations are at high risks 3.282 1.506 0.855 Items, Cronbach alpha,
emanated from upstream and downstream in the composite reliability,
supply chain AVE, descriptive
statistics, and factor
(continued ) loading
IMDS Construct Item Mean SD Loading
122,7
Supply chain centralization
(α 5 0.6441, CR 5 0.881, SCC1: In our supply chain, small things must also be 3.88 1.515 0.769
AVE 5 0.649) asked by superiors
SCC2: Our supply chain is not suitable for those who 4.24 1.396 0.830
like to make their own decisions
1674 SCC3: Individual decisions in any supply chain 4.12 1.696 0.820
require approval from the superiors
SCC4: With the approval of the supervisor, we can 4.86 1.437 0.804
Table 2. take supply chain actions

were sent with a cover letter to guarantee the confidentiality of their responses (Flynn et al.,
2010). Besides, close follow-ups such as weekly phone calls and email reminders were made to
increase the response rate. Finally, a total of 213 useable questionnaires out of 800 were
returned, yielding a valid response rate of 26.63% (see Table 3).

4.3 Bias test


Following the techniques recommended by Podsakoff et al. (2003), two approaches were
deployed to test the common method bias in our study. First, Harman’s one-factor analysis
was tested using exploratory factor analysis (EFA). EFA results revealed six factors that
explained 75.4% of the total variance. The first factor explained 29.01% of the total variance
(not the majority) (see Table 4). Second, we used confirmatory factor analysis (CFA) to test the
model. LISREL 8.80 software was used to run the analysis by loading all indicators to a single

Total Fixed asset Total Total


Industry category (n 5 213) (RMB) (n 5 213) Ownership (n 5 213)

Metals, machinery and 36.2% <5 million 15.5% State-owned 13.9%


engineering enterprises
Electronic product and 29.6 5–10 million 6.6 Collective 1.9
electric appliance enterprises
Chemical and 8.5 10–20 8.9 Private 49.8
petrochemical industry million enterprises
Food, beverages, alcohol 6.1 20–50 10.3 Joint ventures 14.6
and cigarettes million
Miscellaneous 19.6 50–100 13.2 Foreign- owned 20.1
million enterprises
Employees number Total >100 45.5
(n 5 213) million
<50 16.4% Sales Total
(RMB) (n 5 213)
50–99 12.2 <5 million 12.2%
100–199 10.3 5–10 million 4.7
200–499 19.7 10–20 8.4
million
500–999 12.2 20–50 9.4
million
1,000–4,999 11.7 50–100 9.4
million
Table 3. 5,000 þ 17.4 >100 55.9
Company profile million
factor (Sanchez and Brock, 1996). The model fit indices were not acceptable chi-square χ 2 JIT’s impact on
(252) 5 2829.27, RMSEA 5 0.30, SRMR 5 0.24, NNFI 5 0.41, CFI 5 0.46. Thus, a single-factor SCDR
model was not acceptable, implying that common bias was not a concern in our study (see
Table 4).

5. Analyses and results


5.1 Reliability and validity 1675
For construct unidimensionality, we first performed EFA and then calculated Cronbach’s
alpha and composite reliability to determine each construct’s reliability. All items had higher
loadings on the constructs they were intended to measure (Lance et al., 2006), which implies
that all constructs are reliable. After that, we tested the convergent and discriminant validity
using CFA. In assessing convergent validity, items are linked with corresponding constructs
with covariance freely estimated. The model was acceptable with fit indices of chi-square
value of χ 2 (237) 5 530.68, RMSEA 5 0.068, SRMR 5 0.051, NNFI 5 0.97, CFI 5 0.97 (Hu and
Bentler, 1999). The factor loadings in our model were higher than 0.5, and the t-values were
greater than 2.0. For discriminant validity, we compared the square roots of AVE with the
correlation coefficients between the principal construct and all other constructs in the model.
As the square roots of AVE were higher than correlation coefficients in the model, the results
support discriminant validity (Fornell and Larcker, 1981) (see Table 5).

Customer Internal Supplier


disruption Customer disruption disruption Supplier Supply chain
risk JIT risk risk JIT centralization

SCC1 0.038 0.044 0.065 0.011 0.403 0.736


SCC2 0.001 0.035 0.052 0.070 0.056 0.819
SCC3 0.029 0.008 0.135 0.024 0.058 0.812
SCC4 0.022 0.044 0.025 0.007 0.200 0.830
SJIT1 0.005 0.274 0.063 0.146 0.815 0.072
SJIT2 0.054 0.269 0.019 0.276 0.795 0.024
SJIT3 0.061 0.260 0.008 0.177 0.850 0.014
SJIT4 0.123 0.177 0.020 0.063 0.716 0.149
SDR1 0.378 0.004 0.062 0.685 0.266 0.097
SDR2 0.218 0.096 0.260 0.781 0.090 0.064
SDR3 0.083 0.048 0.368 0.823 0.015 0.081
SDR4 0.184 0.068 0.285 0.767 0.067 0.003
IDR1 0.133 0.068 0.692 0.214 0.383 0.020
IDR2 0.178 0.060 0.849 0.126 0.067 0.105
IDR3 0.230 0.010 0.876 0.202 0.039 0.026
IDR4 0.142 0.003 0.832 0.229 0.072 0.052
IDR5 0.185 0.030 0.811 0.182 0.104 0.074
CJIT1 0.000 0.863 0.034 0.024 0.254 0.009
CJIT2 0.036 0.888 0.026 0.009 0.205 0.018
CJIT3 0.026 0.901 0.104 0.055 0.172 0.046
CJIT4 0.087 0.749 0.048 0.149 0.106 0.118
CDR1 0.804 0.014 0.149 0.065 0.298 0.033
CDR2 0.779 0.193 0.269 0.319 0.119 0.018
CDR3 0.683 0.141 0.393 0.310 0.170 0.023
CDR4 0.694 0.097 0.371 0.306 0.116 0.028
Eigenvalue 2.624 5.533 4.036 2.994 1.000 2.651
Total variance explained 74.5%
Note(s): Italics values in the diagonal are the loadings for the factors that the corresponding items are Table 4.
measuring EFA
IMDS 5.2 Structural model assessment for direct and mediating effects
122,7 We used SmartPLS 3.0 software to test the hypotheses and validate our theoretical
framework. We used a bootstrapping procedure for assessing the relationships in the
structural model with a normal setting of 5,000 sub-sample sizes (Jajja et al., 2018). Before we
ran the PLS, variance inflation factors (VIF) were examined to test the multicollinearity of
variables. The results show that all were lower than 4.0, indicating that the collinearity
problem was not a problem in this study. On the other hand, the moderating factor was tested
1676 using OLS regression (Cohen et al., 2014).
Figure 2 presents the results and path coefficients of SEM. The R2 value of IDR is 0.404,
meaning 40.4% of the variance were explained. The supplier JIT is significantly associated
with IDR (β 5 0.161, p < 0.1) and SDR (β 5 0.243, p < 0.001), supporting H1a and H2a. On the

Constructs Mean SD 1 2 3 4 5 6

1. Supplier JIT 3.438 1.590 0.883


2. Customer JIT 3.377 1.643 0.725 0.897
3. Supplier disruption risk 3.804 1.214 0.222 0.042 0.838
Table 5. 4. Customer disruption risk 3.798 1.286 0.211 0.143 0.599 0.848
Descriptive statistics 5. Internal disruption risk 3.437 1.318 0.038 0.016 0.529 0.562 0.860
and discriminant 6. Supply chain centralization 4.275 1.218 0.076 0.049 0.049 0.067 0.135 0.805
validity Note(s): The diagonals showing the square root of AVE and off-diagonal showing correlations

SJIT1

SJIT2

SJIT3
Supplier JIT
SJIT4

–0.161†
0.243***
SDR1
R 2 = 0.059
SDR2 IDR1
2
Supplier R = 0.404
SDR3
disruption risk IDR2
0.331****
SDR4
Internal
IDR3
disruption risk
CDR1 0.405***
Customer
IDR4
CDR2 disruption risk
ns
–0.012
CDR3 2 IDR5
R = 0.025
CDR4 0.158* 0.069ns Internal
JIT
CJIT1
Customer JIT
CJIT2

CJIT3

Figure 2. CJIT4
PLS-SEM results
Note(s): †p < 0.1; *p < 0.05; **p < 0.01; ***p < 0.001; ns: non-significant
other side, customer JIT is also significantly associated with CDR (β 5 0.158, p < 0.05) but not JIT’s impact on
directly associated with IDR (β 5 0.069, p > 0.1), hence rejecting H1b and supporting H2b. As SCDR
we have hypothesized, SDR (β 5 0.331, p < 0.001) and CDR (β 5 0.405, p < 0.001) are strongly
associated with IDR, which supports H3a and H3b. Internal JIT included as a control variable
in our model was not significantly associated with IDR (β 5 0.012, p > 0.1).
Subsequently, we assessed the indirect effects using a similar SmartPLS bootstrapping
method (Preacher and Hayes, 2008). Our study finds that mediating effects are significant at
p < 0.01 and p < 0.1 level respectively. The results confirmed H4a (β 5 0.081, p < 0.05) and 1677
H4b (β 5 0.064, p < 0.1). The mediation effects are further supported by a 95% confidence
interval at a 2-tailed level for supplier JIT through SDR (LL 5 0.038, UL 5 0.134) and
customer JIT through CDR (LL 5 0.003, UL 5 0.120) as shown in Table 6. In brief, our
results indicate that SDR and CDR mediate the effects of supplier JIT and customer JIT
on IDR.
Finally, we summarized the results for the moderating effects of supply chain
centralization in Table 7. The results show that supply chain centralization positively
moderates the relationship between supplier JIT and SDR (β 5 0.100, p < 0.01), and IDR
(β 5 0.090, p < 0.05). Furthermore, supply chain centralization positively moderates the
relationship between customer JIT and CDR (β 5 0.072, p < 0.05) and the relationship between
CDR and IDR (β 5 0.117, p < 0.05).

6. Discussion and implications


6.1 The systematic relationships between supply chain JIT and SCDR
First, from the focal firms’ perspective, adopting supply chain JIT, especially supplier JIT,
reduces IDR. This finding is confirmed by previous studies (Birkie and Trucco, 2020;
Suleiman et al., 2021). For instance, supplier JIT is paramount in streamlining the
procurement of materials and goods upstream. Firms can reap the benefits of on-time
delivery, effective production schedules, shortened cycle times, and fast responses from
suppliers. In summary, these facets of supply chain JIT offset internal disruption risk.
Second, from a supply chain perspective, supply chain JIT makes supply chains fragile
and vulnerable. The inbound and outbound flows are likely disrupted when adopting supply
chain JIT practices. These findings are consistent with previous studies. For example, Jadhav
et al. (2015) revealed that over-reliance on a single sourcing and a narrow supply base limit the
supply options, which likely interrupts the inbound flow to the firm. On the other side,
customer JIT creates a bottleneck to the supply chain system for adopting a pull strategy to
satisfy customer requests. The system becomes fragile when unexpected events disrupt the
outbound flow (Hernandez-Matias et al., 2019).

6.2 The propagation of SCDR in supply chains


First, our findings indicate that supply chain disruption risk (i.e. SDR and CDR) propagates
throughout the supply chain. The results are consistent with the findings of Habermann et al.
(2015) and Scheibe and Blackhurst (2018) that SCDR tends to spread along the supply chain
beyond the initial disruption point. The possible explanation is that a failure in one node will

Model pathways 95% CI


LL UL
Table 6.
Supplier JIT → supplier disruption risk → internal disruption risk 0.003 0.120 Bootstrapping effects
Customer JIT → customer disruption risk → internal disruption risk 0.038 0.134 for mediation model
122,7
IMDS

1678

Table 7.
OLS Regression results
(1) (2) (3) (4) (5) (6) (7) (8)
Variables SDR SDR CDR CDR IDR IDR IDR IDR

Supplier JIT (SJIT) 0.169*** (3.24) 0.256 (1.36) 0.097 (1.39) 0.525*** (2.65)
Customer JIT (CJIT) 0.112* (1.88) 0.197 (1.15) 0.292 (1.47)
Supplier Disruption Risk 0.333*** (4.07) 0.301 (1.27) 0.343*** (4.17) 0.303 (1.33)
(SDR)
Customer Disruption 0.403*** (4.86) 0.104 (0.42) 0.407*** (4.95) 0.113 (0.46)
Risk (CDR)
Supply chain 0.295* (1.74) 0.167 (1.19) 0.351* (1.89) 0.461** (2.18)
Centralization (SCC)
a. SJIT 3 SCC 0.100** (2.28) 0.090* (1.84)
b. CJIT 3 SCC 0.072* (1.86) 0.060 (1.24)
c. SDR 3 SCC 0.006 (0.12) 0.007 (0.14)
d. CDR 3 SCC 0.114** (2.42) 0.117** (2.48)
Internal JIT 0.057 (1.24) 0.059 (1.30) 0.002 (0.03) 0.007 (0.10)
Constant 3.221*** (15.63) 4.463*** (6.34) 3.420*** (16.15) 4.121*** (6.82) 0.840*** (3.10) 2.442*** (2.84) 0.913*** (3.18) 3.013*** (3.12)
Observations 213 213 213 213 213 213 213 213
R-squared 0.049 0.080 0.021 0.040 0.379 0.408 0.386 0.429
Note(s): *p < 0.05; **p < 0.01; ***p < 0.001
spread in a complex and tightly coupled supply chain. Thus, whenever any of the nodes in a JIT’s impact on
supply chain network is disrupted and fails, the risk could propagate to internal operations. SCDR
Second, our findings illustrate that SDR and CDR mediate the relationship between supply
chain JIT and IDR. This means that the vulnerability stemming from supply chain JIT will
ultimately affect internal operations because of the supply chain linkages. Our findings
empirically support that supply chain linkages (e.g. supply chain JIT strategy) would
introduce additional interdependencies between partners (Bode and Wagner, 2015), which
intensifies the risk propagation to the firm internal operations. 1679

6.3 The moderating effects of supply chain centralization


This study demonstrates that supply chain centralization moderates the positive effect of
supply chain JIT on supply chain disruption risk. In other words, supply chain centralization
amplifies the dark side of supply chain JIT and increases the odds of risk propagation along
the supply chain network (Ellis et al., 2011). The plausible explanation could be that supply
chain centralization withholds the important information at the focal firms. Firms with
centralized supply chain structures tend to have limited communication and increased
information asymmetries with their suppliers and customers (Joseph et al., 2016), hindering
innovative solutions to operational problems of supply chain JIT and increasing the
likelihood of disruption risk. Due to the locus of authority in decision-making processes,
partners such as suppliers and customers are difficult to handle unforeseen challenges of
supply chain JIT. As a result, any JIT-induced problem would take time to solve and increase
the chance of SCDR.

6.4 Theoretical and managerial contributions


This study provides fresh insights into the drivers of SCDR by incorporating supply chain
JIT and centralization (Table 8). First, our study contributes to understanding the
comprehensive relationships between supply chain JIT and SCDR. In spite that existing
studies commonly posited that supply chain JIT is a viable strategy that contributes to
operational performance (Bond et al., 2020; Danese et al., 2012; Yang et al., 2021) and supply
chain competence (Green et al., 2014), it is often neglected that the strategy makes supply
chains vulnerable to disruptions. The idea that JIT induces risk is often conceptual and little
research has empirically shown the negative consequence of supply chain JIT. Our findings
offer important empirical evidence to the conceptual proposition that supply chain JIT leads
to disruptions in unforeseen contingencies (Simchi-Levi et al., 2002). While firms may benefit
from eliminating wastes and utilizing supply chain resources efficiently, the risk of
disruptions could occur in the upstream and downstream supply chains. In addition, our
finding indicates the inter-related relationships of SCDR and the propagation of disruption
risk along supply chains, which is in line with prior research that shows risk propagates in
interconnected supply chain nodes (Scheibe and Blackhurst, 2018). In this sense, firms’
internal operations may be ultimately impacted by disruptions in supply chain nodes.
Second, we contribute to the mechanism of how SCDR is amplified in a JIT relationship by
examining the moderating effect of supply chain centralization. We are one of the first to
introduce a moderator associated with the supply chain decision-making structure in the
relationship between supply chain JIT and SCDR. Our study documents empirical evidence that
JIT in a highly centralized supply chain structure increases the bottlenecks of decision making
and increases the chance of SCDR. The finding adds to the controversial role of the centralized
supply chain decision-making structure in supply chain management, favoring the dark side.
For instance, the finding is supported by Flynn et al. (2016) that centralization decreases firms’
information processing capabilities such that they would be more vulnerable to uncertainties.
The research of Brusset and Teller (2017), however, posited that tighter control and integration
IMDS Findings Theoretical implications Managerial implications
122,7
1. Supply chain JIT reduces IDR The results are in line with prior Firms should understand the
while increasing SDR and studies showing that supply chain double-edge characteristics of
CDR JIT enables firms to reap benefits supply chain JIT. While
from suppliers that offset IDR leveraging the benefits of supply
(Birkie and Trucco, 2020; Suleiman chain JIT, they should beware of
1680 et al., 2021). The results are also the disruption risk stemming from
consistent with previous research supply chain JIT
that supply chain JIT makes supply
chains (inbound and outbound
flows) fragile and vulnerable to
SCDR (Jadhav et al., 2015)
2. SCDR (i.e. SDR and CDR) The results are consistent with the Firms should be prepared with
propagates throughout the findings of Habermann et al. (2015) proper, tailored, and robust risk
supply chain. Also, SDR and and Scheibe and Blackhurst (2018) mitigation strategies to curb the
CDR mediate the relationship that SCDR tends to spread along the adverse effects of disruption risk
between supply chain JIT and supply chain beyond the initial when implementing supply chain
IDR disruption point. Second, the results JIT
confirm previous research indicating
that vulnerability stemming from
supply chain JIT ultimately affects
internal operations because of the
supply chain linkages and
interdependences (Bode and
Wagner, 2015)
3. Supply chain centralization The results are in line with the sense- Firms should pursue a
moderates the positive effect making perspective that supply decentralized structure and
Table 8. of supply chain JIT on SCDR chain centralization amplifies the delegate the decision-making
Summary of major dark side of supply chain JIT and responsibility to supply chain
findings, theoretical increases the odds of risk partners and the boundary-
and managerial propagation along the supply chain spanners to reduce the negative
implications network (Ellis et al., 2011) effects of supply chain JIT

in supply chains improves resilience performance, which contradicts our finding (Brusset and
Teller, 2017). Our study highlights the significance of using the sense-making perspective in
supply chains to understand the interaction of supply chain JIT and a centralized decision-
making structure and its impact on SCDR. For instance, when the focal firm increases the control
of information and decisions while implementing JIT programs, it weakens the supply chain’s
ability to flexibly acquire and process important information and form fast responses when
unexpected circumstances happen (Davis-Sramek et al., 2015).
Our findings provide important managerial implications in several ways. First, managers
might leverage our results in adopting supply chain practices and designing supply chain
structures. They should beware of the disruption risk stemming from supply chain JIT and
centralized decision-making. Firms must learn from real-world examples, such as the Toyota
company. Toyota is famous for adopting JIT in supply chains and holding strict control over
its suppliers. The chief executives of Toyota company reveal that they have faced disruptions
risk multiple times over the past couple of decades due to integration with JIT in the supply
chain. When a deadly earthquake and tsunami hit Japan in 2011, Toyota’s business was
severely hurt and the philosophy of JIT was blamed for the huge loss compared with other
companies (MacKenzie et al., 2012).
Second, managers should be prepared with proper, tailored, and robust risk mitigation
strategies in case of disruption risk. We encourage managers to be fully aware of the double-
edged characteristic of JIT and use robust mechanisms such as increasing the level of
digitalization to reduce the chance of internal disruption. They should be cautious about SDR JIT’s impact on
and CDR whenever internal operations are prioritized. For instance, the shock that came to SCDR
Toyota in 2011 forced it to revamp the supply chain strategies. The actions include adopting
standardized components, building a supplier network database, regionalizing the supply
chain, and improving the inventory holding of specialized components at suppliers’ units
(Giovani, 2017).
Third, managers should not emphasize a centralized decision-making structure when
implementing supply chain JIT as it might amplify disruption risk. They should understand 1681
the harm of supply chain JIT implementation in restricting the scope of sense-making of
firms. Thus, it would be wiser to pursue a decentralized structure and delegate the decision-
making responsibility to supply chain partners and the boundary-spanners. Recent events
such as the COVID-19 pandemic, US-China trade wars, Suez Canal blockage, and Brexit have
amplified global disruption risk in the manufacturing industry. The events have triggered a
demand for a more flexible system like never before with effective collaborative design,
supply chain involvement, and decentralized information sharing to render supply chain
partner’s visibility and more opportunities in handling disruption risk.

7. Conclusion, limitations and directions for future research


In a nutshell, our study empirically tests the impact of supply chain JIT on SCDR and the
moderating role of supply chain centralization. We empirically confirm that as firms adopt
supply chain JIT, they are more exposed to supply chain disruptions. In addition, supply
chain centralization amplifies the dark aspect of supply chain JIT because it constrains firms’
sense-making capabilities.
Despite the merits above, this study has some limitations, which provide a venue for
future studies. First, the study only investigates the drivers of SCDR using supply chain JIT
and supply chain centralization. Other important supply chain practices related to the lean
principle (e.g. TQM) and supply chain structure (e.g. formalization) could be examined.
Second, we do not consider specific risk mitigation strategies because we focus on uncovering
the structural relationships of SCDR. It would be fruitful to explore effective tools to overcome
the JIT-SCDR obstacle. Third, the data used for evaluating the relationship between
constructs used in this study are from China so that the conclusion may lack generalizability.
Future studies can include data from other countries to test the relationship. Fourth, we use
cross-sectional data to test the relationships, which is insufficient to draw causal
relationships of the constructs. Future research could employ longitudinal data for
assessing the relationship between variables.

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Corresponding author
Mohammed Ali Suleiman can be contacted at: masuleiman@mzumbe.ac.tz

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