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Technological
The moderating effects of and demand
technological and demand uncertainties
uncertainties on the relationship
253
between supply chain integration
and customer delivery Received October 2009
Revised February 2010,
May 2010,
performance June 2010
Accepted June 2010
Sakun Boon-itt
Department of Operations Management,
Thammasat Business School, Bangkok, Thailand, and
Chee Yew Wong
Business School and Logistics Institute, University of Hull, Hull, UK

Abstract
Purpose – The purpose of this paper is to test the moderating effects of technological and demand
uncertainties on the relationship between supply chain integration and customer delivery performance.
Design/methodology/approach – Based on a survey questionnaire with 151 participants in the
Thai automotive industry supply chain, hierarchical regressions are used to test the moderating effects.
Findings – Internal and supplier integration, but not customer integration, were positively
associated with customer delivery performance. Technological and demand uncertainties were found
to moderate the relationships between internal integration and customer delivery performance,
and supplier integration and customer delivery performance.
Research limitations/implications – The moderating effects of technological and demand
uncertainties in the Thai automotive just-in-time ( JIT) environment are explained. This research
contributes to the development of a contingency theory of supply chain integration suggesting that the
impacts of supply chain integration on customer delivery performance vary under different levels of
technological and demand uncertainties.
Practical implications – Managers recognize the diminishing effects of internal integration and
supplier integration under demand uncertainty, and the increasing effect of supplier integration under
high technological uncertainty.
Originality/value – This study contributes to the supply chain management literature by clarifying
the moderating effects of technological and demand uncertainties on the relationship between supply
chain integration and customer delivery performance.
Keywords Supply chain management, Demand, Service delivery, Customer services quality,
Automotive industry, Taiwan
Paper type Research paper

1. Introduction International Journal of Physical

The positive impact of supply chain integration on delivery performance has long been Distribution & Logistics Management
Vol. 41 No. 3, 2011
recognized by the logistics and supply chain management literature (Heskett, 1977; pp. 253-276
q Emerald Group Publishing Limited
Birou et al., 1998; Bowersox et al., 1999; Stank et al., 1999; Iyer et al., 2004; Germain 0960-0035
and Iyer, 2006). Furthermore, some studies have concluded that different dimensions of DOI 10.1108/09600031111123787
IJPDLM supply chain integration, e.g. internal integration, supplier integration, and customer
41,3 integration, could contribute to delivery performance (Handfield, 1993; Choi and Hartley,
1996; Morash et al., 1996; Fawcett et al., 1997; Birou et al., 1998; Bozarth et al., 1998;
Daugherty et al., 1999; Waller et al., 1999; Stank et al., 2001). However, some recent
studies discovered that the impact of supply chain integration on delivery performance
may not be unconditional. These studies suggest that the performance implications
254 of supply chain integration could be contingent on demand uncertainty, supply
uncertainty, and technological uncertainty (Fynes et al., 2004; Liao and Tu, 2008).
Fynes et al. (2004) found that demand and supply uncertainty (but not technological
uncertainty) positively moderated the relationships between supply chain relationship
quality and supply chain performance (including delivery performance). Furthermore,
the study of Liao and Tu (2008) ascertained that manufacturing system integration had
a significant impact on manufacturing performance under a high level of environmental
uncertainty. These findings suggest that the impacts of supply chain integration on delivery
performance vary depending on the levels of demand and supply uncertainty. They also
suggest the need to develop a contingency theory of supply chain integration so that we can
provide accurate advice to logistics managers on the performance implications of supply
chain integration under varying environmental conditions (Fawcett and Closs, 1993).
With the above limited findings, our knowledge on the effects of various types of
environmental uncertainties on the relationship between supply chain integration and
delivery performance remains inadequate. This study aims to contribute to the logistics
and supply chain management literature by clarifying the effects of technological
uncertainty and demand uncertainty on the impacts of supplier, internal and customer
integration on customer delivery performance. Based on hierarchical regression analysis
of survey responses from 151 first tier suppliers in the Thai automotive industry, this
study analyzes the moderating effects of technological and demand uncertainties.
The findings further ascertain the moderating effects of technological uncertainty and
demand uncertainty and hence assist in the development of a contingency theory of
supply chain integration (Fawcett and Closs, 1993). The findings also allow us to provide
practical guidance to logistics and supply chain managers in terms of the effectiveness of
supply chain integration in influencing customer delivery performance.

2. Theoretical background and hypotheses development

2.1 Supply chain integration
Supply chain integration involves the processes of collaboration across functional
departments, suppliers, and customers to arrive at mutually acceptable outcomes
(Pagell and Krause, 2004). Collaboration is a key element of supply chain integration
because strategic collaboration is required to enable cross-functional communication
and joint efforts (Flynn et al., 2010). Furthermore, an integrated supply chain is linked
organizationally and is coordinated in terms of information flow from raw materials to
the on-time delivery of finished products to customers (Sabath, 1995). Thus, supply
chain integration includes the collaboration of functional departments, suppliers and
customers to link and coordinate information flow and processes so that the supply
chain is able to achieve on-time delivery.
Supply chain integration is required “internally” within and across functions and
“externally” across suppliers and customers (Stevens, 1989; Morash and Clinton, 1998
Frohlich and Westbrook, 2001; Rosenzweig et al., 2003). The integration of all
internal functions from materials management to production, sales, and distribution Technological
is paramount to meeting customer requirements at the lowest total system cost and demand
(Morash and Clinton, 1998). Thus, internal integration is characterized by full systems
visibility across functions such as procurement, production, logistics, marketing, sales, uncertainties
and distribution (Stevens, 1989; Morash and Clinton, 1998; Birou et al., 1998).
External integration extends the scope of information sharing and collaboration to
include suppliers and customers (Stevens, 1989). Supplier integration is the most common 255
form of supply chain integration (Fawcett and Magnan, 2002). Supplier integration
involves the effective alignment, information sharing, and participation in the interactions
between firms and their suppliers (Ragatz et al., 2002). Supplier integration requires a
change in attitude away from one of adversarial to one of cooperative, including joint
efforts in product development, problem solving, technology exchange and design support.
On the demand side of a supply chain, through customer integration, firms will
penetrate deep into the customer organization to understand its product, culture, market
and organization in such a way that they can respond rapidly to the customer’s needs
and requirements. Many studies on forward physical flow suggest applying customer
integration to enable just-in-time (JIT) delivery (Richeson et al., 1995; Claycomb et al.,
1999; Dong et al., 2001) and postponement strategy (van Hoek et al., 1999). With
increased visibility, customer integration will further enable collaboration in demand
planning (Fisher et al., 1994); otherwise, due to the lack of information sharing from one
end of the supply chain to the other, there will be tremendous inefficiencies in customer
service (Lee et al., 1997).
In this article, the above three dimensions of supply chain integration (e.g. supplier
integration, internal integration and customer integration), instead of an aggregated
“supply chain integration” construct, are considered because they may have different
effects on delivery performance (Scannell et al., 2000; Swink et al., 2007). It is also possible
that the effects of technological and demand uncertainties on each of these three
dimensions of supply chain integration differ from one another (Fynes et al., 2004).

2.2 The impact of supply chain integration on customer delivery performance

The article focuses on outbound customer delivery performance, which is simply called
customer delivery performance hereafter. The delivery performance of a logistics
system can be measured in terms of on-time delivery, delivery lead-time, and delivery
reliability (Fawcett and Closs, 1993; Noble, 1997). Owing to the importance of the time
element, customer delivery performance is often regarded as time-based performance
(Dröge et al., 2004; Iyer et al., 2004). In general, logistics and supply chain literature
argues for the positive impact of supply chain integration on customer delivery
performance on the grounds of the sharing of reliable and real-time data both within and
across firms in a supply chain (Daugherty et al., 1999; Stank et al., 1999; Waller et al.,
1999; Sohal et al., 2001; Frohlich, 2002). Furthermore, customer delivery performance can
be achieved by a high level of collaboration because it contributes to joint efforts in
problem solving, product development, and collaborative planning (Morash et al., 1996;
Stank et al., 2001; Swink et al., 2007; Flynn et al., 2010). Rosenzweig et al. (2003) argued
that many problems facing manufacturing, such as parts shortages, delivery and quality
problems, and cost increases, are rooted in the lack of effective internal and external
supply chain integration.
IJPDLM Specifically, given the importance of internal integration, Birou et al. (1998) found
41,3 positive impacts of linkage across functional areas on both delivery reliability and
speed. As explained by Flynn et al. (2010), internal integration breaks down functional
barriers and engenders cooperation, which forms the basis for the coordination of
information flow across functions. Thus, a firm with a high level of internal integration
will be able to ensure on-time delivery (Sabath, 1995). Instead, the empirical survey
256 by Fawcett et al. (1997) indicated that a failure to adopt integration between operation
and logistic functions can lead to poor delivery capability. Furthermore, the product
development literature found that internal integration is required to achieve desirable
time-to-market and cycle time performance (Dröge et al., 2004). These arguments and
prior studies appear to support the positive association between internal integration and
outbound customer delivery performance:
H1a. Internal integration will be positively associated with customer delivery
performance.
Supplier integration is achieved through alignment, information sharing, interactions
between firms and their suppliers (Ragatz et al., 2002). When this is happening, it is more
likely to enable frequent deliveries in small lots, use single or dual sources of supply,
evaluate alternative supply sources on the basis of quality and delivery instead of
price, and establish long-term contracts with suppliers to improve supplier delivery
performance (Handfield, 1993). Furthermore, Narasimhan and Carter (1998) point out
that strategic long-term relationship can have a positive impact on the delivery
capability. The mutual and timely sharing of market and operational information allows
manufacturers to anticipate and more fully respond to changes in customer needs
(Stank et al., 1999; Zailani and Rajagopal, 2005). Likewise, Li et al. (2003) reported that
direct supplier development and supplier’s strategic objective alignment have proven to
be significant predictors of purchasing performance in terms of on-time delivery and
quality performance. These arguments and prior studies appear to support the positive
association of supplier integration on outbound customer delivery performance:
H1b. Supplier integration will be positively associated with customer delivery
performance.
Similar to the impact of supplier integration, customer integration is arguably essential to
improve customer delivery performance (Stank et al., 2001). Morash et al. (1996) suggest
that demand-oriented logistics capabilities such as delivery speed, delivery reliability,
and responsiveness to target market could reflect the value discipline of closeness to
customers. Firms often adopt different information technology tools to share information
with their customers. Subsequently, they will be able to implement collaborative
initiatives such as automatic replenishment programs (APRs) including vendor managed
inventory (VMI), efficient consumer response (ECR), and quick response (QR), which
capture the actual customer demand and understand the variations of customer demand
(Daugherty et al., 1999). Furthermore, it is found that reducing customer demand variance
by sharing accurate and timely information with customers can increase customer
delivery performance (Sabath, 1995; Johnson and Scudder, 1999; Cachon, 1999; Waller et al.,
1999). With the above arguments and prior empirical evidence, it is hypothesized that
customer integration will be positively associated with outbound customer delivery
performance:
 H1c. Customer integration will be positively associated with customer delivery Technological
performance. and demand
uncertainties
2.3 The role of technological uncertainty and demand uncertainty
It is rather intuitive to suggest the need for a higher level of supply chain integration
especially when there is a high level of technological or demand uncertainty (Kahn and
Mentzer, 1996; Mentzer et al., 2000; Li and O’Brien, 2001; Lee, 2002; Ragatz et al., 2002; 257
van der Vorst and Beulens, 2002). With regard to the roles of technological and demand
uncertainties, the literature has put forward two perspectives. The first perspective
suggests a direct relationship between supply chain integration and environmental
uncertainty (Ragatz et al., 2002; Zhou and Benton, 2007; Stonebraker and Liao, 2004;
Paulraj and Chen, 2007). However, we take van Donk and van der Vaart’s (2005)
and Iyer et al.’s (2004) perspective and consider technological and demand uncertainties
as an exogenous factor faced by a firm in a supply chain. Our perspective has
been supported empirically (O’Leary-Kelly and Flores, 2002; Fynes et al., 2004;
Liao and Tu, 2008). This means the main role of supply chain integration is not to
minimize technological or demand uncertainty, but to mitigate the negative impacts of
technological and demand uncertainties on delivery performance. It is therefore argued
that firms that were able to integrate specific functions, as necessitated by their
competitive environment, outperformed those companies that did not (Mason-Jones and
Towill, 1997; O’Leary-Kelly and Flores, 2002).
2.3.1 The moderating effect of technological uncertainty. Technological uncertainty
refers to the changes and unpredictability of product and process technology development
(Chang et al., 2002). More precisely, Ragatz et al. (2002) measured technological
uncertainty as the degree to which product or process technologies employed are new,
complex, and/or rapidly changing. The development of technology provides numerous
opportunities for organizations; for companies to apply new technology to offer various
new products so as to take advantage of any new market opportunities which come with
technological innovation. As technology becomes more multidisciplinary and dynamic,
as part of their supply chain restructuring initiatives, firms are relying on other firms as
a way to attain the necessary technological know-how. Additionally, developments in
information technology enable companies to achieve a degree of control in international
supply chains; to reduce transaction costs relating to the control of goods flows; and to
ensure a QR to customer orders.
Hrebiniak and Snow (1980) and Fisher (1997) indicate that technological uncertainty
will vary by product sector or industry. In the automotive industry, technological
uncertainty can originate from the increased complexity of parts or novelty of part
functions (Oh and Rhee, 2008). When this is happening, there will be more likelihood
of delivery delay and product-quality problems (Oh and Rhee, 2008). When such a
technological uncertainty is simultaneously experienced by several parties in a supply
chain, an integrated supply chain which has a greater ability to collaborate, has aligned
objectives and shares information will be able to mitigate its negative impact on delivery
performance. For example, a survey of high-tech companies indicated that certain
elements of the supplier integration process were more likely to be seen under conditions
of technological uncertainty, leading to significant improvements in cost, quality, and
cycle-time objectives (Ragatz et al., 2002). However, with a lower level of technological
uncertainty, the role of supply chain integration could be redundant. Therefore, we argue
IJPDLM that the impact of supply chain integration on customer delivery performance will be
41,3 different under the presence of different levels of technological uncertainty:
H2a. The associations between internal integration and customer delivery
performance will be moderated by technological uncertainty.
H2b. The associations between supplier integration and customer delivery
258 performance will be moderated by technological uncertainty.
H2c. The associations between customer integration and customer delivery
performance will be moderated by technological uncertainty.
2.3.2 The moderating effects of demand uncertainty. Demand uncertainty is the extent
of change and unpredictability of a customer’s needs and demands (Chang et al., 2002).
Geary et al. (2002) state that demand uncertainty can be viewed as the difference between
the actual end-marketplace demand and the orders placed with an organization by
its customers. While demanding more variety, higher quality, and better product
(Claycomb et al., 1999), customers today also want faster and more reliable delivery. This
does not mean the customers will be able to consistently pass on a predictable demand to
their upstream suppliers. Typically, products with a high level of demand variability,
irregular purchase, high rate of innovation, and short product life-cycle will generate a
higher level of demand uncertainty to the upstream suppliers (Chang et al., 2002).
Very often customers may suddenly place an order twice the typical
order-size, indirectly leading to poor delivery performance. This is because such a
demand uncertainty will often lead to distortion of demand information (Lee et al., 1997).
Changes in demand will subsequently increase the need for a firm to alter supply plans,
manufacturing plans and marketing/sales plans (O’Leary-Kelly and Flores, 2002). Ideally
information sharing and collaboration across functions will enhance the ability of a
manufacturer to alter manufacturing and marketing/sales plans and the ability to react
more accurately to changing demand or supply (Flynn et al., 2010). This means an
integrated supply chain with a higher level of information sharing, objective alignment,
and collaboration will be able to maintain on-time delivery and QR to customer orders
even when there is a high level of demand uncertainty. On the other hand, when facing
stable demand, firms will have more opportunity to meet delivery requirements
(Fisher, 1997). This is especially valid for supply chains operating in a JIT and continuous
replenishment environment (Schonberger, 1986; Zipkin, 1991). Owing to the sharing of
real-time information and the ability to work collaboratively, firms in an integrated supply
chain will be able to enhance the accuracy of production planning and inventory allocation
in an environment with a lower level of demand uncertainty. This implies firms, especially
those operating in a JIT environment, will perform better in delivery performance under a
low, but not high level of demand uncertainty. This means the impacts of internal, supplier
and customer integration on delivery performance will be moderated by demand
uncertainty:
H3a. The associations between internal integration and customer delivery
performance will be moderated by demand uncertainty.
H3b. The associations between supplier integration and customer delivery
performance will be moderated by demand uncertainty.
 H3c. The associations between customer integration and customer delivery Technological
performance will be moderated by demand uncertainty. and demand
Figure 1 shows the conceptual models we use to examine the hypotheses established uncertainties
earlier. The basic model examines the direct impacts of the three dimensions of supply
chain integration (internal integration, supplier integration, and customer integration)
on customer delivery performance (H1), considering firm size as a control variable.
We then extend this model by adding technological uncertainty and demand 259
uncertainty and their interactions with each of the three dimensions of supply chain
integration to examine the moderating effects of technological uncertainty (H2) and
demand uncertainty (H3), respectively.

3. Research methodology
3.1 Sample and data collection
The sample frame was conducted by selecting only the first tier suppliers in automotive
industry. We have chosen the automotive industry in Thailand as the population for this
study for several reasons. First, the automotive industry is seen as an indicator of the
wealth of an economy (Childerhouse et al., 2003). Second, the automotive supply chain
has been well documented in previous research (Bandyopadhyay and Sprague, 2003).
Finally, the automotive sector has been a leader in Thai industry in implementing
supply chain management strategies. In addition, by using a single industry this study
can ensure a high level of internal validity. By disregarding other industries, we may
decrease the generalizability of the research. However, there are still many different
product sectors within the automotive industry, ranging from accessories to body or
engine parts, which can have wider applicability. Therefore, it is expected that a sample
representative of different sectors and firm sizes will maximize generalizability.
In terms of the unit of analysis, this study was predominately conducted
using a population at the plant level. Flynn et al. (1994) pointed out that most empirical
research on operations management occurs at the corporation or individual level. The
independent variables of supply chain management practices usually reflect plant-level
practices. Similarly, the dependent variable of firm capability also reflects plant-level
results. The selection of respondents is crucial when designing a large-scale survey.
A mailing list was obtained from two sources:

Technological
Internal H1a
uncertainty
integration

H2
H1b Customer
Supplier
delivery
integration
performance
H3

Customer H1c Plant size as

integration Demand Figure 1.
uncertainty control variable
Conceptual framework
IJPDLM (1) The Directory of the Society of Automotive Engineering of Thailand.
41,3 (2) The Thailand Automotive Industry Directory.

Table I presents characteristics of the sample. We obtained responses from mainly

supply chain managers, purchasing/logistics managers, and general managers. These
respondents were selected because they have detailed knowledge of supply chain
260 integration practices and company capabilities. Each respondent on the mailing list was
asked to complete the questionnaire from the perspective of their primary supply chain
integration activity. The final total of 151 complete and usable responses (a response rate
of 20.85 percent) is close to the recommended minimum of 20 percent for empirical
studies in operations management (Malhotra and Grover, 1998).

3.2 Questionnaire survey and construct measures

The data for this study were collected via a questionnaire survey. Content validity was
ensured through a comprehensive review of the literature and interviews with
practitioners. All the items from the literature review were identified and used to draft
the questionnaire, along with questions where respondents were asked to provide
demographic information relating to their firms. An English version of the questionnaire
was developed and translated into Thai. A bilingual Thai native proofread the English
version and noted ambiguities that could cause confusion in translation. Following these
revisions, the questionnaire was translated into Thai and then reviewed by several
Thai practitioners with expertise in supply chain management in the automotive
industry. They were asked to examine the questionnaire for clarity and whether it
adequately conveyed the meaning of each item. The interviews primarily focused upon
clarification of the instructions and refinement of item wording. There were no major
problems detected and minor modifications were made to the instructions and wording
of some items. The revised questionnaire was pre-tested on a small scale using
21 potential respondents in order to further assess its validity and overall readability.

Demographic characteristics Percentage of samples

Position of respondents
Supply chain manager 40
Purchasing/logistics manager 22
General manager 22
Production manager 8
President/managing director 8
Ownership
100% Thai owned 48
Thai-foreign joint ventures 34
Foreign owned 18
Number of employees
. 700 16
351-250 23
201-250 23
Table I. 101-200 18
Characteristics 51-100 16
of the sample , 50 4
Comments offered by the respondents helped us to improve question wording and Technological
estimate time required to complete the survey. This pre-tested survey also allowed us to and demand
estimate the variability of the responses to the questions.
The measures of the three supply chain integration constructs, technological uncertainties
uncertainty, demand uncertainty, and customer delivery performance used in this
research were adapted from existing scales found in the previous studies (Table II). For
internal integration, we adapted existing measurement items from Stank et al. (2001), 261
Narasimhan and Kim (2002) and Flynn et al. (2010). For supplier and customer integration,
we adapted existing measurement items from Narasimhan and Kim (2002) and Flynn et al.
(2010). Customer delivery performance is measured according to the measurement items
developed by Ward and Duray (2000), Li (2002) and Boyer and Lewis (2002), which include
on-time delivery, right quantity, short lead time, and reliable delivery to customers.
Our measurement items for technological and demand uncertainties are developed
based on the existing literature on environmental uncertainty. Environmental
uncertainty occurs when there is a lack of knowledge about the outcome of a specific
decision; or a lack of ability to confidently assign probabilities as to how environmental
factors are going to affect a specific decision (Duncan, 1972). Environmental uncertainty
may be further divided into four elements: static-dynamic, simple-complex,
predictable-unpredictable, and certain-uncertain (Oswald et al., 1997). Unpredictability
or complexity in the external environment may give rise to environmental uncertainty
(Lenz, 1980). In a supply chain, uncertainty may originate from unpredictable changes in
demand, supply, competition, and technology (Ettlie and Reza, 1992). This article focuses
on technological uncertainty and demand uncertainty because they are the two most
significant external factors found in the literature (Ragatz et al., 2002; Chang et al., 2002;
Fynes et al., 2004).
Technological uncertainty is measured using measurement scales adapted from
Ragatz et al. (2002), Chang et al. (2002) and Steensma and Corley (2000). Based on these
scales, the items selected were related to the degree to which the product or process
technologies employed are new, complex, and/or rapidly changing. The items also
involve the duration of technological life cycle. For demand uncertainty, we adapted
measurement items from Geary et al. (2002) and Chang et al. (2002), measuring mainly
the changes in demand quantity and timing of the demand. A five-point Likert scale
ranging from “strongly disagree” to “strongly agree” was used in this study.

3.3 Non-respondent bias and common method variance

The non-response bias of the survey was evaluated using the extrapolation method
(Armstrong and Overton, 1997), which tests whether there is any significant difference
between early and late respondents by considering late respondents as non-respondents.
Although this method does not investigate non-response directly (Larson and
Poist, 2004), a comparison was made between responses received in the first and second
wave. We applied t-tests to compare demographic variables between the two waves.
The t-test results indicated no significant difference in any criterion, with significance
levels below 0.1. Therefore, non-response bias did not appear to be a problem; and the
two waves were pooled for the subsequent analysis. Furthermore, the risk of common
method variance was also tested using the Harman one-factor test (Kotabe et al., 2003).
No single factor was apparent in the unrotated factor structure. This indicates that there
is no problem with common method variance.
 41,3

262

measures
Table II.
IJPDLM

Validity and reliability

Construct (source)/indicator Loading Reliability and validity

II: Internal integration (Stank et al., 2001; 0.74 Goodness-of-fit indices: x2 ¼ 11.67, df ¼ 2, p , 0.001;
Narasimhan and Kim, 2002; Flynn et al., 2010) CFI ¼ 0.96;
Have a high level of responsiveness within our plant to meet other IFI ¼ 0.96;
department’s needs TLI ¼ 0.90;
SRMR ¼ 0.03;
Cronbach’s a ¼ 0.83;
Composite reliability ¼ 0.83;
AVE ¼ 0.56

Have an integrated system across functional areas under plant control 0.83
Within our plant, we emphasize on information flows among
purchasing, inventory management, sales, and distribution
departments 0.67
Within our plant, we emphasize on physical flows among production,
packing, warehousing, and transportation departments 0.72
SI: Supplier integration (Narasimhan and Kim,
2002; Flynn et al., 2010)
Share information to our major suppliers through information 0.72 Goodness-of-fit indices: x2 ¼ 8.01, df ¼ 4, p , 0.001;
technologies CFI ¼ 0.98;
IFI ¼ 0.98;
TLI ¼ 0.96;
SRMR ¼ 0.03;
Cronbach’s a ¼ 0.79;
Composite reliability ¼ 0.93,
AVE ¼ 0.85
Have a high degree of strategic partnership with suppliers 0.88
Have a high degree of joint planning to obtain rapid response ordering
process (inbound) with suppliers 0.50
Our suppliers provide production plan information to us in the
production and procurement processes 0.53
Our suppliers are involved in our product development processes 0.50
(continued)
Construct (source)/indicator Loading Reliability and validity

CI: Customer integration (Narasimhan and Kim,

2002; Flynn et al., 2010)
Have a high level of information sharing with major customers about 0.70 Goodness-of-fit indices: x2 ¼ 9.09, df ¼ 2.27, p , 0.001;
market information CFI ¼ 0.99;
IFI ¼ 0.98;
TLI ¼ 0.94;
SRMR ¼ 0.04;
Cronbach’s a ¼ 0.79;
Composite reliability ¼ 0.88;
AVE ¼ 0.74
Share information to major customers through information
technologies 0.70
Have a high degree of joint planning and forecasting with major
customers to anticipate demand visibility 0.71
Our customers provide demand forecast to us as the input to our
production processes 0.51
Our customers are involved in our product development processes 0.60
D: Customer delivery performance (Ward and
Duray, 2000; Li, 2002; Boyer and Lewis, 2002)
Correct quantity with the right kind of products 0.76 Goodness-of-fit indices: x2 ¼ 10.94, df ¼ 5, p , 0.001;
CFI ¼ 0.99;
IFI ¼ 0.99;
TLI ¼ 0.99;
SRMR ¼ 0.02;
Cronbach’s a ¼ 0.90;
Composite reliability ¼ 0.90;
AVE ¼ 0.64
Delivery of products quickly or short lead-time 0.87
Provide on-time delivery to our customers 0.90
Provide reliable delivery to our customers 0.84
Reduce customer order cycle time 0.70
(continued)
uncertainties
Technological
and demand

263

Table II.
 41,3

264

Table II.
IJPDLM

Construct (source)/indicator Loading Reliability and validity

TU: Technological uncertainty (Ragatz et al.,

2002; Chang et al., 2002; Steensma and Corley, 2000)
Process technologies employed in plants are complex 0.65 Goodness-of-fit indices: x2 ¼ 16.11, df ¼ 3, p , 0.001;
CFI ¼ 0.94;
IFI ¼ 0.94;
TLI ¼ 0.99;
SRMR ¼ 0.01;
Cronbach’s a ¼ 0.74;
Composite reliability ¼ 0.85;
AVE ¼ 0.68
Core product technologies often change 0.83
Product technologies employed in plants are complex 0.63
Core supporting technologies often change 0.77
Short technological life cycle 0.62
DU: Demand uncertainty (Geary et al., 2002; Chang et al., 2002)
Customers’ requirement regarding part preferences often change 0.84 Goodness-of-fit indices: x2 ¼ 7.02, df ¼ 2, p , 0.001;
CFI ¼ 0.99;
IFI ¼ 0.98;
TLI ¼ 1.00;
SRMR ¼ 0.02;
Cronbach’s a ¼ 0.77;
Composite reliability ¼ 0.74;
AVE ¼ 0.69
Customers often change their order over the month 0.71
Customers often change their delivery date over the month 0.62
3.4 Scale assessment Technological
All survey instruments have to be reliable to ensure the internal consistency of the and demand
items that are used to measure a latent construct (Dunn et al., 1994). Reliability is most
commonly estimated using Cronbach’s (1951) coefficient a, and composite reliability. uncertainties
A higher level of Cronbach’s coefficient a represents a higher reliability of the scale,
a higher than 0.7 is generally considered to be acceptable (Nunnally, 1978). As shown
in Table II, Cronbach’s a values (ranging from 0.74 to 0.90) and composite reliability 265
(ranging from 0.83 to 0.93) for all variables were well above the critical values. These
results confirm that the theoretical constructs exhibit acceptable psychometric properties.
In order to carry out theory testing, there is a need to achieve unidimensionality,
indicating the existence of a single latent construct underlying a set of measurement items
(Gerbing and Anderson, 1988). Confirmatory factor analysis (CFA) has been recognized
as a robust method for establishing unidimensionality (Li et al., 2005). The CFA results for
supply chain integration constructs, technological uncertainty, demand uncertainty, and
delivery performance in Table II show that the comparative fit index (CFI) values varied
from 0.94 to 0.99 and the standardized root mean square residual (SRMR) values varied
from 0.01 to 0.04. All these values were well above the recommended cut-off value of 0.90
and below the recommended value of 0.08, respectively, (Hu and Bentler, 1999), suggesting
all the constructs were unidimensional. Furthermore, the incremental fit index (IFI), ranged
from 0.94 to 0.99, and the Tucker-Lewisi index (TLI), ranged from 0.90 to 0.99, were also
well above the recommended threshold of 0.90 (Hu and Bentler, 1999). The results showed
that all the measurement models had acceptable fit indices, thus proving the satisfactory
fit between the data and the proposed measurement models for supply chain integration
constructs, technological and demand uncertainty, and customer delivery performance.
Moreover, we assessed the convergent and discriminate validity of the scales using
the method suggested by Fornell and Larcker (1981). Convergent validity measures the
similarity or convergence between individual items measuring the same construct. The
larger the factor loadings or coefficients, the stronger is the evidence that there is a
relationship between the observed indicators to their respective latent variables
(Anderson and Gerbing, 1988). Table II shows that the standardized coefficients for all
items were significant ( p , 0.05). Furthermore, the average variance extracted (AVE)
for each construct exceeded the recommended minimum value of 0.5 (Fornell and
Larcker, 1981), indicating strong convergent validity. As a conclusion, all items were
significantly related to their underlying theoretical constructs.
Discriminant validity can be evaluated by fixing the correlation between any pair
of related constructs at 1.0, prior to re-estimating the modified model. A significant
difference in x2 values for the fixed and free solutions indicates the distinctiveness
of the two constructs (Bagozzi et al., 1991; DeVellis, 1991). In this study, discriminant
validity is established using CFA. For each of the supply chain integration constructs,
technological and demand uncertainties, and delivery performance, discriminate
validity checks were conducted. The results confirm the discriminant validity among
constructs because all three x2 differences between the fixed and free solutions in x2 are
statistically significant, with a level of 0.01.

4. Analysis and results

Table III describes the average values and the correlation coefficient matrix of
supply chain integration, customer delivery performance, and uncertainty indicators
IJPDLM for responding firms. Hierarchical regression analysis was used to test all hypotheses.
41,3 We first developed a regression model to examine the direct effects of internal
integration (H1a), supplier integration (H1b) and customer integration (H1c) on
customer delivery performance. Tables IV and V summarize the regression results. The
results indicate that both internal integration ( p , 0.001) and supplier integration
( p , 0.01) were positively and significantly associated with customer delivery
266 performance, thus supporting both H1a and H1b. However, the coefficient for customer
integration was insignificant, indicating that the association between customer
integration and customer delivery performance was not significant. Thus, hypothesis
H1c was not supported. We also examined the effect of plant size as a control variable.
Our result shows that plant size was not significantly associated with customer delivery
performance.
As shown in Tables IV and V, we then added technological uncertainty (moderator
variable), and subsequently the interaction between technological uncertainty and each
of the three dimensions of supply chain integration into the regression model (H2).
Similar steps are repeated for demand uncertainty (H3). This method enables us to
analyze the proportion of variance that is shared exclusively with each additional

Variables Mean SD II SI CI D TU DU

II 3.75 0.71 1
SI 3.86 0.75 0.52 * * * 1
CI 3.86 0.80 0.42 * * * 0.49 * * * 1
Table III. D 3.99 0.68 0.41 * * * 0.37 * * * 0.17 * 1
Mean, standard TU 3.16 0.82 0.15 * 0.26 * * * 0.20 * * 20.28 * * * 1
deviations, DU 3.20 0.87 0.07 0.08 0.18 * * 20.32 * * * 0.23 * * * 1
and correlations
of the constructs Note: Significance at: *p , 0.1, * *p , 0.05 and * * *p , 0.01

Dependent variable: customer delivery

performance
Independent variables Step 1 Step 2 Step 3

Primary independent variables with control

Plant size 0.071 0.064 0.043
Supplier integration 0.250 * * 0.223 * * 0.287 * *
Customer integration 0.122 0.131 0.089
Internal integration 0.293 * * * 0.301 * * * 0.164 *
Moderating variable
Technological uncertainty 20.105 * 2 0.096
Interaction effects
Supplier integration £ technological uncertainty 0.509 * *
Table IV. Customer integration £ technological uncertainty 2 0.050
Hierarchical regression Internal integration £ technological uncertainty 2 0.416 *
results for supply chain R2 0.239 0.307 0.432
integration, technological Change in R 2 0.239 * * 0.068 * 0.125 * *
uncertainty and their Change in F 14.97 * * 2.23 * 4.92 * *
interaction on customer
delivery Note: Significance at: *p , 0.1, * *p , 0.01 and * * *p , 0.001
 Technological
Dependent variable: customer delivery
performance and demand
Independent variables Step 1 Step 2 Step 3 uncertainties
Primary independent variables with control
Plant size 0.071 0.064 0.042
Supplier integration 0.250 * * 0.102 0.146 * 267
Customer integration 0.122 0.085 0.097
Internal integration 0.293 * * * 0.144 * 0.332 * * *
Moderating variable
Demand uncertainty 20.211 * * 2 0.223 * *
Interaction effects
Supplier integration £ demand uncertainty 2 0.284 * *
Customer integration £ demand uncertainty 2 0.124 Table V.
Internal integration £ demand uncertainty 2 0.376 * * Hierarchical regression
R2 0.239 0.289 0.403 results for supply chain
Change in R 2 0.239 * * 0.050 * * 0.114 * * integration, demand
Change in F 14.97 * * 9.79 * * 2.99 * * uncertainty and their
interaction on customer
Note: Significance at: *p , 0.1, * *p , 0.01 and * * *p , 0.001 delivery

variable (Licht, 2003). Prior to creation of the interaction terms, both independent
and moderator variables were mean-centered to reduce the potential problem of
muliticollinearity (Aiken and West, 1991). The VIF associated with each regression
coefficient range less than 5, suggesting no problem with multicollinearity.
As shown in Table IV (step 2), we further added technological uncertainty into
the regression and observed a significant change in R 2 ( p , 0.1), indicating an increase
in the predictive power of the regression model. In step 3, we then assessed the
moderating effects of technological uncertainty by adding the interactions between
technological uncertainty and the three dimensions of supply chain integration into the
regression, resulting in changes in R 2, suggesting that there is a further increase in the
predictive power of the regression model. More specifically, technological uncertainty
had a significant ( p , 0.1), but negative moderating effect (negative sign for the
coefficient) on the relationship between internal integration and customer delivery
performance, supporting H2a. In addition, technological uncertainty had a significant
( p , 0.01), and positive moderating effect on the relationship between supplier
integration and customer delivery performance, supporting H2b. However, we found no
moderating effect of technological uncertainty on the relationship between customer
integration and customer delivery performance; thus, H2c is not supported.
Similarly, adding demand uncertainty into the model yielded a significant change in
R 2 in the regression model ( p , 0.01). We then assessed the moderating effects of
demand uncertainty by adding the interactions between demand uncertainty and the
three dimensions of supply chain integration into the regression (Table V). As indicated
by changes in R 2, adding the interactions between demand uncertainty and the three
dimensions of supply chain integration further increased the predictive power of the
regression model. The results show that demand uncertainty had a significant ( p , 0.01),
but negative moderating effect on the relationship between internal integration and
customer delivery performance, supporting H3a. Also, we found a significant ( p , 0.01),
but negative moderating effect of demand uncertainty on the relationship between
IJPDLM supplier integration and customer delivery performance, supporting H3b. However,
41,3 H3c is not supported because we found no moderating effect of demand uncertainty on
the relationship between customer integration and customer delivery performance.

5. Discussion and implications

The significant and positive relationship between internal integration and
268 customer delivery performance found in this study suggests that internal integration
will contribute to customer delivery performance. This finding reinforces the need for
breaking down functional barriers and enabling information sharing and cooperation
across functions to improve delivery performance (Sabath, 1995; Birou et al., 1998;
Fawcett et al., 1997; Dröge et al., 2004; Iyer et al., 2004; Germain and Iyer, 2006; Flynn et al.,
2010). Our finding also indicates that supplier integration will contribute to customer
delivery performance, further supporting evidence provided by some previous studies
(Stank et al., 1999; Zailani and Rajagopal, 2005).
However, our result shows no significant relationship between customer integration
and customer delivery performance. Though previous studies suggest the power of
customer integration in increasing customer delivery performance by reducing customer
demand variance via sharing of accurate and timely information with customers (Sabath,
1995; Morash, 2001; Waller et al., 1999; Gimenez and Ventura, 2005), our result
surprisingly does not support this hypothesis. This result does not surprise us because a
similar result was previously reported (Swink et al., 2007; Germain and Iyer, 2006).
Swink et al. (2007) suggest that customer integration may have an indirect relationship
with operational performance. Germain and Iyer (2006) further proved that the
performance implication of external integration (customer integration included) is
indirect and it is mediated by internal integration. Based on the context of the Thai
automotive industry, our explanation for this result is that firms in the Thai automotive
industry may have implemented customer integration, not from the pressure to
increase their delivery performance, but by the motivation to improve other aspects of
organizational performance such as innovation and marketing.
With regard to the moderating effects of technological uncertainty, our finding
suggests that technological uncertainty had a positive moderating effect on the
relationship between supplier integration and customer delivery performance. This means
that the positive impact of supplier integration on customer delivery performance was
reduced when the technological uncertainty was lower, or the positive impact of supplier
integration on customer delivery performance was greater when the technological
uncertainty was higher. This finding is supported by our theoretical argument suggesting
that integration with suppliers who got involved in technological innovation would help
to mitigate the negative impact of technological uncertainty on delivery performance
(Oh and Rhee, 2008). Furthermore, since there is a substantial extent of innovation and
technological outsourcing in the Thai automotive supply chain, the need for supplier
integration is expected. This explains why the supplier integration process was found to
be more likely to be applied under conditions of technological uncertainty in a previous
study of the electronics industry in the USA (Ragatz et al., 2002).
However, our finding suggests that technological uncertainty had a negative
moderating effect on the relationship between internal integration and customer delivery
performance. This means that the positive impact of internal integration on customer
delivery performance was reduced when the technological uncertainty was higher,
or the positive impact of internal integration on delivery performance was greater when Technological
the technological uncertainty was lower. The diminishing positive impact of internal and demand
integration on customer delivery performance under a high level of technological
uncertainty can be explained as follows. Our results suggest that, supplier integration, uncertainties
rather than internal integration, will have a more significant impact on customer delivery
performance when technological uncertainty increased. Owing to the significant
dependency of first tier suppliers on second tier suppliers with regards to technology 269
advancement, when there are changes in product, process and/or supporting technologies,
there is often a need to work with key suppliers to ensure that the current delivery
programs are not affected. Internal integration alone is inadequate and in fact it
may be counter effective without supplier integration. Thus, we found that the interaction
between supplier integration and technological uncertainty, but not the interaction
between internal integration and technological uncertainty, was able to mitigate the
negative impacts of technological uncertainty on customer delivery performance.
In terms of demand uncertainty, our results suggest that demand uncertainty
had a negative moderating effect on the relationship between internal integration and
customer delivery performance, as well as the relationship between supplier integration
and customer delivery performance. This means that the positive impacts of internal and
supplier integration were reduced when the demand uncertainty was higher. Ideally
information sharing and collaboration across functions and with suppliers will enhance
the ability of a supply chain to alter manufacturing and marketing/sales plans to react
more accurately to changing demand or supply (O’Leary-Kelly and Flores, 2002). Our
results further clarify such ability by suggesting that internal integration and supplier
integration will become more effective when demand uncertainty is low. Though we
found a moderating effect of demand uncertainty, our direction of the moderating effect is
the opposite from the result of Fynes et al. (2004). The main difference between our study
and theirs is that our study is based on samples from the Thai automotive supply chain,
and their study is based on the electronics sector in Northern Ireland. Our explanation lies
in the need for stability by the automotive supply chains in Thailand which operate in a
JIT and continuous replenishment environment (Schonberger, 1986; Zipkin, 1991). In the
context of automotive industry, firms usually rely on JIT systems which require suppliers
to deliver the necessary volume of auto-parts, leading to a long-term relationship
(Nopprach, 2006). For managers working in automotive industry, JIT or relatively stable
environment with predictable demand, internal integration will have an even more
significant and positive impact on customer delivery performance. This result supports
the work of Morris and Carter (2005), who suggest that firms should invest resources into
both reducing uncertainty and increasing cooperation in their relational exchanges.
In addition, within the context of the automotive industry in a developing country
like Thailand, supplier integration can be implemented to achieve customer delivery
performance, regardless of the level of demand uncertainty. Therefore, it is expected to
achieve a better customer delivery performance when the demand uncertainty is low.
Finally, customer integration was found to insignificantly associate with customer
delivery performance, which explains why its interactions with technological and
demand uncertainties were found to have insignificant impact on customer delivery.
The above results have significant implications for supply chain research. The
first contribution of this study lies in the examination of three dimensions of
supply chain integration as opposed to a single supply chain construct.
IJPDLM Though theoretically convincing, our results suggest that the supply chain research
41,3 community should not automatically assume significant and positive relationships
between supply chain integration and customer delivery performance. As pointed out by
some previous studies (Swink et al., 2007), our results further confirm that not all
dimensions of supply chain integration could have a direct positive effect on customer
delivery performance. Some studies suggest that the effect of customer integration on
270 customer delivery performance could be indirect, or mediated by internal integration
(Germain and Iyer, 2006); though the “indirect effect” explanation seems plausible, further
research is required to clarify this aspect.
The second contribution of this study lies in the clarification of the effects of different
dimensions of supply chain integration on customer delivery performance under varying
technological and demand uncertainties. Contradictory to the conventional wisdom and
a prior study (Fynes et al., 2004), our results indicate that investment in a higher level of
supply chain integration under a higher level of technological and demand uncertainty
will not always improve customer delivery performance. Logistics managers need to
know which dimensions of supply chain integration to emphasize under different levels
of technological and demand uncertainty. Especially, for a supply chain operating in a
JIT environment, internal integration will have a more significant (and positive) impact
on customer delivery performance under low, but not high, levels of technological and
demand uncertainties. Similarly, supplier integration will have a more significant impact
on customer delivery performance when there is a low level of demand uncertainty.
However, when there is a high level of technological uncertainty, supplier integration
will have a more significant impact on customer delivery performance. These results
further provide evidence to the establishment of a contingency theory of supply chain
integration (Flynn et al., 2010).
In the case of demand uncertainty, our result allowed us to explain how supply chain
integration can be used to mitigate the negative effects of the Bullwhip effect or demand
amplification (Lee et al., 1997). When the customer demand information is amplified or
distorted (hence the environmental uncertainty is rising), internal integration in a firm is
not adequate in improving customer delivery performance because demand uncertainty
is usually originated from the external environment. Recognizing the inadequacy of
internal integration, logistics managers should put greater efforts in supplier and
customer integration.
The third contribution of this study lies in the clarification of the roles of
technological and demand uncertainties. As far as the continuous development of the
contingency theory supply chain integration is concerned, it is essential for us to clarify
the roles of technological and demand uncertainty. In the logistics and supply chain
literature, there is currently no agreement whether environmental uncertainty should be
considered as an antecedent of supply chain integration (Ragatz et al., 2002; Stonebraker
and Liao, 2004; Paulraj and Chen, 2007; Zhou and Benton, 2007) or an exogenous factor
(O’Leary-Kelly and Flores, 2002; Fynes et al., 2004; van Donk and van der Vaart, 2005;
Liao and Tu, 2008). Our results are similar to those of Iyer et al. (2004), which concluded
that technological and demand uncertainties do not predict integration; instead, they are
exogenous factors faced by a firm in the Thai automotive supply chain. To truly answer
this question, future research on supply chain integration should include technological
and demand uncertainties whenever possible.
6. Conclusion Technological
This study attempts to clarify the moderating effects of technological and and demand
demand uncertainties on the relationships between three dimensions and customer
delivery performance. Our results confirm that technological and demand uncertainties uncertainties
as exogenous factors moderated the relationships between supply chain integration
and customer delivery performance. Our result indicates that the impact of supplier
integration on delivery performance became more significant when technological 271
uncertainty was high. However, our findings differ from the prior studies (Fynes et al.,
2004; Liao and Tu, 2008) who found positive moderating effects. Instead, our results
indicate that the impacts of both supplier and internal integration on delivery performance
became more significant under low levels of technological and demand uncertainties.
Our results are valuable in contributing to the development of a contingency theory
of supply chain integration, which rejects the conventional view of the unconditional
performance implication of supply chain integration (Fawcett and Closs, 1993). These
results should in fact be considered as a crucial step in supply chain research, since it
raises many more research questions than it answers, especially the need to explain
delivery performance under varying technological and demand uncertainties, and the
missing link between customer integration and delivery performance. To answer such
questions, many more empirical studies using data from different industries in various
different countries will be necessary.
While this study made some contributions from both a theoretical and practical point
of view, it also has some limitations. First, a single respondent in a firm was asked to
respond to a survey. But, in reality, no person in a firm is in charge of the entire supply
chain. Second, the conceptual framework may require more contextual dimensions
instead of just technological and demand uncertainties. Adding interaction effects
between technological and demand uncertainties and more contextual factors such
as industry complexity, globalization and demand trends, product life cycle, and
organizational structure would probably explain more variance and their inclusion here
would be prudent. Furthermore, the validity of our results may be limited to contexts
specific to the Thai automotive supply chain. Next, the implementation of supply chain
integration is a long process and therefore it might require several stages. Within
different stages and business objectives, the benefits and requirements for supply chain
integration implementation may vary. Thus, a longitudinal research design is needed for
future studies to truly understand causal relationships between supply chain integration
and delivery performance alongside the effect of other contextual factors. Finally,
despite our best efforts, common method bias due to the use of single respondents in our
data collection may not have been completely eliminated. Future study needs to consider
multiple respondents from each plant, whenever possible.

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Corresponding author
Sakun Boon-itt can be contacted at: sboonitt@tu.ac.th

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