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A Structural Equation Model of Supply Chain Information Integration

A Structural Equation Model of Supply Chain Information Integration. Susan Horne with assistance from Dr. Troutt & Dr. Harvey. Objective of a Supply Chain.

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A Structural Equation Model of Supply Chain Information Integration

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  1. A Structural Equation Model of Supply Chain Information Integration Susan Horne with assistance from Dr. Troutt & Dr. Harvey

  2. Objective of a Supply Chain “...maximize the overall value generated, which is the difference between what the final product is worth to the customer and the effort the SC expends in filling the customer request.”* *Chopra & Meindl, SC Management: Strategy, Planning and Operation, 2001

  3. Research Genesis

  4. Coordination Better SC coordination Increased efficiency Competitive advantage • Supply chain coordination occurs when all stages take action together, taking into account the effects of actions on the other stages. • Lack of trust between partners results in opportunism, duplication of effort, and lack of information sharing and ultimately defeats the goal of maximizing overall chain value.

  5. Lack ofCoordination Performance Effects • Increases • Manufacturing cost • Inventory cost • Replenishment lead time • Transportation cost • Labor cost for shipping and receiving • Decreases • Level of product availability • Quality of partner relationships • Profitability

  6. Importance of Information Information is potentially the biggest driver of SC performance as it directly affects each of the other drivers by providing management with opportunities to improve SC responsiveness and efficiency. Chopra & Meindl

  7. Information Requirements by Distribution Network Design

  8. The Model SC Information Integration Information Flow Integration Partner Integration IT Integration

  9. Data

  10. The Questionnaire Part 1: IT Integration Integration of IT infrastructure 1. Automatic data capture systems are used (e.g. bar code) across SC. 2. Definitions of key data elements (e.g. customer, order, part number) are common across SC. 3. Same data (e.g. order status) stored in different databases across SC is consistent. 4. Same data needs to be reentered in the computer at each step in SC. 5. The following applications communicate in real-time: • SC planning applications (e.g. Demand planning, transportation planning, manufacturing planning). • SC transaction applications (Order management, procurement, manufacturing and distribution). • SC applications with internal applications of our organization (such as enterprise resource planning). • Customerrelationship applications with internal applications of our organization.

  11. The Questionnaire Part 2: Information Flow Integration Integration of Information Flows 1. Production and delivery schedules are shared across SC. 2. Performance metrics are shared across SC 3. SC members collaborate in arriving at demand forecasts. 4. Actual sales data is shared by our downstream partners (e.g. distributors, wholesalers, retailers). 5. Inventory data are visible at all steps across SC. 6. Order fulfillment and shipment status are tracked at each step across SC. 7. Information about the product moves faster than the product in our SC.

  12. The Questionnaire Part 3: SC Partner Integration Relationships with SC Partners 1. With our key partners, procedures and cost structures are transparent to each other. 2. We have created formal and informal arrangements for information exchange with our partners. 3. Partners are involved in quality and improvement initiatives. 4. We share best practices with our partners. 5. We learn about new technologies and markets from our partners.

  13. Data Analysis

  14. Bivariate Correlations ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).

  15. iti1 .41 iti2 .70 iti3 .64 iti4 .37 IT Integration 1.19 iti5 1.39 iti6 1.26 1.02 .75 iti7 .66 .86 iti8 -.44 sci5 -.98 sci6 -.79 SC Info Integration -.55 Information Flow Integration sci1 .93 .73 .84 sci2 .76 sci3 .52 .34 .60 sci4 -.26 .21 sci7 rir2 .71 Partner Integration .85 rir3 .90 rir4 .67 .43 rir5 lto5 The Model – Current State All loadings significant @ .05 level Cronbach’s a are .83-.84 NNFI =.95 CFI = .958 RMSEA = .045

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