Professional Documents
Culture Documents
By
Minkyun Kim
Doctor of Philosophy
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UMI 3407912
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Minkyun Kim
2010
This dissertation is dedicated to my loving wife who has always believed in me and
supported me with unconditional love and devotion. Without her, this dissertation could
not be completed.
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Table of Contents
TABLE OF CONTENTS................................................................................................. III
LIST OF TABLES ........................................................................................................... V
LIST OF FIGURES......................................................................................................... VI
ACKNOWLEDGMENT.................................................................................................. VII
ABSTRACT ................................................................................................................. VIII
1. INTRODUCTION ...................................................................................................... 1
1.1. THE PROBLEM ...................................................................................................... 1
1.2. STATEMENT OF PURPOSE...................................................................................... 2
1.3. MOTIVATIONS FOR RESEARCH ............................................................................... 4
1.4. OBJECTIVES ......................................................................................................... 6
1.5. CONTRIBUTIONS OF THE RESEARCH ....................................................................... 6
1.6. ORGANIZATION OF THE DISSERTATION.................................................................... 7
2. LITERATURE REVIEW .......................................................................................... 10
2.1. THEORETICAL BACKGROUND ............................................................................... 10
2.1.1. Dynamic capabilities .................................................................................. 10
2.2. SUPPLY CHAIN RISK ........................................................................................... 13
2.3. SUPPLY CHAIN RISK MANAGEMENT...................................................................... 17
2.4. STRATEGIC SOURCING ........................................................................................ 20
2.5. E-BUSINESS TECHNOLOGIES IN SUPPLY CHAIN ..................................................... 28
2.6. SUPPLY CHAIN INTEGRATION ............................................................................... 33
2.7. ORGANIZATIONAL CULTURE ................................................................................. 37
2.8. BUSINESS ENVIRONMENT AND CHARACTERISTICS ................................................. 40
3. MODEL DEVELOPMENT ...................................................................................... 43
3.1. THE CONCEPTUAL MODEL ................................................................................... 43
3.2. THE RESEARCH MODEL ...................................................................................... 54
4. RESEARCH METHODOLOGY .............................................................................. 67
4.1. THE SURVEY METHODOLOGY .............................................................................. 67
4.2. INSTRUMENT DEVELOPMENT AND MEASUREMENTS ............................................... 69
4.3. THE PILOT STUDY............................................................................................... 84
4.4. THE FULL SCALE STUDY AND SAMPLE .................................................................. 86
4.5. PARTIAL LEAST SQUARES METHODOLOGY ............................................................ 86
5. DATA ANALYSIS AND FINDINGS ........................................................................ 89
5.1. PROFILE OF RESPONDENTS ................................................................................. 89
5.2. EVALUATION OF MEASUREMENT MODELS ............................................................. 92
5.3. EVALUATION OF STRUCTURAL MODELS ................................................................ 97
5.3.1. Full Effects ................................................................................................. 97
5.3.2. Moderating Effects ................................................................................... 101
5.3.3. Analysis of Subgroup Effects ................................................................... 106
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6. DISCUSSION OF RESULTS ................................................................................ 113
6.1. THE EFFECT OF STRATEGIC SOURCING ON SUPPLY CHAIN RISK .......................... 113
6.2. THE EFFECT OF E-BUSINESS TECHNOLOGIES ON SUPPLY CHAIN RISK.................. 115
6.3. THE EFFECT OF SUPPLY CHAIN INTEGRATION ON SUPPLY CHAIN RISK ................. 117
6.4. THE EFFECT OF ORGANIZATIONAL CULTURE ON SUPPLY CHAIN RISK ................... 119
6.5. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON STRATEGIC
SOURCING .................................................................................................................... 121
6.6. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON E-BUSINESS
TECHNOLOGIES ............................................................................................................. 123
6.7. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON SUPPLY
CHAIN INTEGRATION ...................................................................................................... 124
6.8. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON
ORGANIZATIONAL CULTURE ............................................................................................ 126
6.9. THE DIRECT EFFECT OF BUSINESS ENVIRONMENTS ON SUPPLY CHAIN RISK ......... 126
6.10. THE MODERATING EFFECT OF BUSINESS CHARACTERISTICS ON THE RELATIONSHIP
BETWEEN SUPPLY CHAIN PRACTICES AND SUPPLY CHAIN RISK .......................................... 128
6.11. THE EFFECT OF SUPPLY CHAIN RISKS ON PERFORMANCE ................................... 132
7. SIGNIFICANCE & IMPACT OF RESEARCH ......................................................... 136
7.1. CONTRIBUTIONS OF RESEARCH ......................................................................... 136
7.2. LIMITATIONS ..................................................................................................... 142
7.3. FUTURE RESEARCH .......................................................................................... 143
APPENDIX. SURVEY MEASUREMENTS ................................................................. 145
REFERENCES ............................................................................................................ 155
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List of Tables
TABLE 1. COMPARISON OF RBV AND DYNAMIC CAPABILITIES ADAPTED FROM (EISENHARDT ET
AL. 2000, P.1111)..................................................................................................... 12
TABLE 2. SUMMARY OF LITERATURE REVIEWS ON STRATEGIC SOURCING .............................. 25
TABLE 3. SUMMARY OF LITERATURE REVIEW ON E-BUSINESS TECHNOLOGIES IN A SUPPLY CHAIN
................................................................................................................................ 32
TABLE 4. SUMMARY OF HYPOTHESES ON FULL EFFECTS .................................................... 63
TABLE 5. SUMMARY OF HYPOTHESES ON MODERATING EFFECTS ........................................ 64
TABLE 6. MEASUREMENTS FOR STRATEGIC SOURCING ....................................................... 70
TABLE 7. MEASUREMENTS FOR EXTENSIVE USE OF E-BUSINESS TECHNOLOGIES ................... 71
TABLE 8. MEASUREMENT FOR INTENSITY OF E-BUSINESS TECHNOLOGIES ADOPTION.............. 72
TABLE 9. MEASUREMENTS FOR E-BUSINESS TECHNOLOGY ADOPTION IN THE SUPPLY CHAIN ... 74
TABLE 10. MEASUREMENTS FOR INTERNAL INTEGRATION.................................................... 75
TABLE 11. MEASUREMENTS FOR INTEGRATION WITH CUSTOMERS ....................................... 76
TABLE 12. MEASUREMENTS FOR INTEGRATION WITH SUPPLIERS ......................................... 77
TABLE 13. MEASUREMENTS FOR ORGANIZATIONAL CULTURE .............................................. 78
TABLE 14. MEASUREMENTS FOR SUPPLY CHAIN RISK ........................................................ 79
TABLE 15. MEASUREMENTS FOR FINANCIAL PERFORMANCE ................................................ 80
TABLE 16. MEASUREMENTS FOR OPERATIONAL PERFORMANCE .......................................... 81
TABLE 17. MEASUREMENTS FOR SUPPLY CHAIN PERFORMANCE ......................................... 82
TABLE 18. MEASUREMENTS FOR DYNAMIC BUSINESS ENVIRONMENT ................................... 83
TABLE 19. MEASUREMENTS FOR COMPETITIVE BUSINESS ENVIRONMENTS ........................... 84
TABLE 20. DELETED SURVEY ITEMS IN THE PILOT STUDY .................................................... 85
TABLE 21. INDUSTRY CODE FOR RESPONDENTS FIRMS...................................................... 90
TABLE 22. BUSINESS CHARACTERISTICS OF RESPONDENT FIRMS ........................................ 91
TABLE 23. RELIABILITY AND CONVERGENT VALIDITY ........................................................... 93
TABLE 24. FACTOR ANALYSIS BY PLS ............................................................................... 95
TABLE 25. DISCRIMINANT VALIDITY ................................................................................... 97
TABLE 26. STATISTICAL COMPARISON OF PATHS IN MANUFACTURING APPROACH ............... 107
TABLE 27. STATISTICAL COMPARISON OF PATHS IN SUPPLIERS LOCATION ........................ 109
TABLE 28. STATISTICAL COMPARISON OF PATHS IN MARKET LOCATION ............................. 110
TABLE 29. SUMMARY OF RESULTS ON FULL EFFECTS RESEARCH HYPOTHESES ................. 111
TABLE 30. SUMMARY OF RESULTS ON MODERATING EFFECTS RESEARCH HYPOTHESES ..... 112
TABLE 31. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF STRATEGIC SOURCING ..... 115
TABLE 32. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF E-BUSINESS TECHNOLOGIES
.............................................................................................................................. 117
TABLE 33. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF SUPPLY CHAIN INTEGRATION
.............................................................................................................................. 119
TABLE 34. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF ORGANIZATIONAL CULTURE
.............................................................................................................................. 121
TABLE 35. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF BUSINESS ENVIRONMENTS127
TABLE 36. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF SUPPLY CHAIN RISK ......... 132
TABLE 37. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF PERFORMANCE ............... 135
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List of Figures
FIGURE 1. SOURCES IN RISK IN THE SUPPLY CHAIN ADAPTED FROM (CHRISTOPHER & PECK
2004, P.10) .............................................................................................................. 15
FIGURE 2. A FRAMEWORK FOR SUPPLY CHAIN RISK MANAGEMENT ..................................... 20
FIGURE 3. FOUR DIMENSIONS OF STRATEGIC SOURCING (KOCABASOGLU AND SURESH 2006)
................................................................................................................................ 21
FIGURE 4. E-BUSINESS TECHNOLOGIES IN A SUPPLY CHAIN ADAPTED FROM (VAKHARIA 2002,
P.498)...................................................................................................................... 28
FIGURE 5. INTEGRATION IN THE SUPPLY CHAIN ADAPTED FROM (FROHLICH AND W ESTBROOK
2001, P.186) ............................................................................................................ 34
FIGURE 6. ARCS OF THE INTEGRATION ADAPTED FROM (FROHLICH AND W ESTBROOK 2001,
P.187)...................................................................................................................... 35
FIGURE 7. THE COMPETING VALUES FRAMEWORK OF ORGANIZATIONAL CULTURE ADAPTED
FROM (DENISON AND SPREITZER 1991, P.12) ............................................................. 39
FIGURE 8. A FRAMEWORK OF BUSINESS ENVIRONMENT AND CHARACTERISTICS ................... 42
FIGURE 9. CREATING RISK MITIGATING STRATEGIES IN A SUPPLY CHAIN ADAPTED FROM
(CHRSITOPER AND PECK 2004, P.24) ......................................................................... 46
FIGURE 10. SUPPLY CHAIN RISK MANAGEMENT FRAMEWORK ADAPTED FROM (RITCHIE AND
BRINDLEY 2007A, P 1401) ......................................................................................... 50
FIGURE 11. THE CONCEPTUAL MODEL .............................................................................. 51
FIGURE 12. THE FULL CONCEPTUAL MODEL ...................................................................... 53
FIGURE 13. IMPACT OF BUSINESS ENVIRONMENTS ADAPTED FROM (W ARD ET, AL. 1995, P101)
................................................................................................................................ 58
FIGURE 14. BUSINESS CONDITIONS IN A SUPPLY CHAIN ADAPTED FROM (VAN DER VAART AND
VAN DONK 2006, P. 11) ............................................................................................ 60
FIGURE 15. A RESEARCH MODEL WITH FULL EFFECTS ....................................................... 65
FIGURE 16. A RESEARCH MODEL WITH MODERATING EFFECTS ........................................... 66
FIGURE 17. STEPS FOR DEVELOPING MEASUREMENTS ....................................................... 69
FIGURE 18. RESEARCH RESULTS FOR FULL EFFECTS ....................................................... 100
FIGURE 19. RESEARCH RESULTS FOR MODERATING EFFECTS .......................................... 105
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Acknowledgment
I would like to gratefully and sincerely thank Professor Nallan Suresh for his continuous
guidance, understanding, help, and endless support. He has provided me with such an ample
opportunity to explore the issues that I have always interested meto be exact, purchasing in
supply chain management, and in turn, he has helped me structure the scope of this issue in the
realm of supply chain risk management. I am so blessed to have him as my advisor and mentor.
This work could not have been done without the questions, criticisms, and advice from my
dissertation committee, Professor Natalie Simpson and Professor Charles Wang. They helped me
I thank Dr. Sangmi Chai, my wife and the most important colleague throughout my
doctorial study. I know that this dissertation would have never been completed without her
support, help, guidance and endless devotion. I would like to thank her with my heart for her
strong and loving support, her advice and encouragement, her companionship, and the many
Finally, I would like to express very sincere and deepest thanks to my parents who have
supported me and believed in me. I also would like to show my heartfelt appreciation to my
parents-in-law. They always have been my supporters and helped me to make this work possible.
vii
Abstract
Supply chain risk management has emerged as an important issue for researchers and
practitioners because mitigating supply chain risk helps to improve firms as well as supply
chains performance. However, managers are not adequately prepared to manage supply chain
risks and most organizations do not have effective supply chain risk management policies. The
technologies and supply chain integration on supply chain risk mitigation. More importantly, this
study examines the role of business environment, organizational culture and other business
characteristics in influencing supply chain practices and supply chain risk mitigation.
Based on the theoretical background of dynamic capabilities, this study attempts to fill
the gap in supply chain risk management literature by examining businesses environments. In
addition to business environments, this study reflects business characteristics and organizational
culture. This research establishes a research framework of mitigating supply chain risk based on
the literature review of supply chain risk management. By studying previous literature on the
supply chain risk management, this study found three common themes of risk mitigating
strategies in the supply chain: collaboration and cooperation, information sharing and flexibility.
Thus, this research investigates the impact of three supply chain practices, strategic sourcing, e-
business technologies in supply chain, and supply chain integration which enable firms to have
Supply chain risks are categorized in three ways depending upon the sources of supply
chain risks. The first set of sources is from the internal risk within firms. The second sources
stem from internal risk within the supply chain. The third set of sources is from the external risk
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outsides of the supply chain. Because supply chain risks have very broad areas, this research
The conceptual model of this research is based on mitigating supply chain risks by
implementing supply chain practices such as strategic sourcing, e-business technologies and
supply chain integration. On this main conceptual model, this research reflects organizational
culture as an internal factor of supply chain risk management, and business environments as an
external factor of supply chain risk management. This research framework is composed of
supply chain practices which mitigate supply chain risks, business environments which influence
supply chain practices as well as supply chain risks, organizational culture which affects supply
chain risks, the impact of business characteristics on the relationship between supply chain
practices and supply chain risks, and the relationship between supply chain risks and
performance.
This research applied the survey methodology to empirically validate the research
framework. In order to improve the quality of the survey, this research conducted a three- step
approach. First, the survey measurement items were adapted from prior literatures. Second, by
having interviews with supply chain professionals, the content validity check was conducted.
The feedbacks and comments on the survey were reflected to make a revised version of the
survey. Finally, the pilot study was conducted. Thirty three supply professionals completed the
survey. The statistical testing of examining the reliability on the measurement indicators was
conducted to eliminate low reliability items. The feedbacks and comments were also received to
improve the quality of the survey. Since this research investigated the supply risks, the finalized
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Collecting 152 surveys from purchasing and supply management executives from the US
manufacturing industry, this research uses partial least squares methodology for data analysis.
This research results empirically confirm that strategic sourcing mitigates the supply chain risk.
Strategic sourcing is engaged in not only emphasizing the purchasing function on aligning firms
strategy but also improving the relationships with suppliers by sharing the information and
developing the suppliers. Thus, supply chain members can reduce the probability of supply
disruptions. Even if disruptions occur in the supply chain, supply chain members can minimize
the magnitude of the supply disruptions. E-business technologies were also found to mitigate
supply chain risks. E-business technologies enable supply chain members to share the
information in the real time and communicate frequently. Therefore, e-business technologies
enable supply chain members to be flexible to react quickly to disruptions in supplies, resulting
The results also support that supply chain integration mitigates supply chain risk. Supply
chain integration has been a widely applied supply chain management practice in order to
improve the performance. It encourages the firms to collaborate together and share information.
Like other supply chain practices such as strategic sourcing and e-business technologies in this
research, supply chain integration is a key element in the risk mitigating strategy of the supply
chain. Thus, supply chain integration plays an important role in mitigating supply chain risks.
This research empirically confirms strategic sourcing, e-business technologies and supply chain
integration mitigate supply chain risks. However, the in this research organizational culture is not
Next, this research considers the business environments and characteristics in supply
chain risk management. The business environments reflect competitive and dynamic markets and
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business characteristics indicate manufacturing approach, suppliers and market location and firm
size. Competitive and dynamic business environments have a direct influence on strategic
sourcing, e-business technologies and supply chain integration. If business environments become
competitive and dynamic, firms implement strategic sourcing in order to strengthen their
relationships with suppliers, e-business technologies to share the real time information, and
supply chain integration to collaborate with suppliers. However, competitive and dynamic
business environments are not found to have a significant relationship with organizational culture.
Organizational culture established with beliefs of the managers is not influenced by external
market conditions. The research results also support that considering business environments is a
key factor of implementing supply chain practices to have competitive advantages toward
Business environments have moderating effects between supply chain practices and
supply chain risk. As business environments become competitive and dynamic, the mitigating
effects of strategic sourcing, e-business technologies, supply chain integration becomes stronger.
In other words, the impact of strategic sourcing, e-business technologies and supply chain
integration grow to be very effective on mitigating the supply chain risks. Therefore, if firms
operate in dynamic and competitive markets, strategic sourcing, e-business technologies and
supply chain integration are very useful supply chain practices on setting up risk mitigating
strategy in the supply chain. However, business environments are not found to have a significant
impact on organizational culture and the relationship between organizational culture and supply
chain risks.
Business characteristics also have a moderating effect on the relationship between supply
chain practices and supply chain risks. Depending on the manufacturing approach (push and
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pull), in the case of firms with push approach, strategic sourcing, e-business technologies and
supply chain integration become more effective on mitigating supply chain risk comparing with
the pull approach. Depending on the suppliers location, if firms have suppliers outside of the US,
strategic sourcing, e-business technologies and supply chain integration have the larger impact
on mitigating supply chain risk comparing with the suppliers from the US. On the other hand,
firms market location does not have any influence on the relationship between supply chain
This research also examines the relationship between supply chain risks and the
chain performance. The results support the notion that supply chain risks have a negative
relationship with performance. If supply and purchasing managers perceive high risks in the
supply chain, then the performance is found to be low. If they perceive low risks in the supply
This research contributes to the supply chain management literatures by explicitly raising
issues of supply chain risks for managers, by empirically validating the conceptual framework of
supply chain practices, supply chain risks and the performance; by examining the impact of
organizational culture on supply chain risk and, finally, by filling gaps in the literature on the
Although this study has limitations arising from the survey methodology, this research
can be extended in various ways. Because this study focuses on the manufacturing industry, the
research framework can be applied to service industries like the health care industry. Likewise,
future studies can investigate the cultural difference between the US and other Asian countries. It
xii
will be very worthwhile examining the impact of cultural differences on risk mitigating strategies
in supply chains. These are two of many possible extensions of this research.
Key Words: Supply Chain Risk Management, Business Environment and Characteristics,
xiii
1. Introduction
1.1. The Problem
Recently, supply chain management theory and practices are receiving a great deal of attention
as effective tools for dealing with challenges that are generated by competitive and dynamic
markets. Current business trends such as the increased use of outsourcing, the globalization of
supply chains and the reduction in the supply base lead to greater exposure to risks. Other
potential risks include a more integrated process among supply chain members, a reduction in
buffer inventories, an increasing demand for on-time delivery within more limited time frames,
shorter product life cycles and time-to-market, as well as capacity limitation and relatively high
demand in the early stages of the product life cycle (Norrman and Jansson 2004). In recent years,
the structure of supply chains has become more complex due to the growing levels of risk and
uncertainty in the market as well as within the supply chain itself. Managers are not able to
control all aspects of the supply chain, which requires them to take selective actions in dealing
with the risk (Luhmann 1995). According to the McKinsey Global Survey, executives are not
adequately prepared to manage supply chain risks (McKinsey 2006). According to AMR
research, 60% of organizations in the US do not have effective supply chain risk management
policies (Hillman, 2007). High risk generates inefficiency in the supply chain (Christopher and
Lee 2004). More importantly, tangible risks in the supply chain have been confirmed to be one of
the causes for poor performance (Wilding 1998). Therefore, mitigating risk in the supply chain
has emerged as a significant issue in academia as well as in the business world because of the
unknown impact of risk on the supply chain. This research attempts to fill gaps in the literature
1
However, the risks in the supply chain come from various sources. The research of
Christopher and Peck (2004) characterizes risk in three ways: 1) internal to the firm, such as
process and control; 2) external to the firm but internal to the supply chain network such as
demand and supply; and, 3) external to the network, such as environmental risks. These risks,
which are interconnected, have been categorized into several other categories, including supply
chain disruption, delay, forecast, procurement, risk, capacity and inventory risks (Chopra and
Sodhi 2004). This study focuses on managing supply risks in the supply chain from the inbound
perspective.
Supply chain risk mitigation has begun to be intensively discussed in supply chain management
literature. If disruptions occur in the supply chain, financial losses and low customers
satisfaction result, affecting all members in the supply chain. It is very important for firms to
prevent the supply chain disruptions and minimize damages. Thus it is critical for supply chain
professionals to consider various factors in establishing risk mitigating strategies in the supply
chain. These are also important issues for supply chain management researchers to address.
In terms of mitigating supply chain risks, previous literature introduces various supply
chain strategies. First of all, it is very important for researchers to identify and understand supply
chain risk while minimizing the impact of the risk (Norrman and Jansson 2004). In order to
mitigate risk, prior studies present one common strategy, namely the significance of internal and
external integrations in a supply chain for mitigating supply chain risks (Kleindorfer and Saad
2005). Information sharing and collaborative relationships in supply chain networks also lessen
supply chain risks (Faisal, Banwet, and Shankar 2006). In supply chain risk management, the
significance of information sharing and the development of relationships has been emphasized.
2
In addition, cultural factors can also make a significant impact on supply chain risk mitigation
(Ritchie and Brindley 2007a). This research investigates supply chain management practices
Supply chain management practices are recognized to enable supply chain networks to
limit their risks. However, they may not be capable of controlling environmental risk, which is
considered to be one of the important sources of supply chain risks. Environmental risk can
influence organizations supply chains directly or indirectly (Christopher and Peck 2004). Since
there is a lack of research regarding the business environment, organizational culture and other
business characteristics, this research attempts to fill that need. Although any business
uncertainty is not well controlled by organizations, managers awareness of, and their quick
uncertainty is considered a critical antecedent for supply chain management practices because
perceptions toward unpredictability in the external business climate are the foundations on which
managers make decisions affecting the supply chain (Chen and Paulraj 2004; Kocabasoglu,
The purpose of supply chain risk management is to mitigate supply chain risks, resulting
in effective and efficient supply chain performance. Cohen and Kunreuther (2007)
conceptualized supply chain risk management as supply chain hierarchies, customer supplier
relationships and market mechanisms in a real options framework. This option framework helps
allocate optimal resources, which leads to efficient supply chain performance (Cohen and
Kunreuther 2007). Failure to mitigate supply chain risks like supply chain glitches tends to
generate loss of shareholders value due to the economic impact of poor supply chain
3
performance (Hendricks and Singhal 2003). In other words, high perceived risk generates low
performance outcome and low perceived risk generates high performance outcome (Ritchie and
Brindley 2007b). While supply chain management practices are applied for mitigating risk, they
may also positively affect performance. Previous literature indicated that supply chain
management practices such as strategic sourcing, e-business technologies and supply chain
integration, make a positive impact on performance (Carr and Pearson 1999; Chen, Paulraj, and
Lado 2004; Wu, Mahajan, and Balasubramanian 2003; Narasimhan and Kim 2002). This
research examines the role of supply chain management practices that not only mitigate supply
The motivations for this research are divided into three categories: major gaps in the supply
chain risk management literature, the application of supply chain management practices in
supply chain risk management and the lack of recognition of the significance of supply chain risk
management.
Firstly, the area of supply chain risk management is emerging as a new issue because the
supply chain network is becoming increasingly complex and vulnerable. It is difficult for
managers of supply chains to manage these risks in order to improve their organizations
performance as well as supply chain performance. In spite of the newly found demand for
research in the field, supply chain risk management is a fairly new area for investigation,
especially in terms of empirical studies. More importantly, managing supply chain risks provides
benefits to the firms, and the failure to mitigate risk produces greater losses. However, while the
importance of supply chain risk management is recognized, there is a lack of empirical studies in
supply chain risk management, thus making such empirically grounded research necessary
4
(Juttner, Peck, and Christopher 2003). This research aims to fill that gap by empirically
examining both the mitigation of supply chain risk through adoption of supply chain
management practices as well as the role of business environments, organizational culture and
other business characteristics in the relationship between supply chain risk and supply chain
management.
the risks. The literature agrees that supply chain management practices play an important role in
supply chain risk management and performance. However, it is very important for managers to
investigate whether supply chain management practices work effectively in the real business
world. Adding the business environment and other characteristics for consideration would help
managers understand the role of supply chain management practices in specific real business
environments. This research intends to confirm the specific supply chain management practices
which need to be implemented to mitigate the risk and improve the performance of member
It is believed that this research concerning supply chain will make meaningful
contributions to both academia and practitioners. This motivation also has an influence on the
methodological approaches used in this research. The empirical approach became popular
because it recognizes the importance of field-based research, and reflecting the business context
in which practice happens (Malhotra and Grover 1998). Therefore, this research adopts the
business contexts.
Finally, managers are not familiar with how to deal with supply chain risks and do not
necessarily recognize the importance of supply chain risk management. According to the
5
McKinsey Global Survey, executives are not prepared to adequately manage supply chain risks
(McKinsey 2006). Also, Mark Hillman in AMR research stated that 60% of organizations in the
US do not have an effective supply chain risk management policy (Hillman 2007). Most
organizations are not prepared to implement supply chain risk management since managers are
not familiar with the issues. This research is meant to inform managers about the significance of
1.4. Objectives
The major objective of this research is to investigate the impacts of strategic sourcing, e-business
technologies and supply chain integration in the context of supply chain risk mitigation. In
addition, this study examines the role of the business environment, organizational culture and
other business characteristics in supply chain management practices and supply chain risks.
What impacts do strategic sourcing, e-business technologies and supply chain integration
What impact does the business environment and characteristics have on supply chain
This research makes significant contributions in terms of academia as well as practice. First, this
study raises some of the issues of supply chain risks that have been overlooked by managers.
Second, this research empirically validates the conceptual framework of the relationships among
supply chain practices, supply chain risks and performance. Third, the impact of organizational
6
culture is examined in the area of supply chain risks. Finally, this research fills the gap in the
research regarding the relationships between supply chain risk management, the business
This sub-section describes the organization of this dissertation. Section 2 provides an explanation
of the theoretical background and a review of relevant literature that examines supply chain risks,
supply chain risk management, performance, supply chain management practices, organizational
culture and business environment and characteristics. The theoretical underpinning of this
chain risk management covers various strategies for lessening risks. The performance section
considers three dimensions performance: financial, operational and supply chain performance.
The elements of supply chain management practices are identified as strategic sourcing, e-
business technologies in supply chain and supply chain integration. The organizational culture
Section 3 establishes a conceptual model relating to supply chain risk management and
performance as they are linked to the business environment and characteristics. The various
constructs and hypothesis are developed for designing the research model. This section develops
a basic conceptual model and a research model. In the first sub-section, the conceptual model is
based on the analysis of the literature and a consideration of gaps in prior research. This model
answers questions regarding the relationships between supply chain management practices and
supply chain risk as well as between supply chain risk and performance. In the second sub-
section, a research framework is developed with full effects and moderating effects. A research
7
model with full effects describes a framework of supply chain risk management which deals with
supply chain practices, organizational culture, supply chain risk and performance. A research
model with moderating effects describes a framework of supply chain risk management with an
includes developing the measurement instrument, a pilot study and sample and population issues.
This section describes the research methodology to be utilized in this study. This section
discusses in detail the processes of developing the survey and measurements. This section begins
with the survey methodology, instrument development and measurements, the pilot study, the
Section 5 explains data analysis and findings. This section provides the results of the data
analyses. Section 5.1 provides a profile of the survey participants in this research. Section 5.2
contains the assessment of the measurement scales, which establishes the reliability and validity
of the survey instruments in this research. Section 5.3 provides analysis of the structural model
Section 6 discusses data analysis results. The main objective of this research is to
investigate the relationship between supply chain practices such as strategic sourcing, e-business
technologies and supply chain integration with supply chain risks. From the buyers perspective,
this research framework empirically validates that implementation of supply chain practices
mitigate supply chain risks. Since industry has become global and highly competitive,
performance emerges as a key objective for all supply chain members in order to survive in the
global marketplace. Therefore, mitigating supply chain risks to improve performance and
determining the role of supply chain practices in supply chain risk management are important
8
topics of discussion, particularly in light of the results of this study. In addition, this study
considers the internal factor of organizational culture and the external factors of business
environments and characteristics within the main research framework of supply chain risks
management. Therefore, this research shows that firms have to deal with these factors in supply
chain risks management in order to have competitive advantages and that they also need to
performance.
Section 7 presents contributions, limitations and future research. The purpose of this
study is to establish a research framework for supply chain risk management and to empirically
investigate how supply chain practices and organizational culture influence supply chain risks
from the business environment perspective. In addition, this research also examines whether
successful supply chain risk management will improve the performance. Since this research
serves to close a gap in the literature of supply chain risk management, this research will,
9
2. Literature Review
The following section covers a review of the theoretical background and relevant literature. This
section begins with theoretical background, which includes dynamic capabilities, and discusses
in detail, the literature pertaining to supply chain risk, supply chain risk management, strategic
sourcing, e-business supply chain technologies, supply chain integration, organizational culture
In recent years, the theory of resource-based view (RBV) of the firm has been applied
extensively to investigate how firms can acquire competitive advantages through managing their
routine operations successfully. The role of the operations management component has been
explored and it has been found that a firm can compete effectively in the market by adopting a
more strategic, operations management approach (Lewis 2000). According to the results, a firm
can gain a competitive advantage in the market by using a strategic operations management
approach (Lewis 2000). The relationship between strategic purchasing and a firms performance
based on RBV has been investigated and it has been found that strategic purchasing has a
positive impact on the firms performance (Carr and Pearson 2002). RBV considers a firms
Based on the resource based view, dynamic capabilities are introduced as a more
developed theory (Teece, Pisano, and Shuen 1997) (Panda et al. 2003). In other words, dynamic
capabilities extended the view of RBV into a competitive value corresponding to environmental
10
changes (Miller 2003). Compared to a resource-based view, a dynamic capabilities approach
focuses more on market speed and unpredictable changes in the business environment. The
dynamic capabilities approach also focuses on the dynamic process of developing capabilities
while the RBV identifies resources and capabilities as static (Panda et al. 2003 ). The main idea
presented by dynamic capabilities is how a firm can acquire or develop firm-specific resources or
and Martin 2000; Winter 2003). For this reason, a firms ability to configure and relocate
resources and its competence is regarded as a source of significant advantage in rapidly evolving
business conditions. Dynamic capabilities are defined as the firms capability to integrate, build
and reconfigure internal and external competences to achieve a competitive advantage in the
rapidly changing environments (Teece, Pisano, and Shuen 1997). The RBV has been criticized
because it cannot sufficiently explain how firms can have a competitive advantage in an
have the ability to integrate, build and reconfigure internal and external competencies (Teece,
Pisano, and Shuen 1997) for addressing uncertainties in the business environment. In the
dynamic capabilities model, this ability offers a competitive advantage to firms (Eisenhardt and
Martin 2000). Dynamic capabilities are a firms processes that use resources in their processes
to integrate, reconfigure, gain and release resourcesto match and even create a favorable
market change. Dynamic capabilities are the organizational and strategic routines by which firms
achieve new resource configurations as markets emerge, collide, split, evolve, and die
(Eisenhardt and Martin 2000). Dynamic capabilities enable firms to change routine operating
11
processes in response to market changes (Anand et al. 2009). Table 1 shows comparisons
Table 1. Comparison of RBV and Dynamic Capabilities adapted from (Eisenhardt et al.
2000, p.1111)
Two main characterizations of dynamic capabilities are extracted from the term dynamic
congruence with the changing business environment. The term capabilities refers to strategic
management of a firms resources including internal and external skills as well as functional
competences that respond to a rapidly changing business environment (Teece, Pisano, and
Shuen 1997). Therefore, the term dynamic capabilities entails creating higher order skills as well
12
as innovative and agile resources toward a dynamic environment that are beyond operational
functional skills, resources that are required for every-day operations (Agarwal and Selen 2009).
Due to the effectiveness of utilizing resources, dynamic capabilities affect a firms profitability
factors that mitigate risks stemming from an unpredictable business environment. Dynamic
capabilities enable firms to leverage resources for establishing and maintaining relationships
with suppliers as well as customers (Perez Perez and Sanchez 2002). In the dynamic business
environment, a firm can face a variety of risks while maintaining its supply chain. Since a
strategic approach to supply chain management can be a component of a firms core competence,
that firms ability to configure and relocate resources to avoid or reduce various risks in the
supply chain will contribute to a firms performance. This study investigates how a firm can
utilize its capabilities to reduce risks in the supply chain by identifying risk mitigating factors.
Risk has been defined in many different ways depending on the nature and perspective of various
disciplines. In the field of business management, risk is generally defined as the probability of
variation in potential results in both objective and subjective ways (Spekman and Davis 2004). In
the context of supply chain management, supply chain risks are defined as any risks for the
information, material and product flows from original supplier to the delivery of the final product
for the end user and the possibility and effect of a mismatch between supply and demand in
simple terms (Juttner, Peck, and Christopher 2003). Supply Chain risks are arguably divided in
two different aspects: risk and uncertainty sources and risk consequences which mean risk
impacts on business (Juttner, Peck, and Christopher 2002). The risks considered in this study are
13
risk and uncertainty sources since the consequences of risk are regarded as impacts on
performance.
supply chain risks are explained by using the risk spiral which includes four components: lack of
confidence, lack of visibility, build-up of buffers and long pipelines (Christopher and Lee 2004).
Limited visibility in supply chain flows reduces confidence, which leads to delays in decision
making and results in the building-up of buffers, which then creates long supply chain pipelines
(Christopher and Lee 2004). Six dimensions of risks are found in the supply chain, which are
physical movements of goods, the flow of information, the flow of money, the security of
internal information systems, the relationships among supply chain members, and social
responsibilities of supply chain members (Spekman and Davis 2004). Supply chain risks are
divided into five categories: physical aspects of the actual supply chain movement, flow of
money, informational flow, relational links in supply chain networks and innovational
Three categories of supply chain risk sources have been suggested: environmental risk
stemming from uncertainty in the business environment, such as disasters; organizational risks
stemming from supply chain members, such as machine failures; and labor strikes and network
related risks stemming from interactions within the supply chain network, such as a lack of
interaction (Juttner, Peck, and Christopher 2003). Three categories of supply chain risk have also
been presented. First, the internal risk to the firm, which includes process risk and control risk
(Christopher and Peck 2004; Juttner, Peck, and Christopher 2003). Process risk relates to
disruptions in value-adding activities. The control risk is the risk that arises from the application
or misapplication of policies in governing the process. Second, the external risk to the firm, but
14
internal risk to the supply chain network, which includes demand and supply. Demand risk
relates to potential or actual disturbance in the downstream flow of the focal firm. Supply
Supp risk
relates to potential or actual disturbance in the upstream flow of the focal firm. Third, the
external risk to supply chain network includes environmental risk. Environmental risk relates to
that affects the whole supply chain directly and indirectly. Figure 1 shows the five main sources
Figure 1. Sources
es in Risk in the Supply Chain aadapted from (Christopher
Christopher & Peck
2004, p.10)
In Johnson (2001), two categories of supply chain risk are identified: Demand risk, which
includes seasonality, volatility, new product adoption and short product life cycle, and supply
15
risk, which includes disruptions in supply, production capacity and logistics as well as long lead
time between supply and demand. This research adopts an inbound perspective of supply chain
risk.
Prior studies introduced some definitions of supply risk. Supply risk is defined as
transpiration of significant and disappointing failures with inbound goods and services
(Zsidisin, Panelli, and Upton 2000, p. 187). It is also defined as that which adversely affects
inward flow of any type of resource to enable operations to take place; also termed input risk
(Harland, Brenchley, and Walker 2003, p. 53). However, these definitions reflect a traditional
view of supply because it neglects to consider multiple dimensions of the construct. Therefore, a
new definition of supply risk is presented as the probability of an incident associated with
inbound supply from individual supplier failures or the supply market occurring, in which its
outcomes result in the inability of the purchasing firm to meet customer demand or cause threats
to customer life and safety (Zsidisin 2003a, p. 222). Zsidisin (2003a) also includes the supply
disruptions into the concept of supply risks. Supply disruption risk is defined as managers
perception of the total potential loss generated from disruptions on the supply from suppliers to
buyers (Ellis, Henry, and Shockley 2010). Incorporating supply disruption risk, this study
Supply risk has two main sources: individual supplier failures, which include new
other customers, quality problems, price/cost increases, inability to meet quantity demand,
technologically out-of-date and discontinued supply and market characteristics that include a
sole source or limitedly qualified sources, market shortages, commodity price increases,
16
Managers perceive supply risk characteristics in three categories: item, market and supply
(Zsidisin 2003b). Item characteristics have an impact on profitability and the nature of product
application. Market characteristics entail global sourcing, market capacity constraints, market
price increases and number of qualified suppliers (Zsidisin 2003b). Supplier characteristics
include capacity constraints, inability to reduce cost, incompatible information systems, quality
problems, unpredictable cycle times, and changes in volume and mix requirements. Due to the
uncertain supply chain environment, supply chain risk becomes broader than ever before (Barry
2005) so that this research is dealing with supply chain risk in three ways: internal risk of supply
chain members, external risk of supply chain members but internal risk within supply chain
Supply chain risk management can be defined in two ways. One way is to define it as
collaborating with partners in a supply chain and apply risk management process tools to deal
with risks and uncertainties caused by, or impacting on, logistics related activities or resources
(Norrman and Jansson 2004, p. 436). It is also defined in simple terms as the identification and
management of risks for the supply chain, through a coordinated approach amongst supply chain
members, to reduce supply chain vulnerability as a whole (Juttner, Peck, and Christopher 2003,
p. 201). In these definitions, supply chain risk management has to distinguish between supply
chain risk sources, risk consequences, risk drivers and risk mitigating strategies. This research
will focus on risk mitigating strategies in order to minimize risk consequences and improve
The research of Christopher and Lee (2004) suggests three strategies to remove the
supply chain risk spiral. First, supply chain members need to make information accurate, visible
17
and accessible. Up-to-date information is very useful for planning purposes. Second, they need to
be alerted for out-of-control conditions. Statistical process control can be conducted to reduce the
variations of a supply chain plan. Third, they need to perform responsive corrective actions. With
contingency plans, they are able to make corrective actions when some disruptions occur
The research of Christopher and Peck (2004) points out the importance of risk assessment
before setting up mitigating risk strategies. Before designing mitigating strategies, managers
need to understand the nature of the supply chain network and supply base strategy for their
firms. Then they emphasize the importance of supply chain collaboration, which encourages
information exchange in supply chain networks and supply chain agility, which includes supply
chain visibility, a clear view of the up- and downstream flow of the supply chain and supply
chain velocity, and the relation of end-to-end distance to time in the supply chain. They also
point out the importance of cultivating an organizational culture where people become aware of
supply chain risk and supply chain risk management so that all workers in the organization
recognize supply chain risk in their activities (Christopher and Peck 2004).
The research of Juttner et al. (2003) present four points for mitigating strategies. First,
avoidance is associated with products geographic markets and supplier and market
organizations. A company can drop specific products, suppliers and geographical markets due to
unreliable supply. Second, companies control contingencies from various risk sources. It
production, handling, storage and transportations. Third, cooperation involves joint agreement,
which can reduce uncertainty in production. This includes joint agreement between supply chain
members to share information and prepare joint plans. Fourth, flexibility increases supply chain
18
responsiveness to unexpected events. Examples are postponement and multiple sourcing (Juttner,
Supply risk management uses approaches very similar to supply chain risk management.
It is confirmed that reduced supply risk can be achieved by forming alliance relationships,
making suppliers responsible for developing risk mitigation plans, maintaining common
platforms for products, connecting directly with suppliers and establishing industry standards.
They also suggest that purchasing organizations develop multiple sources for strategic items,
hold safety stocks and maintain a well-stocked supply line (Zsidisin, Panelli, and Upton 2000).
Johnson (2001) presented ways of managing supply risk in the toy industry. First, a
company can reduce capacity risks by outsourcing and building flexible partners. The company
can also conduct outsourcing as a proactive solution for mitigating risk. Second, the companies
need to use information, air freight, and warehouse consolidation to improve supply and demand
matching. Establishing an electronic supply chain by sharing information helps supply chain
members improve in matching supply and demand. Finally, companies can reduce currency and
political risk through operational hedging. Diversifying supply sources internationally is one way
Consistent with previous suggestions, Harland et al. (2003) also found similar supply risk
management strategies. First, forming a collaborative supply network strategy is very critical.
More involvement from supply network key players leads to better supply network design.
Second, implementing a supply network risk strategy is very important for the organizations
Developing new skills for managing interrelationship with other supply network members is
necessary for managers so that they can be educated about supply network risk.
19
Optimal
Resource
Performance
Allocation in
Supply Chain
Supply Chain
Practices
well as managing supplier relations in a manner that moves toward achieving the organizations
long term objectives (Smeltzer, Manship, and Rossetti 2003). Strategic sourcing is viewed as the
use of supplier capabilities in the process of design, engineering and manufacturing to achieve
strategic objectives (Narasimhan and Das 1999a). It is also defined as a framework that can assist
managers in the process of making buying decisions with consideration of the following factors:
20
competitive advantage and demand flexibility as primary factors, and process capability, process
maturity and systematic risk as secondary factors (Sislian and Satir 2000). Strategic sourcing has
another definition as a procurement framework based on the concept of total cost of ownership,
which helps firms add value and improve their competitive positions (Anderson and Katz 1998).
These definitions and findings over the years have pointed out four essential dimensions
purchasing function with other functions, 3) effective information sharing with suppliers and, 4)
supplier development and supply base management (Kocabasoglu and Suresh 2006). Figure 3
describes four dimensions of strategic sourcing to explain the concept of strategic sourcing.
21
Strategic sourcing has been shown to have a significant impact on several aspects of firm
performance. In an early work, Carter and Narasimhan (1996) identified six strategic factors
affecting performance, measured by market position, customer satisfaction and market share.
They rank-ordered the six strategic purchasing factors as: the importance of purchasing, human
resource management, interaction with suppliers, influence over suppliers, interaction with other
departments, and the purchasing organization and structure (Carter and Narasimhan 1996).
Carr and Pearson (1999) examined the role of strategic purchasing on the firms financial
confirmed that strategic purchasing is positively associated with a firms financial performance.
Their study also found that strategic purchasing has a positive impact on buyer-supplier
Carr and Smelzer (1999) tested the hypothesis that strategic purchasing is positively
related to supplier responsiveness, supplier communication, changes in supplier market and firm
performance. Their study showed that strategic purchasing not only affects the firms
performance positively but also improves the relationship with suppliers, encouraging both a
The study of Narasimhan and Das (1999a) focused on the relationship between strategic
sourcing and manufacturing flexibility. Their study results confirmed that strategic sourcing has
a positive impact on modification flexibility; however, it did not show any significant
relationship between volume flexibility and new product development flexibility. In addition,
strategic sourcing was found to have an indirect relationship with manufacturing cost reduction.
22
This study provided insights into how strategic sourcing can help improve manufacturing
flexibility and establish appropriate sourcing strategies (Narasimhan and Das 1999a).
competence and manufacturing performance. They found that purchasing competence has four
supplier capability auditing and purchasing integration. They confirmed that buyer-supplier
relationship development, supplier capability auditing and purchasing integration are positively
related with manufacturing performance. Purchasing integration was also found to have played a
Adding to the above results, Narasimhan et al. (2001) found five dimensions of
Purchasing competence was related to performance, which was composed of market share, TQM
and customer satisfaction. The results showed that purchasing competence has a significant
relationship with TQM and customer satisfaction. This study emphasizes that purchasing
competence can also serve to achieve better TQM as well as better customer satisfaction,
although no significant relationship with market share was found (Narasimhan, Jayaram, and Das
2001).
Likewise, Narasimhan and Das (2001) examined the impact of purchasing integration and
23
integration between purchasing practices and manufacturing performance. These results provide
insights into how purchasing should be internally integrated into business process and planning
strategic purchasing and its impact on firms financial performance. Their study presented that
sourcing has a positive influence on firms financial performance (Carr and Pearson 2002).
Chen et al. (2004) used a different approach for examining the indirect relationship
between strategic purchasing and financial performance. In their research, strategic purchasing
affects three factors, which are communication with suppliers, limiting the number of suppliers
and the development of long-term relationships with suppliers. Their empirical research results
showed that these factors were affected positively. However, only two factors, communication
with suppliers and long-term supplier relationships are positively related to customer
responsiveness, which has a positive impact on financial performance. This research implies that
strategic sourcing promotes better supply management capability which leads to improved
customer responsiveness and financial performance (Chen, Paulraj, and Lado 2004).
purchasing strategic integration on business performance. Their results showed that both
purchasing efficacy and purchasing strategic integration have a positive relationship with two
aspects of business performance: commercial and financial. He also examined the moderating
effect of purchasing strategic integration, and the results show that the relationship between
24
(Gonzalez-Benito 2007). Table 2 presents the summary of the literature reviews on strategic
sourcing.
25
Carr and 739 surveys Level of Strategic Strategic purchasing has a significant
Smeltze received purchasing, Supplier relationship with supplier
r (1999) from high communication, Supplier communication, supplier
level responsiveness, Change responsiveness, change in supplier
purchasing in supplier market, market and firms performance.
executives in Firms performance
NAPM
Narasim 75 surveys Strategic sourcing, Strategic sourcing positively affects
han and were Advanced manufacturing supplier responsiveness and
Das received strategies, Modification assistance. Strategic sourcing has a
(1999a) from senior flexibility, Volume significant relationship with only
managers in flexibility, New product modification flexibility not with
NAPM with development flexibility, volume flexibility and new product
follow-up Mfg. Cost functions development flexibility. Since
interviews modification flexibility is positively
associated with mfg. cost reductions,
strategic sourcing indirectly
influences manufacturing
performance.
Das and 322 surveys Purchasing competence, Purchasing competence has four
Narasim received Parts bundling, Buyer- dimensions of parts bundling, buyer-
han from supply supplier relationship supplier relationship development
(2000) executives in development practices, practices, supply capability auditing,
NAPM Supply capability and purchasing integration. Supplier
auditing, Purchasing capability auditing and purchasing
Integration integration has a positive relationship
Mfg. performance with manufacturing performance.
26
Smeltze 29 Case Negotiation plans Lack of understanding exists on
r et al. studies from Strategic sourcing integrating the strategic sourcing and
(2003) Fortune 500 negotiation plans. Thus, supply
firms. managers should emphasize on
integrating these two processes.
27
2.5. E-Business Technologies in Supply Chain
There has also been a major technological transformation in purchasing, by way of e-business
technologies, which can provide organizations with a wide range of benefits such as savings in
between buyers and suppliers (Min and Galle 1999; Deeter-Schmelz et al. 2001). E-business
technology also enables firms to collect and analyze real-time information resulting in enhanced
collaboration among firms (Vakharia 2002). E-business technologies are categorized into various
forms of e-business technology into three types: e-commerce, e-procurement, and e-collaboration.
(Johnson and Whang 2002). Among these, e-procurement, referring to the use of e-business
technologies in purchasing, allows firms to purchase materials using the Internet (Presutti 2003).
part of e-procurement are included in this study. Figure 4 describes the e-business technologies
Figure 4. E-Business technologies in a supply chain adapted from (Vakharia 2002, p.498)
28
Many studies have pointed out the potential benefits of e-procurement. four main benefits
are identified: 1) lower procurement process cost, compared to manual procurement processes, 2)
greater visibility on expenditure control, 3) increased procurement control, and 4) benefits from
managing suppliers (Croom 2000). E-procurement may also generate secondary benefits by
streamlining purchasing processes (e.g. decreased paperwork, quick and prompt order processing,
and improved order accuracy), internal cost reduction in purchasing (e.g. transparency, order
discounts and price efficiency) and external business innovations such as new market penetration
mistakes in procurement, and optimizes inventory (Muffatto and Payaro 2004). In addition, e-
procurement may result in greater transparency in procurement, with more detailed data
(Puschmann and Alt 2005); increased speed, quantity and quality of information processing,
especially with international suppliers (Essig and Arnold 2001); and improved processing of
requests for quotes (RFQ), as it results in savings in cost of processing, increased accuracy of
quotations, and higher job satisfaction for quote analysts (Weil 2000).
Among many studies on the impact of e-procurement, Boyer and Olsen (2002) found that
assessed on the two dimensions of cost performance (reduced cost of activities associated with
purchasing and cost of personnel training) and other performance aspects (billing accuracy and
availability of supplies). The broader impact on firm or supply chain performance was not
assessed. It was shown that Internet sitespecific factors had a significant impact on purchasing
29
Wu, Mahajan and Balasubramanian (2003) assessed the impact of firm characteristics,
was considered one of the four elements of adoption intensity of e-business technology.
Performance outcomes are related to efficiency, sales performance, customer satisfaction, and
relationship development. It was shown that performance was improved due to e-business-based
communication and internal administration but not online order taking and e-procurement (Wu,
Wu, Zdisin and Ross (2007) utilized the same data to analyze the impact on intensity of
e-procurement, along with the antecedents of top management emphasis, organizational learning
ability and normative pressures. The outcome measures were relationship development and
perceived efficiency gains. The use of coordination e-procurement applications was found to
have both direct and indirect effects on perceived efficiency gains, while transactional
application use can directly lead to efficiency gains (Wu, Zsidisin, and Ross 2007).
adoption and its benefits in Greek government (Panayiotou, Gayialis, and Tatsiopoulos 2004).
Johnson et al. (2007) presented the findings from a study of drivers and the outcomes of e-
business technology use in the supply chain. Their study examined the impact of the industrial
context, firm characteristics and firm-level strategic resources, such as purchasing teams, on the
exploitation of e-business technologies and the relationship between e-business technology use
and firm performance. A two-dimensional framework for e-business technology was proposed
with transactional and relational dimensions. Transactional technologies were further subdivided
into dyadic cooperation and price determination. Significant differences were found between the
two dimensions in terms of their overall levels of adoption, with dyadic coordination being the
30
most widely adopted. Finally, e-business technologies targeted at reducing dyadic coordination
costs were found to lead to improved financial performance. On the other hand, price
determination and private exchange in e-business technologies did not affect the firms financial
In Devaraj et al. (2007), it was hypothesized that while e-business technologies may offer
no direct benefit to performance, these technologies might support customer integration and
supplier integration in the supply chain, which in turn might impact operating performance. It
was shown that there was no direct benefit of e-business technologies on performance; however,
supplier integration was found to positively impact cost, quality, flexibility, and delivery
performance; however, there was no significant relationship between customer integration and
performance. Using dynamic capabilities theory and a resource-based view, it was postulated
that online information and process act as resources that result in logistics fulfillment
capabilities. These capabilities in turn lead to satisfaction with e-procurement, which was the
performance measure. It was shown that information flow process quality, including online
information, and order procedures are positively associated with logistics fulfillment process
quality. Logistics fulfillment process quality, measured by fulfilled order accuracy and fulfilled
order timeliness, was seen to positively affect satisfaction with e-procurement performance
(Vaiduanathan and Devaraj 2008). It is found that the Internet did not increase the capability of
process efficiency, but it boosted the integration process capability in procurement (Ordanini and
31
Rubera 2008). Table 3 presents the summary of the literature reviews on e-business technologies
in a supply chain.
32
Articles Description Variables Findings
Devaraj 120 responses IV: E-business Purchasing and collaboration in e-
et al. from senior capabilities business capabilities are positively
(2007) managers in (customer, associated with customer and supplier
various SIC purchasing and integration. Only supplier integration
codes collaboration), positively affects operational
Supplier performance.
integration,
Customer
integration,
DV: Operational
performance
Supply chain integration has been emphasized in the past literature because it plays a critical role
in creating value for supply chain partners (Mitra and Singhal 2008; Watson and Zheng 2005).
collaborates with its supply chain partners and collaboratively manages intra and inter-
organization processes (Flynn, Huo, and Zhao 2010). The purpose of stimulating supply chain
integration is to coordinate the production process so that competitors cannot easily match the
resulting competitive advantage created (Anderson and Katz 1998; Lummus, Vokurka, and
Alber 1998). Other aspects of the benefits of supply chain integration are reduced inventory, lead
33
times, order delays and bullwhip effect as well as increased customer satisfaction (Sahin and
Robinson 2005; Mitra and Singhal 2008). Integration, information sharing and coordination
improved the ability of the supply chain to react to changes in a dynamic environment (Lee, So,
Figure 5. Integration in the supply chain adapted from (Frohlich and Westbrook 2001,
p.186)
Internal integration within the firms makes a positive, direct impact on both business and
performance. Interestingly, supplier integration does not have a direct relationship with either
performance (Flynn, Huo, and Zhao 2010). It is important to approach internal integration and
supplier integration differently. In order to improve the performance, internal integration should
be facilitated first to promote the supplier integration (Das, Narasimhan, and Talluri 2006).
Supply chain integration has a positive influence on suppliers communication performance, but
not on suppliers operational performance (Cousins and Menguc 2006). More importantly,
internal integration affects positively the external integration with suppliers and customers. Both
internal and external integrations are significant antecedents of improving firms supply chain
34
agility (Braunscheidel and Suresh 2009). Figure 6 describes that extensive integration in the
Figure 6. Arcs of the Integration adapted from (Frohlich and Westbrook 2001, p.187)
design perspective, external integration in design and internal integration in design process
positively affect firms performance (Droge, Jayaram, and Vickery 2004). In the integration with
global suppliers, supplier integration helps suppliers to have capabilities on process management
and performance management (Lockstrom et al. 2010). In the projects of developing new
products, integration with manufacturing and marketing helps to improve the projects return on
investments (Swink and Song 2007). Supply chain integration has the moderating effect on the
relationship between product diversification and the performance and between international
market diversification and the performance. In other words, supply chain integration intensifies
the positive impact of product diversification on improving the performance. Supply chain
35
integration increases the positive effects of international market diversification on improving the
performance (Narasimhan and Kim 2002). In the context of joining the industry exchanges by
supply chain integration, investors in the stock markets react positively with announcements of
joining the industry exchanges. The market return shows abnormal returns, which added firms
In Frohlich and Westbrook (2001), supply chain integration was depicted to have three
dimensions: internal integration, customer integration and supplier integration. Supply chain
integration is divided by the supply chain integration of information and delivery in terms of
direction in flow: backward and forward. It was empirically confirmed that the greatest degree of
supply chain integration strongly relates with a higher level of performance (Frohlich and
Westbrook 2001). Likewise, in Braunscheidel and Suresh (2009), supply chain integration was
categorized into three ways: internal integration within the firms, external integration with key
suppliers, and external integration with key customers. Many factors affect internal supply chain
integration such as organizational culture and structure, informal and formal communications
among departments within the firm, facility layout, job rotation and cross functional teams
(Pagell 2004). This dissertation approached supply chain integration in terms of internal
Supply chain integration generates benefits on both suppliers and customer sides. On the
supplier side, greater information exchange with suppliers increased joint problem solving and
created efficient routines for accessing information (Eisenhardt and Martin 2000; Uzzi 1996).
Petersen et al. found that increased coordination with suppliers led to better design and financial
performance for both suppliers and buyers (Petersen, Handfield, and Ragatz 2005). Lawson et al.
(2008) confirmed that supplier integration promoted close personal relationships, closeness and
36
interaction as well as trust and respect with suppliers. In terms of customers, Vickery et al. (2003)
found that supply chain integration had beneficial impacts on customer service metrics. Because
integration with customers derives coordination with key customers, it is considered to be one of
the most important factors influencing competitive performance (Zhao et al. 2008).
In the field of supply chain and operations management, there is a gap in research on the
relationship between organizational culture and supply chain risk. This research examines how
organizational culture affects supply chain risk. A general definition of organizational culture is
an indoctrination of mind that distinguishes human members of one group from other groups
(Hofstede 1980). Organizational culture also refers to the beliefs and values which provide
foundations for management systems, practices as well as members behaviors (Denison 1990).
group as it learns to cope with its problems of external adaptation and internal integrationthat
has worked well enough to be considered valid and, therefore, to be taught to new members as
the correct way to perceive, think, and feel in relation to those problems (Schein 1985, p 9;
McDermott and Stock 1999, p 524). Obviously, organizational culture plays an important role in
affecting all aspects of organizations (Denison and Mishra 1995). Therefore, this research
anticipates that organizational cultures will influence supply chain risk and performance.
The study of Denison and Spreitzer (1991) described organizational culture in figure 1.
According to their research, organizational culture has two dimensions, represented by the
vertical and horizontal axes. At the high end of the vertical axis is flexibility, which can absorb
change in the organization, and at the low end of the vertical axis is control, which maintains
stability and order. At the left end of the horizontal axis is an internal focus, which maintains and
37
improves activities within organizations, and at the right end of the horizontal axis is an external
focus, which represents competition, adoption and interaction with the external environment.
As shown in Figure 1, these two dimensions form four major models in organizational
culture. Group culture is located in the quadrant of high flexibility and high internal focus. Its
characteristics include being open to change as well as concern and commitment to the internal
organization. Developmental culture is located in the quadrant of high flexibility and high
external focus. Its characteristics include being open to innovation, adaptation and support from
external organization. Hierarchical culture is located in the quadrant of high control and high
internal focus. Its characteristics include stability, control, measurement and information
management in internal organizations. Rational culture is located in the quadrant of high control
and high external focus. Its characteristics include accomplishment, productivity, direction and
38
Figure 7. The Competing Values Framework of Organizational Culture adapted
from (Denison and Spreitzer 1991, p.12)
Schein (1986, 1992) categorized three cultural aspects: artifacts, espoused values and
basic underlying assumptions. Artifacts are behaviors that people can see, hear and feel when
people face unfamiliar culture. Artifacts are the focus of operations management research
regarding organizational culture since they are visible. Espoused values become visible as people
think that their considered beliefs are right leading to their behaviors. These basic underlying
assumptions are perceptions and feelings that become the basis of values and actions.
39
Prior literature discussed market orientation and learning orientation as a cultural factor
orientation focuses on creating behaviors to create the value for customers (Narver and Slater
1990). This research considers basic underlying assumptions as customer orientation because
supply managers perceptions and feelings based on their values and actions on serving
customers. It also focuses on espoused values of supply chain professionals to find out cultural
impact in their organizations. Because espoused values are regarded as the beliefs that members
of the organization hold, they are not visible (Nahm, Vonderembse, and Koufteros 2004). This
Ward et al. (1995) established three dimensions of the business environment. First,
environmental munificence represents the extent to which the business environment supports
unexpected changes in environmental circumstances (Dess and Beard 1984). This concept is
competitors and technology (Bourgeois and Eisenhardt 1988). Third, environmental complexity
represents the range of heterogeneity and range of organization activities (Child 1972).
Business environment is also considered part of business uncertainty, which has four
dimensions (Kocabasoglu, Prahinski, and Klassen 2007). Consistent with previous research,
munificence has a meaning of external environments which can support firms growth in their
industry (Dess and Beard 1984). Dynamism refers to the extent of change in design, technology
and customer preference of business environment (Achrol and Stern 1988). Hostility represents
40
the degree of competition and external control in the industry (Miller 1987). Heterogeneity refers
to the level of dissimilarity in the industry (Aldrich 1979). This study follows four dimensions of
business environment: munificence, dynamism, hostility and heterogeneity and integrate four
dimensions on two aspects: dynamic and competition. Therefore, this research focuses on
dynamic and competitive markets that firms face with and consider dynamic and competitive
Previous research has generally neglected to empirically test the influence of business
characteristics on supply chain integration and performance (Van der Vaart and Van Donk 2008).
Fischer (1997) argued that the effectiveness of supply chain management depends on various
business characteristics such as product life cycle and process. Business conditions can be
market maturity and product life cycle. In their study, they found that supply chain performance
differs based on the business conditions of product type (Ramdas and Spekman 2000). Other
business conditions, such as decoupling point, delivery time, process type, volume and variety
characteristics and order-winners are applied to examine the impact on supply chain integration
(Van Donk and Van der Vaart 2004). This dissertation research considers manufacturing
approaches such as pull and push, industry, globalization and firm size as business characteristics.
Business characteristics are considered as an internal factor of the firms. Because business
environment and characteristics are neglected in supply chain management, this research
41
Figure 8. A Framework of Business Environment and Characteristics
42
3. Model Development
This section develops the basic conceptual model and a research model. In the first section, the
conceptual model is based on the analysis of the literature and a consideration of gaps in prior
research. This model is aimed at answering questions regarding the relationships between supply
chain management practices and supply chain risk as well as between supply chain risk and
performance. In the second section, a research framework is developed with full effects and
moderating effects. A research model with full effects describes a framework of supply chain
risk management which deals with supply chain practices, organizational culture, supply chain
risk and performance. A research model with moderating effects describes a framework of
supply chain risk management with an indirect impact from business environment and
characteristics.
Previous literature has suggested many strategies for mitigating supply chain risk. Because this
study identifies risk from three sources: internal risk, internal supply chain network risk and
environmental risk, this section begins with operations strategies for mitigating internal risk and
operational risk. Lewis (2003) delineate cause, control and consequences of operational risk
According to his research, every decision made by managers in operations management can
involve both beneficial and detrimental risk factors. In order to reduce adverse consequences,
operations managers needed to control all processes, which is impossible. He pointed out that too
There are various risks existing in supply chains. Previous literature presents many
strategies to deal with supply chain risk. The study of Braunscheidel and Suresh (2009) applied
43
supply chain agility approach in order to deal with supply chain disruptions. According to their
study, supply chain agility and its antecedents give organizations the ability to respond quickly to
changes and disruptions in the market. They emphasized that internal and external supply chain
integration and external flexibility, such as mix and volume flexibility, positively affect a firms
supply chain agility, which can be used as an important tactic for responding to disruptions in
The study of Chopra and Sodhi (2004) introduced seven strategies for mitigating risk:
inventory, increasing flexibility, pool or aggregate demand and increasing capability. In their
study, they emphasized the role of managers because they had to understand and recognize
supply chain risks and determine how to adopt mitigating strategies that would work for their
organizations.
The research of Christopher and Lee (2004) suggested three strategies for eliminating
spiraling supply chain risk. First, information in supply chain should be accurate and visible.
More importantly, it should be accessible by all members of the supply chain so that they can
plan appropriately. Second, they need to be quickly informed when something is out of control.
Supply chain members can react quickly to minimize the variations of demand and supply. Third,
they need to take corrective actions in order to recover from disruptions with help of contingency
plans.
Craighead et al. (2007) suggested two mitigation capabilities: recovery capability and
warning capability. Recovery capability refers to interactions between supply chain entities and
the coordination of supply chain resources that speed recovery from disruptions. Warning
capability refers to the interaction and coordination of supply chain resources in order to detect
44
potential disruptions and give out information to supply chain entities that could help mitigate
risk.
Christopher and Peck (2004) pointed out the importance of risk assessment prior to
setting up risk mitigating strategies A good understanding of supply chain network and supply
base strategy is necessary for firms managers to have in order to set up proper strategies. They
then emphasized the importance of supply chain collaboration, such as information sharing and
supply chain agility, in supply chain networks. Figure 9 describes various approaches to mitigate
45
Figure 9. Creating risk mitigating strategies in a supply chain adapted from (Chrsitoper
and Peck 2004, p.24)
The study of Faisal et al. (2006) listed eleven enablers of risk mitigation and established
an interpretive structural model for supply chain risk mitigation. In tier 1, collaborative
relationships, information sharing and trust among supply chain partners had interactive
relationships. Three enablers in tier 1 affected aligning incentives and revenue sharing policies
and knowledge about various types of risks in a supply chain in tier 2. Two enablers in tier 2
46
influenced cooperate social responsibility and strategic risk planning, which affected each other
in tier 3. Two enablers in tier 3 made an impact on risk sharing in the supply chain and
information security in the supply chain in tier 4. Two enablers in tier 4 affected continual risk
assessment analysis and agility in the supply chain in the final tier.
The research of Juttner et al. (2003) presented four mitigating strategies. The first
strategy is to avoid high risk by dropping specific products and geographical markets that had
unreliable supply. The second strategy is to utilize contingency plans for controlling various risk
sources such as increasing inventory and maintaining excessive capacity in production, handling,
storage and transportation. The third strategy is to inspire cooperation, such as information
sharing and joint plans by joint agreement, which can reduce uncertainty in production. The last
The study of Kleindorefer and Saad (2005) introduced ten principles of risk mitigating
strategies. First, the focal firm must take care of itself before asking other supply chain entities
to mitigate supply chain risks, which requires internal integrations. Second, a diversification is
necessary toward sourcing options, facility locations, operational nodes and logistics by applying
a portfolio theory. Third, strong incentives and collaboration would help the weakest link in a
supply chain network in order to minimize the probability of supply chain disruptions. Fourth,
prevention is the best strategy so that the firms should avoid high supply chain vulnerability.
Fifth, supply chain entities should not seek for extreme leanness and efficiency, which increases
preparation for supply chain disruptions. Seventh, collaborative information sharing is a key to
supply chain partners preparing for the disruptions. Eighth, firms need to emphasize risk
47
assessment since crisis management is not sufficient. Ninth, agility and flexibility in supply
chains are also essentials for supply chain risk management. Finally, emphasis on quality
Norman and Johnson (2004) used a case study of Ericsson in supply chain risk
management. Its approach was to collaborate with suppliers, as the company conducted open
discussions with suppliers in all aspects of supply chain risk. This proactive approach was able to
reduce the risk as well as consequences for Ericsson, although continuous implementation was
required.
Since this study focuses on the supply side of supply chain risk, risk mitigating strategies
relating to supply are discussed. Supply risk mitigating strategies have very similar approaches to
supply chain risk mitigating strategies because there are not clear distinctions between supply
risk and supply chain risk. The research result found that close buyer-supplier relationships,
sharing risk mitigation plans, direct access to suppliers and developing standards for the products
were key components of mitigating supply risks. Additional suggested solutions were to
establish multiple sources for suppliers, well-stocked supply lines and hold high safety stocks
(Zsidisin, Panelli, and Upton 2000). It is proposed that a low level of differentiation in suppliers
and that a low fixed number of suppliers tended to reduce the supply risk, as shown by the
Johnson (2001) used the toy industry to suggest strategies for managing supply risk. First,
companies can adopt outsourcing and build flexible partners. Second, companies need to
maximize information usage to improve supply and demand matching. Third, companies can
48
Consistent with previous suggestions, Harland et al. (2003) also found similar supply risk
management strategies. First, promoting collaboration in supply chain networks is very crucial
for better supply chain network designs. Second, implementing supply network risk strategy is
very critical for the organizations as managers need to be educated about supply risks.
The research of Jiang et al. (2009) investigated the labor turnover ratio of suppliers and
supply risks. They suggested that buyers need to cooperate with suppliers to improve labor
conditions with proactive approaches through long-term supplier relationships, which would
Previous literature has suggested many kinds of supply chain risk mitigating strategies.
Prior literatures suggest that supply chain practices are tools for performing these strategies
because supply chain practices promote collaboration, information sharing and flexibility.
Therefore, this study introduces supply chain practices such as strategic sourcing, e-business
technologies in the supply chain and supply chain integration to mitigate supply chain risks.
Strategic sourcing, e-business technologies in the supply chain and supply chain integration
contain all important elements to successfully mitigate supply chain risks among supply chain
practices. Details regarding those supply chain practices will be discussed in the next section of
The relationship between supply chain risks and performance is a new emerging area for
researchers. Although previous literature indicated that supply chain glitches and delays in new
product introductions cause loss of shareholders value in the stock market (Hendricks and
Singhal 1997, 2003), there is little or no research about whether successful mitigating risk
strategies improves performance or not. More importantly, as far as it is known, there is no study
which investigates how supply chain risks perceived by supply and purchasing managers affect
49
the performance. This research also measures the performance in three different dimensions. In
order to investigate the impact of supply chain risks on the performance in various approaches,
financial, operational and supply chain performance would be measured. Thus, this research
examines how supply chain risks affect firms financial performance, operational performance
and supply chain performance. Figure 10 introduces the supply chain risk management
framework.
Figure 10. Supply chain risk management framework adapted from (Ritchie and Brindley
2007a, p 1401)
Successful risk mitigating strategies by Ericson helped to reduce its insurance cost, which
covered supply chain disruptions (Norrman and Jansson 2004). The study of Ritchie and
Brindley (2007b) developed a conceptual framework for a linkage between risk and performance
by applying case study approaches. They suggested causal pathways between risk sources and
performance as topics for future research, which could make meaningful contributions to
academia and practitioners. Therefore, this research also investigates the causal relationship
50
between risk sources and supply chain performance. Figure 11 describes a conceptual model for
this research, which is consists of supply chain practices, supply chain risks and performance.
Although cultural impact is considered a significant factor for supply chain risk management,
these cultural impacts have not been fully investigated yet. It is found that cultural factors had a
significant impact on supply chain agility and flexibility, which facilitate supply chain risk
mitigation (Ritchie and Brindley 2007b). The research of Braunscheidel and Suresh (2009) also
emphasized the importance of cultural impacts. In their study, they divided cultural aspects into
market orientation and learning orientation. Market orientation culture was defined as
organizational culture that could create superior values for customers while learning orientation
culture was defined as organizational culture that looked to learning for improvement and which
attempts to create value for an organization. These two kinds of organizational culture positively
influenced internal and external integration as well as external supply chain flexibility
51
(Braunscheidel and Suresh 2009). Unlike their studies, this study investigates how an underlying
level of beliefs in organizational culture affects managers perceptions toward supply chain risk
because they are important factors that affect managers perception toward supply chain risk and
performance. In the supply chain risk management framework, environments and industry
characteristics are included as sources of risk (Ritchie and Brindley 2007b). Environmental
the supply chain (Chen and Paulraj 2004). Business environments and uncertainties are applied
as antecedents to forward and reverse supply chain risk propensity, which presented the
significance of the business environment (Kocabasoglu, Prahinski, and Klassen 2007). In this
research, business environments are considered as an external factor for affecting supply chain
practices as well as supply chain risks. It has been criticized to neglected business conditions in
supply chain practices research (Van der Vaart and Van Donk 2008). In this research, business
characteristics are considered as an internal factor of influencing the relationship between supply
chain practices such as strategic sourcing, e-business technologies in the supply chain and supply
chain integration and supply chain risks. Therefore, this research examines the role of business
environment and characteristics in supply chain practices, supply chain risk and performance.
More details regarding organizational culture will be discussed in the next section.
52
Figure 12. The Full Conceptual Model
53
3.2. The Research Model
development, flexibility and internal coordination. One definition of strategic sourcing addressed
collaboration with suppliers, as it was defined as the use of supplier capabilities in establishing
strategic objectives (Narasimhan and Das 1999). The definition also mentioned that strategic
sourcing should consider demand flexibility and systematic risk, as they defined it as a
framework for assisting the buying decision-making process while considering the importance of
these factors: competitive advantage and demand flexibility as a primary factor and process
capability, process maturity and systematic risk as a secondary factor (Sislian and Satir 2000). It
has been pointed out the significance of managing supplier relationships as they defined it, a
systematic and comprehensive process of acquiring inputs as well as managing supplier relations
in a manner that achieves value in obtaining the organizations long term objectives (Smeltzer,
Based on these definitions, strategic sourcing has two main aspects and four dimensions.
The role of purchasing within the firm represents two dimensions, which are a strategic role on
the status of purchasing and effective internal coordination of purchasing with other functions of
the firm. The building of effective relationships represents two dimensions, which are
information sharing with suppliers and development of suppliers (Kocabasoglu and Suresh 2006).
Strategic sourcing enables buyers to develop relationships with suppliers through information
sharing as well as internal integration. This study anticipates strategic sourcing to affect supply
54
Many studies indicate that E-business technologies provide organizations the benefits of
communication networks between buyer and supplier relationships (Min and Galle 1999; Heizer
and Render 2000; Deeter-Schmelz et al. 2001). E-business can also promote effective supply
chain management decision-making by enabling the collection and analysis of real time
technologies promote better firm management of information and supplier knowledge, better
procurement mistakes, optimize inventory stock and increase the number of products by main
suppliers (Muffatto and Payaro 2004). One of the benefits of e-business technologies is that it
gives purchasers the capability of increasing the speed, quantity and quality of information
processing, especially with international suppliers (Essig and Arnold 2001). E-business
technologies boosted integration with suppliers and customers (Devaraj, Krajewski, and Wei
2007). Based on these findings, it can be concluded that e-business technologies helps supply
chain entities share their real-time information, integrate with each other and manage
information better, thus increasing flexibility. This study anticipates that e-business technologies
will reduce supply chain risks. Therefore, this study proposes hypothesis 2:
The drivers of supply chain integration are the information technology revolution,
and Nichols 1999). As supply chain networks become increasingly complex and the level of
competitions in the global market becomes extremely competitive, the implementation of supply
55
chain integration becomes critical to mitigate supply chain risks. The basic elements of supply
information technology sharing, and managing integrated processes in the supply chain
(Akkermans, Bogerd, and Vos 1999). Power also identified five aspects of supply chain
2005). It has been pointed out that information technology enables supply chain entities to share
all information, resulting in minimizing the inventory level and improving the partnerships in the
While supply chain integration might provide all solutions for mitigating supply chain
risk, the result is found that internal and external integration positively affect supply chain agility,
which helped to mitigate supply chain risk (Braunscheidel and Suresh 2009). It is empirically
confirmed that integration mitigated supply chain process variability in high demand,
unpredictable circumstances (Germain, Claycomb, and Droge 2008). This study anticipates
supply chain integration will reduce supply chain risk. This leads to hypothesis 3:
technologies and supply chain integration are influenced by organizational cultures. Individuals
in organizations who have different beliefs and values will adopt these practices differently. It
has been proposed that organizational cultures are also associated with the benefits of magnitude,
(Zammuto and O'Connor 1992). The study of McDermott and Stock (1999) empirically tested
Zammuto and OConnors propositions. They found that organizational culture and advanced
56
manufacturing technology implementation are closely associated with each other. Their research
results showed that group culture correlated positively with advanced manufacturing technology
outcomes but that development culture negatively correlated with advanced manufacturing
technology.
(McDermott and Stock 1999). From a knowledge management perspective, the organizational
members values influence knowledge management practices (Alavi, Kayworth, and Leidner
2005-6). Organizational cultures had a significant relationship with leadership, strategic planning,
customer focus, information analysis, people and process management in total quality
management practices (Prajogo and McDermott 2005). Beliefs in the value of investment in
production, group work, external orientation, control and integration are associated with time-
Organizational culture affects supply chain and other manufacturing practices because it
makes an impact on managers perception as well as behaviors toward supply chain and other
manufacturing practices. Thus, this research assumes that the organizational culture influences
supply and purchasing managers attitude toward supply chain risks. Their attitudes relating to
supply chain risks are very crucial factors on how they perceive and react toward supply chain
In supply chain management, business environment and characteristics are often ignored,
although they have received some attention recently. Business environment is a very important
factor and affects performance both directly and indirectly. Business environment influenced
57
manufacturing flexibility and the role of manufacturing mangers in strategic decision-making
(Swamidass and Newell 1987). The three dimensions of environment, which are environmental
performance, although the effect of environmental complexity was neglected (Ward et al. 1995).
Figure 13 describes the impact of business environments on supply chain practices as well as the
performance.
Figure 13. Impact of business environments adapted from (Ward et, al. 1995, p101)
type, were examined in terms of their moderating effect on the relationship between supply chain
relationship quality and supply chain performance (Fynes, De Burca, and Voss 2005). The
impact of business environment on strategic sourcing and buyer-supplier relationships was also
examined (Chen and Paulraj 2004). The relationship between business environments exhibiting
munificence, dynamism, hostility and heterogeneity and forward and reverser supply chain risk
Business environments are impossible for managers to control. However, they can adjust
and adapt to the business environments that they are facing with. Strategic sourcing, e-business
technologies and supply chain integration are very useful practices to have competitive
58
advantages in the dynamic and competitive business environments against competitors.
Therefore, this research reflects business environments on supply chain practices as well as the
munificence, dynamism, hostility and heterogeneity and investigates both their direct and
indirect impact on supply chain risk. Integrating four dimensions of business environments, this
research focuses on dynamic and competitive market conditions that firms deal with. Business
environments refer to the market condition that the firms are facing with. Therefore, this study
proposes hypothesis 5:
H5a: Dynamic and competitive business environments make a direct impact on strategic
sourcing.
H5b: Dynamic and competitive business environments have a moderating impact on the
relationship between strategic sourcing and supply chain risk.
H5c: Dynamic and competitive business environments make a direct impact on e-
business technologies.
H5d: Dynamic and competitive business environments have a moderating impact on the
relationship between e-business technologies and supply chain risk.
H5e: Dynamic and competitive business environments make a direct impact on supply
chain integration.
H5f: Dynamic and competitive business environments have a moderating impact on the
relationship between supply chain integration and supply chain risks.
H5g: Dynamic and competitive business environments make a direct impact on
organizational culture.
H5h: Dynamic and competitive business environments have a moderating impact on the
relationship between organizational culture and supply chain risks.
H5i: Dynamic and competitive business environments make a direct impact on supply
chain risks.
59
Previous survey-research based studies have disregarded how business conditions affect
the relationship between supply chain integration and performance (Van der Vaart and Van
Donk 2008). Basically, it is argued that an effectiveness of supply chain management depends on
various business conditions such as the type of product, including life cycle and process (Fisher
1997). Business conditions are also measured by market dynamics, an availability of substitute
product, change in technology, market maturity and product life cycle, with product being
divided into two groups, functional and innovative products, in order to investigate the impact on
supply chain performance (Ramdas and Spekman 2000). Other business conditions, such as
decoupling point, delivery time, process type, volume and variety characteristics and order-
winners, are applied to examine the impact on integration (Van Donk and Van der Vaart 2004).
Adding to business conditions and environment, this study includes the firm characteristic of size.
Figure 14. Business conditions in a supply chain adapted from (Van der Vaart and Van
Donk 2006, p. 11)
The business characteristics are very important factors for supply chain practices and
supply chain risks because there are a lot of possibilities that business characteristics can be a
60
source of supply chain risks or a useful tool of mitigating the supply chain risks. Firm size is
very critical because if firm size is greater, the firm has a capability of utilizing their resources to
mitigate the supply chain risks. On the other hand, if firm size is small, the firms have the
Thus, this research investigates the firm size as one of business characteristics. In
addition, this research examines how push and pull approach in manufacturing affect the
relationship between supply chain practices and supply chain risks. Since pull approach is
following the demand request from the markets unlike push approach, this research assume that
the manufacturing approach will make a difference on the relationship between supply chain
This study also makes an interesting point about how global suppliers affect the
relationship between the supply chain risks and supply chain practices. Since there is a long
distance and time difference between suppliers and buyers, it will generate many problems on
communication, quality management and flexibility toward supply chain disruptions. Thus, this
research examines the suppliers locations. Adding to suppliers location, this research also
investigated the market locations. The comparisons of the research model in this study will
depend on manufacturing approach, such as push and pull types, industry types, globalization,
H6: The relationship between supply chain practices and supply chain risks will be
differentiated depending upon the organizations business characteristics.
The association between supply chain risks and performance is an area that has not yet
been actively researched. Previous literature empirically found that supply chain glitches and
delays in new product introductions made shareholders lose value in the stock market (Hendricks
61
and Singhal 1997, 2003). However, there is no empirical research on how successfully mitigating
investigating the relationship between supply chain risks and the performance.
It is important for supply and purchasing managers to recognize how supply chain risks
affect on the performance. Using Ericssons case study, successful mitigating risk strategies lead
to reducing insurance costs that cover supply chain disruptions since they do not have a direct
impact on the performance (Norrman and Jansson 2004). A conceptual framework regarding risk
and performance has been established and it suggested a causal relationship between risk sources
and performance (Ritchie and Brindley 2007b). This study proposes that the supply chain risks
Prior literatures measured the performance in various ways. The performance is measured
by return on assets or investments, market shares increase and cost savings. In order to show
different aspects of the performance and how the supply chain risks affect multi dimensions of
the performance, this study uses three dimensions of the performance: financial, operational and
H7: Mitigating supply chain risks through supply chain practices influences performance.
Figure 15 describes the research model with full effects and figure 16 described the
research model with moderating effects. Table 4 and 5 summarizes hypotheses for this research.
62
Table 4. Summary of Hypotheses on Full Effects
Full Effects
H1 Strategic sourcing mitigates supply chain risks.
H2 E-business technologies mitigate supply chain risks.
H3 Supply chain integration mitigates supply chain risks.
H4 Organizational cultures are associated with supply chain risks.
H5a Dynamic and competitive business environments make a direct impact on strategic
sourcing.
H5c Dynamic and competitive business environments make a direct impact on e-business
technologies.
H5e Dynamic and competitive business environments make a direct impact on supply
chain integration.
H5g Dynamic and competitive business environments make a direct impact on
organizational culture.
H5i Dynamic and competitive business environments make a direct impact on supply
chain risks.
H7 Mitigating supply chain risks through supply chain practices influences the
performance.
63
Table 5. Summary of Hypotheses on Moderating Effects
Moderating Effects
H5b Dynamic and competitive business environments have a moderating impact on the
relationship between strategic sourcing and supply chain risks.
H5d Dynamic and competitive business environments have a moderating impact on the
relationship between e-business technologies and supply chain risks.
H5f Dynamic and competitive business environments have a moderating impact on the
relationship between supply chain integration and supply chain risks.
H5h Dynamic and competitive business environments have a moderating impact between
organizational culture and supply chain risks.
H6 The relationship between supply chain practices and supply chain risks will be
differentiated depending upon the organizations business characteristics.
64
Figure 15. A Research Model with Full Effects
65
Figure 16. A Research Model with Moderating Effects
66
4. Research Methodology
The following section describes the research methodology to be utilized in this study. This
section discusses in detail the processes of developing the survey and measurements. This
section begins with the survey methodology, instrument development and measurements, the
pilot study, the full scale study and sample and partial least squares.
method for studying organizational problems in the production and operations management field
(Malhotra and Grover 1998). From 1992, survey research in the operations management area
was increased by 5.1% (Rungtusanatham et al. 2003). Previous literature points out the three
main ways of utilizing survey research. First, surveys are conducted to generate descriptions of
letting people answer predefined questions. Finally, although the information is collected from a
sample population, findings are generalized to the larger population (Pinsonneault and Kraemer
1993).
On the other hand, survey research is not free of problems. Pinsonneault and Kraemer
(1993) encountered problems with the survey research methodology, which they summarized.
First, the survey research method was used only when the research design required multiple
methods. Second, while the samples were supposed to be random, the sampling procedures were
unsystematic and often inadequate. Third, the survey research method had very low response
rates. Fourth, survey research showed weak linkages between units of analysis and respondents,
which should be consistent. Finally, the researchers relied too much on cross-sectional surveys
67
when they should conduct longitudinal surveys to validate their research design as well as
findings (Pinsonneault and Kraemer 1993). Although survey research is a very useful method,
researchers should carefully apply it depending on the purpose of their research, i.e., exploration,
description and explanation. The research of Malhotra and Grover (1998) summarized four
distinctive methods of survey research: first, the collection of information by asking respondents
the relationship between variables; third, using a sample for generalization; and finally, survey
research that aims at contributing to theory development, such as empirically validating a theory.
Their research also pointed out cumulative errors that may occur with the survey research
method:
2. Sampling error: definition and justification of sample frame, random sample, the
error
In order to avoid these errors, this research attempts to ensure a survey research method of high
68
Instrument Development
Literature Review
Interview with Professionals
Feedback from Experts
Pilot Study
Reliability
Validity
Factor Analysis
Full-Scale Study
Measurement Model
Reliability
Validity
Confirmatory Factor Analysis
Full-Scale Study
Structural Model
Fit Indexes
Path Coefficients
Alternative Models
Figure
Figure17.
8. Steps
Steps for
for Developing
MeasurementMeasurements
Developments
This study develops instruments for survey measurements based on previous literature. Since it
does not utilize newly created constructs, it is expected that all constructs have acceptably
reliable and valid survey measurements. These measurements applied in firm levels. Tables 6
through 19 describe the details of the survey measurements for this study. The entirety of the
69
Table 6. Measurements for Strategic Sourcing
Constructs Measurements
Construct Dimension Source Items Scale
Strategic Purchasing (Carr and 1. Purchasing is included in the 1=Strongly
Sourcing Smeltzer firms strategic planning Disagree
1997) process. 7=Strongly
(Chen, 2. The purchasing function has Agree
Paulraj, and good knowledge of the firms
Lado 2004) strategic goals.
(Kocabasoglu 3. Purchasing performance is
and Suresh measured in terms of its
2006) contributions to the firms
success.
4. The purchasing professionals
development focuses on
elements of the competitive
strategy.
5. The purchasing department
plays an integrative role in the
purchasing function.
70
Table 7. Measurements for extensive use of e-business technologies
Constructs Measurements
Construct Dimension Source Items Scale
E-Business Extensive (Johnson et 1. Electronic data interchange 1 = None
Technologies Use al. 2007) (EDI) 7=
2. Real-time electronic linkage Extensive
with suppliers
3. Electronic/online purchase order
system
4. Online reverse auction/e-
auction.
5. Public & Industry E-market
places
6. Private B2B exchange/Extranet
71
Table 8. Measurement for intensity of e-business technologies adoption
Constructs Measurements
Construct Dimension Source Items Scale
E-Business Intensity of (Menon et al. 1. Coordinate new product and 1=Strongly
Technologies E-Business 1999; Wu, service development teams. Disagree
technologies Mahajan, and 2. Provide customers with 7=Strongly
adoption Balasubramanian general information about Agree
2003; Subramani our SBU (e.g., via Web sites
2004) and information boards).
3. Send customers regular
updates about new products
and other developments
within our SBU (e.g., via e-
mail).
4. Provide after-sales service
to our customers (e.g., via
online information about
installation and
troubleshooting).
5. Provide information in
response to consumer
questions or requests (e.g.,
via searchable online
databases).
6. Send suppliers regular
updates about new product
and service plans and
developments within our
SBU (e.g., via e-mail).
7. Provide specific online
information about product
and service specifications
that our suppliers must
meet.
8. Share product and inventory
planning information with
our suppliers.
9. Permit suppliers to directly
link up to our databases
(e.g., via Enterprise
Resource Planning/ERP
systems).
10. Perform financial and
managerial accounting.
11. Provide reimbursements and
manage payrolls.
72
Constructs Measurements
Construct Dimension Source Items Scale
12. Manage employee benefits
(e.g., life and medical
insurance).
13. Accept payments
electronically from
customers (e.g., online
payment).
14. Allow customers to track
and inquire about their
orders electronically.
15. Search and locate potential
suppliers online.
16. Place and track orders with
suppliers electronically
(e.g., online order
placement).
17. Allow suppliers to submit
bids online.
18. Use online marketplaces to
source supplies (e.g.,
Ariba.com,
Commerceone.com)
73
Table 9. Measurements for e-business technology adoption in the supply chain
Constructs Measurements
Construct Dimension Source Items Scale
E-Business E-Business (Menon et al. 1. Order Processing, invoicing 1=Strongly
Technologies technologies 1999; Wu, and settling accounts Disagree
adoption in Mahajan, and 2. Exchange of shipment and 7=Strongly
the supply Balasubramanian delivery information Agree
chain 2003; Subramani 3. Managing warehouse stock
2004) and inventories
4. Understanding trends in
sales and customer
preferences with your
suppliers
5. Integrating your functions
(e.g. design and
manufacturing) with
suppliers
6. Sharing your firms
expertise to create new
business opportunities with
your suppliers
74
Table 10. Measurements for Internal Integration
Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Internal (Pagell 2004; 1. We use cross functional teams 1=Strongly
Integration Integration Jaworski and to solve problems. Disagree
Kohli 1993; 2. Internal management 7=Strongly
communicates frequently about
Narasimhan goals & priorities. Agree
and Kim 3. Our firm does not encourage
2002; openness and teamwork
Braunscheidel 4. Formal meetings are routinely
and Suresh scheduled among various
2009) departments.
5. When problems or
opportunities arise, informal,
face-to-face meetings never
occur.
75
Table 11. Measurements for Integration with Customers
Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Integration (Frohlich and 1. Our customers give us 1=Strongly
Integration with Westbrook feedback on quality and Disagree
customers 2001; Shah delivery performance. 7=Strongly
2. Customers are actively
2002; involved in our new product Agree
Narasimhan development process.
and Kim 3. Customers frequently share
2002; demand information with our
Braunscheidel firm.
and Suresh 4. Our production plans are
2009) shared with our customers.
5. Our inventory levels are shared
with our customers
76
Table 12. Measurements for Integration with Suppliers
Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Integration (Frohlich and 1. Our inventory levels are shared 1=Strongly
Integration with Westbrook with our suppliers. Disagree
suppliers 2001; Shah 2. Our key suppliers deliver to 7=Strongly
our plant in a JIT basis.
2002; 3. We have high corporate level Agree
Christopher communication on important
2000; van issues with key suppliers.
Hoek, 4. Sharing of information via the
Harrison, and Internet is important to our
Christopher supply chain.
2001; 5. We work with our suppliers to
seamlessly integrate our inter-
Narasimhan firm processes
and Kim 6. Our supply chain employs
2002; rapid response initiatives.
Braunscheidel 7. We jointly develop new
and Suresh products/services with our
2009) suppliers.
77
Table 13. Measurements for Organizational Culture
Constructs Measurements
Construct Dimension Source Items Scale
Organizational Espoused (Taylor and 1. We want to encourage our 1=Strongly
Culture Values: Bowers 1972; workers to work in innovative Disagree
Beliefs Sakakibara et ways. 7=Strongly
al. 1997; 2. We want to increase creativity Agree
Bates et al. among our workers.
1995; Nahm, 3. Functional departments
Vonderembse, should work together as a
and Koufteros team.
4. Employees from one
2004) department should work with
employees from other
departments.
5. Employees should work
together as a team.
6. Departmental managers
should make decisions that
benefit the whole company.
7. When making decisions, the
overall effects of a decision
should be considered.
8. Decisions should be based on
overall company objectives.
9. Managers should take tight
control upon their
subordinates.
10. Command and control is the
best way to manage.
11. Workers should simply follow
the directions given by their
managers.
12. Our suppliers can be part of
our success in our business.
13. Our suppliers are strategic
partners in building up our
competitive capabilities.
14. The best suppliers are the
ones who enable us to provide
value to customers.
78
Table 14. Measurements for Supply Chain Risk
Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Probability (Slovic 1. It is highly unlikely that we 1=Extremely
Risk of Supply 1987; Yates will experience an interruption low
Disruption and Stone in the supplies from our 7=Extremely
suppliers.
Risk, 1992a, 2. There is a high probability that high
Magnitude 1992b; our suppliers will fail to
of Supply Shapira provide supplies to us.
Disruption 1995; 3. We worry that suppliers may
Risk, Zsidisin not provide suppliers as
Overall 2003a; Ellis, specified within out purchase
Supply Henry, and agreement.
4. An interruption in the supplies
Disruption Shockley from our suppliers would have
Risk 2010) severe negative financial
consequences for our business.
5. Suppliers inability to provide
supplies would jeopardize our
business performance
Information system
sophistication.
6. We would incur significant
costs and/or losses in revenue if
our suppliers failed to provide
supplies Legal liabilities.
7. Overall, the supplies from our
suppliers are characterized by
low levels of risk.
79
Table 15. Measurements for Financial Performance
Constructs Measurements
Construct Dimension Source Items Scale
Performance Financial (Miller 1991; 1. Average Return on investment 1 = Well
Germain, 2. Average Return on Assets Below
Claycomb, 3. Average Profit Industry
and Droge 4. Increase in Market Share Average
2008; Yeung 7= Well
2008) Above
Industry
Average
80
Table 16. Measurements for Operational Performance
Constructs Measurements
Construct Dimension Source Items Scale
Performance Operational (Vickery, 1. Percent defects during 1 = Well
Droge, and production Below
Markland 2. Delivery reliability Industry
1993; Miller 3. Production & Inventory costs Average
and Roth 4. Production lead time 7= Well
1994; Above
Devaraj, Industry
Hollingworth, Average
and
Schroeder
2004;
Devaraj,
Krajewski,
and Wei
2007)
81
Table 17. Measurements for Supply Chain Performance
Constructs Measurements
Construct Dimension Source Items Scale
Performance Supply (Beamon 1. Ability to respond to and 1 = Well
Chain 1999; Sezen accommodate periods of poor Below
2008) supplier performance Industry
2. Ability to respond to and
accommodate new products, Average
New markets, or new 7= Well
competitors Above
3. Customer response time Industry
4. Total cost of distribution, Average
including transportation and
handling costs
5. Total cost of manufacturing,
including labor, maintenance
and re-work costs
82
Table 18. Measurements for Dynamic Business Environment
Constructs Measurements
Construct Dimension Source Items Scale
Business Dynamism (Kocabasoglu, 1. Rate at which products and 1 = Slow
Envrionments Prahinski, and services become outdated 7 = Rapid
Klassen 2007; 2. Rate of introduction of new
Miller 1987; products and services
Ward et al. 3. Rate of change in tastes and
1995) preferences of customers in
your industry
Heterogeneity (Dess and 1. In your industry, success 1=Strongly
Beard 1984; depends on providing to a Disagree
Achrol and large range of consumer 7=Strongly
Stern 1988; tastes Agree
Miller 1987; 2. your primary challenge in
Kocabasoglu, production is to customize
Prahinski, and the product for different
Klassen 2007) tastes
3. your market has many
different customer segments
83
Table 19. Measurements for Competitive Business Environments
Constructs Measurements
Construct Dimension Source Items Scale
Business Munificence (Dess and 1. Economic growth in your 1=
Environment Beard 1984; market Dramatically
Ward et al. 2. Growth in consumer demand decreased
1995; within the industry 7=
Kocabasoglu, 3. Growth in industry sales Dramatically
Prahinski, increased
and Klassen
2007)
Hostility (Ward et al. 1. Market activities of your key 1=Strongly
1995; Miller competitors have become less Disagree
1987; predictable 7=Strongly
Kocabasoglu, 2. Market activities of your key Agree
Prahinski, competitors have become
and Klassen more hostile
2007) 3. Market activities of your key
competitors now affect your
plant in more ways than in
the past
A pilot study is considered an important step in empirical research because it can help increase
the quality of the survey. If the pilot study is properly conducted with small samples, researchers
can correct any problems in the development stage of the full scale survey. More importantly,
The survey was reviewed by a group of experts in the field of supply chain management.
They went over the survey and provided feedback on how well the survey items were measured.
Their recommendations were incorporated and the instruments were modified based on their
feedback by rewording items to increase clarity and make them easier to answer. The most
common criticism was that the survey was not easy to answer.
84
A total of 32 responses were collected for the pilot study. The respondents were supply
managers, purchasing managers, vice presidents and purchasing and supply management
respondents were in high enough positions that they were able to answer all questions in the
survey. Based on the results of Cronbachs , the survey instruments were removed. Items with a
value of less than 0.60, the acceptance level of Cronbachs , have been removed. Table 20
85
4.4. The Full Scale Study and Sample
The full-scale study required a two-step process. The first step identified the target population
and selected an appropriate sample. The target population for this survey is executives in US
(NAPM)-Buffalo, the Association for Operations Management (APICS)-Buffalo and the Institute
their participation in the survey, which helped to increase the response rate.
Second, supply and purchasing managers in companies located on the West Coast, in the
Mid West and Eastern US were contacted and sent the e-mail announcement to encourage
completion of the survey. These techniques were executed to increase the response rate (Frohlich
2002).
This research utilized a web version of the survey because for the following reasons. Since
survey respondents are geographically dispersed, cost and time were saved. Compared to the
traditional mail survey, a web survey generated a better response rate and item completion rate.
The measurements on the web survey items are the same as those on paper surveys (Klassen and
Jacobs 2001; Boyer et al. 2002). After collecting all surveys, this research established
This research applied the partial least squares (PLS) technique of structural equation modeling
(SEM) to establish measurement models and investigate the structural model. There are two
main reasons for using PLS. PLS, a variance-based approach to structural equation modeling,
can be used to specify both the relationships among the constructs as well as a measurement of
the constructs (Wold, 1989). Compared to LISREL or AMOS, PLS has the advantage of not
86
making any assumptions about population or scale measurement while working with no
distributional assumption (Haenlein and Kaplan, 2004). The other advantage of PLS is that it is
less restrictive with regard to a sample size with unbiased estimates (Falk and Miller, 1992).
Using partial least squares, convergent and discriminant validity as well as reliability were
The partial least squares have other advantage toward LISREL or AMOS. The PLS does
not require strong theoretical backgrounds. In addition, it only requires the structurally linking
among the constructs to have the measurement and structural models. More importantly, the
constructs need to be formative measurement items (Cenfetelli and Bassellier 2009). Thus,
although this research is based on the dynamic capability theory, the PLS can be utilized to
As it is mentioned above, PLS has less restrictions on the sample size. However, the
minimum requirements exist for the PLS data analysis. There is a rule of thumb that ten cases are
necessary per indicators (Marcoulides, Chin, and Saunders 2009). Therefore, this research does
not have enough sample size to conduct the data analysis with LISREL or AMOS. However, it
has enough sample size with PLS for the data analysis.
This research has more reasons for applying the PLS. This research has constructs which
require for multi-dimensions such as the performance which has three dimensions: financial,
operational and supply chain performance. The PLS modeling is more suitable to use for more
complex models which includes the multi-dimensions because PLS can establish high orders for
the performance, multi-dimension constructs. More importantly, the PLS is more appropriate to
examine the moderating effects (Wetzels, Odekerken-Schroder, and van Oppen 2009). Therefore,
87
Another important reason for using the PLS is the sub group analysis for investigating the
moderating effect of business characteristics on the relationship between supply chain practices
and supply chain risks. Basically, this research compares the path coefficients between groups.
The PLS is a proper methodology for this research because of the sample size. Because this
research does not have enough sample size for both groups, it is appropriate to use the PLS in
order to capture the difference between both groups. If this research has enough sample size for
both groups, it should use the LISREL or AMOS for sub group analysis (Qureshi and Compeau
2009). Because of all above reasons, this research uses the PLS for data analysis.
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5. Data Analysis and Findings
This chapter provides the results of data analyses. Section 5.1 provides a profile of the survey
participants in this research. Section 5.2 contains the assessment of the measurement scales,
which establishes the reliability and validity of the survey instruments in this research. Section
5.3 provides analysis of the structural model for generating the results for full and moderating
effects.
This research focuses on supply chain risk management. The respondents are composed of
supply and purchasing management executives from manufacturing companies located in the
US. They are members of NAPM-Buffalo, APICS-Buffalo, ISM-Pittsburgh and ISM members in
the Eastern and Western U.S. The respondents were mainly from manufacturing industries with
Specifically, the respondents were from industries in SIC code 25, furniture and fixtures
(8 firms), code 28, chemicals and allied products (10 firms), code 30, rubber and plastic products
(2 firms), code 32, stone, clay, glass and concrete products (3 firms), code 33, primary metal
products (15 firms), code 34, fabricated metal products (14 firms), code 35, industrial machinery
and computing equipment (41 firms), code 36, electronic and electrical equipment and
components (37 firms), code 37, transportation and machinery items (11 firms), and code 38,
measuring, analyzing and controlling instruments (9 firms). Table 21 describes the industries
89
Table 21. Industry Code for Respondents Firms
Industry (Industry Code) Frequency
furniture and fixtures (25) 8
chemicals and allied products (28) 10
rubber and plastic products (30) 2
stone, clay, glass and concrete products (32) 3
primary metal products (33) 15
fabricated metal products (34) 14
industrial machinery and computing equipment
41
(35)
electronic and electrical equipment and
37
components (36)
transportation and machinery items (37) 11
measuring, analyzing and controlling
9
instruments (38)
missing 2
Total 152
supply chain practices and supply chain risk, it is very important to categorize the firms
location and firm size. Table 22 describes business characteristics of the samples, manufacturing
The e-mail announcement of the survey was sent to members of NAPM-Buffalo, APICS-
Buffalo, ISM-Pittsburgh and other ISM members, a total of 622 members. Due to incentives for
participants, only one week was used for the window of completing the survey. One hundred
fifty-nine members participated in the survey, making the response rate 25.56 %, although seven
members did not complete the survey. Thus, a total of one hundred fifty-two surveys were used
90
Table 22. Business Characteristics of Respondent Firms
Manufacturing Approach
Pull Push
85 61
Suppliers Location
US Global
70 77
Market Location
US Global
62 84
Firm Size by Annual Sales
Less than $10 million 4
$10 to $50 million 29
$51 to $100 million 24
$101 to $ 250 million 18
$251 to $500 million 22
$501 to $1 billion 20
Over $1 billion 31
This study conducts various response bias tests. Because the respondents came from all
over the US, this study has to ensure that the responses do not have any differences depending on
their companies locations. The responses were collected from Buffalo, Pittsburgh, East coast
and the West coast areas. Therefore, this study conducted a one factor ANOVA test to compare
the mean difference test among their responses. The test shows no statistical difference of means
on each measurement items as it found no significant differences across the different regions.
The collecting period was only two weeks period as it is assumed that there would be no
bias between early and late responders. However, in order to increase the reliability as well as the
validity of this research, it also conducted a mean different test between early responders and late
responders. Since the collecting period was only two weeks. It divides the responses which were
collected during the first week into the early responders and the responses which were collected
during the second week into the late responders. The test is conducted to compare the means on
91
each measurement item between early responders and late responders. It found no statistical
to low rate of the response rate. The response rate of this research was not low compared to other
empirical research in supply chain and operations management field. However, this research
ensures whether there is a response bias exists or not. To perform the test of the response bias,
this research compares sales levels, firm size between responders and non responders, which are
available in the web survey. ANOVA analysis indicates no statistical significance between these
two groups, which means that the response bias between responders and non responders does not
In addition, less than one percent of the responses were missing due to a special function
of the web-survey. This study did not consider missing responses since it would not have made a
All survey items were adopted from previously published literature. All items were assessed
using the seven-point Likert scale. The strategic sourcing indicator measured the purchasing
functions toward firms competitive strategy. The supply chain integration indicator measured a
firms internal integration as well as its integration with suppliers. The e-business technologies
indicator measured functions and extensive usage of e-business technologies. The organizational
culture indicator measured beliefs about working with others, management control and
integrating with suppliers. The supply chain risk indicator measured the probability and
magnitude of supply chain disruption risk. The business environments indicator measured a
firms competitive environment, the rate of change in the industry, market activity and market
92
heterogeneity. The performance indicator measured financial, operational and supply chain
performance.
For assessing reliability, the factor loadings of the indicators of latent constructs must be
greater than 0.7 in order to establish strong reliability (Fornell and Larker 1981). Cronbachs
was also used to assess reliability. The acceptable score for Cronbachs is 0.7 for existing
constructs and 0.6 for newly created constructs. Based on these criteria, all indicators of the
Composite reliability (CR) and average variance extracted (AVE) were used in this study
to assess convergent validity. Values above the threshold value of 0.7 for composite reliability
suggest good internal consistency (Hulland 1999). Additionally, AVE, representing the
proportion of average variance between constructs and indicator variables, needed to be greater
than 0.5 to suggest good convergent validity (Chin 1998). All measures of CR and AVE, as
93
Using PLS, this research conducted a factory analysis on survey items. All loadings are above
0.7, which is acceptable (Chin 1998), and no significant cross loadings are found, which provides
For evaluating discriminant validity, this study followed the suggestion of Fornell and
Larker (1981): the square root of AVE should be greater than the correlations of the variables in
order to confirm discriminant validity. Accordingly, the value of diagonal elements should be
greater than those of off-diagonal elements (Fornell and Larker 1981; Hulland 1999). Thus, the
94
Table 24. Factor Analysis by PLS
95
SS SCI EBT OC BE SCR PER
SCRa -0.116 0.415 0.260 -0.187 -0.065 0.915 -0.039
SCRb -0.134 0.455 0.115 -0.027 -0.047 0.875 -0.062
SCRc 0.146 0.415 0.318 -0.113 0.432 0.818 -0.173
SCRd 0.176 0.526 0.208 -0.107 0.506 0.759 0.069
SCRe 0.132 0.396 0.197 -0.127 0.015 0.864 -0.483
SCRf 0.195 0.403 0.448 -0.084 0.247 0.903 -0.265
PERa 0.247 0.473 0.403 -0.078 0.011 0.089 0.892
PERb 0.335 0.385 0.364 -0.121 0.133 -0.054 0.757
PERc 0.428 0.394 0.531 0.073 0.247 0.002 0.833
PERd 0.291 0.489 0.196 0.141 0.393 0.204 0.803
PERe 0.146 0.375 0.113 0.036 0.101 0.075 0.770
PERf 0.360 0.275 0.368 0.153 0.297 0.015 0.769
PERg 0.354 0.408 0.179 0.256 0.300 0.081 0.783
PERh 0.332 0.392 0.363 0.194 0.293 0.194 0.863
PERi 0.208 0.223 0.355 0.102 0.244 0.072 0.871
96
Table 25. Discriminant Validity
This study applied the partial least squares (PLS) technique of structural equation modeling
(SEM) to investigate the structural model. A bootstrap resampling procedure was conducted to
examine the stability of the estimates (Chin, Marcolin, and Newsted 2003) and to develop robust
This research examined hypothesis 1, 2, 3, 4, 5A, 5C, 5E, 5G, 5I and 7 with the full effects
model. Hypothesis 1, 2, 3, and 4 examined a direct relationship between supply chain practices
and supply chain risks. Hypothesis 5A, 5C, 5E, and 5G examined a direct relationship between
dynamic and competitive business environments and supply chain practices. Hypothesis 5I also
examined a direct relationship between dynamic and competitive business environments and
supply chain risks. Finally, hypothesis 7 examined a direct relationship between supply chain
97
The results of the research confirm that strategic sourcing negatively affects supply chain
risk, which supports hypothesis 1: strategic sourcing mitigates supply chain risks. The results
indicate there is statistical significance to this negative relationship, with a path coefficient of -
0.220 and t-score of 2.33 at a 0.01 level of significance. The results also show there is a negative
relationship between e-business technologies and supply chain risks, which supports hypothesis
2: e-business technologies mitigate supply chain risks. The results show there is a statically
significant negative relationship between the path coefficient of -0.175 and t-score of 2.17 at a
0.01 level. Hypothesis 3 was also supported by the research results as implementing supply
chain integration has a significantly negative relationship with supply chain risks with a path
coefficient of -0.208 and t-score of 2.84 at a 0.01 level of significance. However, the results do
not support hypothesis 4: organizational cultures are associated with supply chain risks. No
statistical significance was found between organizational culture and supply chain risks.
The data analysis results show that dynamic and competitive business environments
positively affect strategic sourcing, supporting hypothesis 5a: dynamic and competitive business
environments make a direct impact on strategic sourcing. A statistically positive relationship was
found between a path coefficient of 0.163 and a t-score of 1.89 at a 0.05 level. Hypothesis 5c,
technologies, was also supported by the research results as business environments have a positive
impact on e-business technologies. The path coefficient was 0.314 and the t-score was 3.05 at a
0.01 level significance. The research results support hypothesis 5e, dynamic and competitive
relationship between business environments and supply chain integration was shown. A path
coefficient of 0.282 with t-score of 3.70 indicated a statistically positive relationship. On the
98
other hand, this research found no statistical significance between business environments and
organizational culture. Therefore the research results do not support hypothesis 5g: dynamic and
the result support hypothesis 5i: dynamic and competitive business environments make a direct
environments and supply chain risks with the path coefficients, 0.215 and t-statistics, 2.78 at p <
0.01 significance level. Finally, the research results confirm that supply chain risks negatively
influence performance, which supports hypothesis 7: mitigating supply chain risks by supply
chain practices influences the performance. A statistically negative relationship was established,
with a path coefficient of -0.251 and t-score of 2.80 at a 0.01 level. R2 in supply chain risks for
the structural model was 36.64%, which was explained by the following factors: strategic
sourcing, supply chain integration, e-business technologies, organizational cultures and business
99
Figure 18. Research Results for Full Effects
100
5.3.2. Moderating Effects
To analyze moderating effects, two different types of analysis were conducted based on the
variable characteristics. First, for business environments and the first business characteristic
(firm size), a moderating effects analysis was conducted, since the research examines how the
relationship between supply chain practices, such as strategic sourcing, e-business technologies
and supply chain integration and supply chain risks, is affected as a variable (such as the rate of
change) ranges in value from low to high. The moderating effects of business environments and
Second, for the three business characteristics of manufacturing approach, suppliers and
market location, a subgroup analysis was conducted, given the fact that the firms in the data
sample belonged to two different subgroups. Therefore, this study added a multi-group PLS
analysis for examining moderating effects since subgroup analysis is a proper methodology for
examining the strength of a moderating effect when dealing with nominal moderating variables,
which this study uses (Qureshi and Compeau 2009; Sia et al. 2009).
The moderating effects of business environments and firm size, on both the relationships
between supply chain practices such as strategic sourcing, supply chain integration and e-
business technologies and supply chain risks as well as on the relationship between
organizational culture and supply chain risks, were analyzed as follows. PLS can evaluate
interaction effects by comparing the R2 of the main model with that of the full model, which
includes both the main model and the interaction model (Chin, Marcolin, and Newsted 2003).
Accordingly, the moderating effects of business environments and firm size were
analyzed along the lines of the research of Carte and Russell (Carte and Russell 2003). The
101
difference in variance was examined between moderating and main effects using the following
interaction) / (N-df interaction-1)]. Following the research of Chin et al. (Chin, Marcolin, and Newsted
2003), moderating effects are also validated by comparing the R2 of the main and moderating
effects using Cohens f = [R2 (interaction model R2 (main effects model)] / [1-R2 (main effect
First, the research results show that dynamic and competitive business environments have
significant moderating effects on the relationship between strategic sourcing and supply chain
risks. The effect size of the interaction between strategic sourcing and supply chain risks
indicates an f statistic of 4.01 with significance at a 0.05 level, and a Cohens f of 0.05, which is
a small effect size. Dynamic and competitive business environments do affect the relationship
between strategic sourcing and supply chain risks. This indicates that the negative relationship
between strategic sourcing and supply chain risks is stronger when business environments
become more competitive, which supports hypothesis 5b: b dynamic and competitive business
environments have the moderating impact between strategic sourcing and supply chain risks.
Second, the study results show that dynamic and competitive business environments have
significant moderating effects on the relationship between e-business technologies and supply
chain risks. The effect size of the interaction between e-business technologies and supply chain
risks indicates an f statistic of 3.85, which is significant at the 0.05 level, and Cohens f of 0.05,
which is again a small effect size. Dynamic and competitive business environments also affect
the relationship between e-business technologies and supply chain risks. This result points out
that the negative relationship between e-business technologies and supply chain risks becomes
stronger in more dynamic markets, supporting hypothesis 5b, dynamic and competitive business
102
environments have the moderating impact between e-business technologies and supply chain
risks.
Third, the research results confirm that dynamic and competitive business environments
have significant moderating effects on the relationship between supply chain integration and
supply chain risks. The effect size of the interaction between supply chain integration and supply
chain risks indicates an f statistic of 5.96, which is significant at a 0.025 level, and Cohens f of
0.07, which is a medium effect size. Thus, dynamic and competitive business environments
affect the relationships between supply chain integration and supply chain risks, supporting both
hypotheses 5d: dynamic and competitive business environments have the moderating impact
between e-business technologies and supply chain risks. This suggests that the negative positive
relationship between supply chain integration and supply chain risks are greater when faced with
greater market competition. In addition, because the relative interaction size for supply chain
integration is greater than that for strategic sourcing and e-business technologies, it appears to
serve to mitigate supply chain risks more than strategic sourcing and e-business technologies in
However, the research results do not provide empirical evidence that dynamic and
relationship between organizational culture and supply chain risks. More importantly, the
research results indicate that dynamic and competitive business environments do not have any
direct impact on organizational culture, statistically. Therefore, hypothesis 5h, dynamic and
competitive business environments have the moderating impact between organizational culture
103
Regarding the moderating effects of firm size, the effect size of the interaction between
strategic sourcing and supply chain risks indicates an f statistic of 4.05, significant at the 0.05
level, and Cohens f of 0.04, which is a small effect size. The effect size of the interaction
between e-business technologies and supply chain risks indicates an f statistic of 3.93, at the 0.01
level, and Cohens f of 0.04, which is a small effect size. The effect size of the interaction
between supply chain integration and supply chain risks indicates an f statistic of 5.21, at the
0.025 level, and Cohens f of 0.06, which is a small/medium effect size. However, the effect size
of the interaction between organizational culture and supply chain risks indicate no statistical
significance of both the f statistic and Cohens f. The firm size does have a moderating effect on
the relationships between strategic sourcing, e-business technologies, supply chain integration
and supply chain risks but not organizational culture. This result represent that as the firm size
increases, the negative relationships hypothesized are stronger. Thus the research results support
hypotheses 6: the relationship between supply chain practices and supply chain risks will be
104
Figure 19. Research Results for Moderating Effects
105
5.3.3. Analysis of Subgroup Effects
A subgroup analysis was performed with PLS for the business characteristics variables of
manufacturing approach, suppliers and market location. Dividing the firms into multiple groups
based on these business characteristics, this study examined the significance of the differences in
(Chin 1998; Fisher and Gregoire 2006; Duxbury and Higgins 1991; Howell and Hall-Merenda
1999). This research followed the steps of the research of Ahuja and Thatcher 2005.
First, the full model was estimated with all samples and then for each subgroup, i.e., pull
and push for manufacturing approach, domestic and international suppliers for suppliers
location and domestic and international markets for market locations. In order to investigate the
moderating effects of these business characteristics, this research followed the studies of Chin
(2000) and Keil et al. (2000) to figure out the differences by comparing the structural model.
To compare the statistical path, the path coefficients for two groups need to be figured
out. Then, a standard error estimate for the two structural models multiplied by the percentage of
the two group sample numbers should be added together. The square root of this number should
be multiplied by the square root of one over the two sample numbers. Finally, the difference of
path coefficients from two groups is divided by the number just calculated. A subgroup analysis
of the moderating effect between organizational culture and supply chain risks was not tested
because the relationship between organizational culture and supply chain risks was not
First, from the results indicating that there were moderating effects on the relationships
between strategic sourcing, e-business technologies, supply chain integration and supply chain
risks, a subgroup analysis of the two manufacturing approaches was performed. In the pull
approach (85 responses, or 55.9% of the total sample), the path coefficients were -0.236 from
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strategic sourcing to supply chain risks, -0.180 from e-business technologies to supply chain
risks, and -0.152 from supply chain integration to supply chain risks, with t-scores of 2.220,
1.934 and 1.734, respectively, which were statistically significant at p < 0.05 in all relationships.
Likewise, as seen in Table 22, there were 61 responses (40.1% of the total sample) in the push
approach. The respective path coefficients were -0.211, -0.229, and -0.272 for strategic sourcing,
e-business technologies and supply chain integration with t-scores of 1.995, 2.121 and 2.479,
respectively, which were statistically significant at p < 0.05 and < 0.01 in all relationships.
When the path coefficients were compared between the pull and push subgroups,
values of comparison paths for strategic sourcing, e-business technologies and supply chain
integration with supply chain risks were 1.928, 2.416 and 4.381, respectively, which are
statistically significant at the 0.05 and 0.01 levels in all relationships. This research result
supported hypothesis 6: the relationship between supply chain practices and supply chain risks
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Second, from the results indicating moderating effects on relationships among strategic
sourcing, e-business technologies, supply chain integration and supply chain risks, a subgroup
analysis was performed based on suppliers location. It may be seen from Table 23 that for firms
that have only US suppliers (70 responses or 46.1% of the total sample), the path coefficients for
strategic sourcing and e-business technologies and supply chain integration with supply chain
risks were -0.191, -0.174 and -0.188, respectively, with t-scores of 2.043, 1.999 and 2.001,
respectively, which were statistically significant at the p < 0.05 level in all relationships. Table
17 shows that there were 77 responses (50.7% of the total sample), from firms with global
suppliers. The respective path coefficients were -0.258, -0.357 and -0.222 for strategic sourcing,
e-business technologies and supply chain integration with supply chain risks with t-scores of
2.839, 3.268 and 2.405, respectively, which were statistically significant at p < 0.05 and < 0.01
in all relationships.
When the path coefficients were compared between the US and global subgroups,
statistically significant differences were found. The t-values of the comparison paths for strategic
sourcing, e-business technologies and supply chain integration with supply chain risks are 2.780,
5.186 and 1.793, which were statistically significant at the 0.05 and 0.01 levels in all
relationships. This research result supported hypothesis 6: the relationship between supply chain
practices and supply chain risks will be differentiated depending upon organizations business
characteristics.
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Table 27. Statistical Comparison of Paths in Suppliers Location
Finally, from the results indicating similar relationships among strategic sourcing, e-
business technologies, supply chain integration and supply chain risks, a subgroup analysis was
performed based on the firms market locations. For US the subgroup (62 responses, or 40.8% of
the total sample), the path coefficients for strategic sourcing and e-business technologies and
supply chain integration with supply chain risks were -0.218, -0.165 and -0.200, respectively,
with respective t-scores of 1.988, 1.772 and 1.899, which were statistically significant at the p <
0.05 level in all relationships. For global groups (84 responses, 55.3% of the total sample), the
respective path coefficients were -0.225, -0.184 and -0.213 for strategic sourcing, e-business
technologies and supply chain integration with supply chain risks, with respective t-scores of
2.110, 1.808 and 1.969, which were statistically significant at p < 0.05 in all relationships.
As Table 24 shows, when the path coefficients of the US and global subgroups were
compared, statistically significant differences were not found. The t-values of the comparison
paths for strategic sourcing, e-business technologies and supply chain integration with supply
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chain risks also turned out to be insignificant. These results do not support hypothesis 6: the
relationship between supply chain practices and supply chain risks will be differentiated
and suppliers location, had a moderating effect on the relationships between the supply chain
practices strategic sourcing, e-business technologies and supply chain integration and supply
chain risks. However, market location, one of the business characteristics that this research
investigated, did not have a moderating effect on those relationships. Thus, hypothesis 6, the
relationship between supply chain practices and supply chain risks will be differentiated
depending upon organizations business characteristics, was supported except for the market
location business characteristic. Table 25 summarizes the results of all of the research hypotheses.
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Table 29. Summary of Results on Full Effects Research Hypotheses
Research Hypothesis Status
H1 Strategic sourcing mitigates supply chain risks. Supported
H2 E-business technologies mitigate supply chain risks. Supported
H3 Supply chain integration mitigates supply chain risks. Supported
H4 Organizational cultures are associated with supply chain risks. Not Supported
H5a Dynamic and competitive business environments make a Supported
direct impact on strategic sourcing.
H5c Dynamic and competitive business environments make a Supported
direct impact on e-business technologies.
H5e Dynamic and competitive business environments make a Supported
direct impact on supply chain integration.
H5g Dynamic and competitive business environments make a Not Supported
direct impact on organizational culture.
H5i Dynamic and competitive business environments make a Supported
direct impact on supply chain risks.
H7 Mitigating supply chain risks through supply chain practices Supported
influences the performance.
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Table 30. Summary of Results on Moderating Effects Research Hypotheses
Research Hypothesis Status
H5b Dynamic and competitive business environments have a Supported
moderating impact on the relationship between strategic
sourcing and supply chain risks.
H5d Dynamic and competitive business environments have a Supported
moderating impact on the relationship between e-business
technologies and supply chain risks.
H5f Dynamic and competitive business environments have a Supported
moderating impact on the relationship between supply chain
integration and supply chain risks.
H5h Dynamic and competitive business environments have a Not Supported
moderating impact on the relationship between organizational
culture and supply chain risks.
H6 The relationship between supply chain practices and supply Supported except for
chain risks will be differentiated depending upon market location
organizations business characteristics.
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6. Discussion of Results
The main objective of this research is to investigate the relationship between supply chain
practices such as strategic sourcing, e-business technologies and supply chain integration with
supply chain risks. From the buyers perspective, this research framework empirically validates
that implementation of supply chain practices mitigate supply chain risks. Since industry has
become global and highly competitive, performance emerges as a key objective for all supply
chain members in order to survive in the market. Therefore, mitigating supply chain risks to
improve performance and determining the role of supply chain practices in supply chain risk
management are important topics of discussion, particularly in light of the results of this study.
In addition, this study considers the internal factor of organizational culture and the
external factors of business environments and characteristics within the main research
framework of supply chain risks management. Therefore, this research shows that firms have to
deal with these factors in supply chain risks management in order to have competitive
advantages and that they also need to allocate their resources, based on dynamic capability,
The research results supported hypothesis 1: strategic sourcing mitigates supply chain risks. Five
of the measurement items of strategic sourcing contained two main dimensions: the strategic role
of purchasing and the effective internal coordination between the purchasing function and other
functions. In addition, the concept of strategic sourcing has been developed by including
effective information sharing with suppliers and supplier development (Kocabasoglu and Suresh
2006). Strategic sourcing is utilized not only for improving the competitive advantage for
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purchasing but also for interacting with suppliers closely. More importantly, strategic sourcing
should consider flexibility and risk in making buying decisions (Sislian and Satir 2000). Based
on the dimensions of strategic sourcing, this research investigated the impact of strategic
The research results empirically support that strategic sourcing decreases supply chain
risks. This research measured supply chain risks in both of the following dimensions: probability
and magnitude of supply chain disruption risk. Strategic sourcing is very effective in minimizing
the probability and magnitude of supply chain disruption risk largely for the following reason:
strategic sourcing enabled buyer firms to interact very close with suppliers in order to help them
develop. Thus, strategic sourcing improved suppliers ability to provide high quality supplies to
buyers without any disruptions. Even if supply disruptions occurred, supplier and buyers worked
together to minimize the magnitude of supply chain disruption so that they can reduce damage to
the supply chain. Because of this reason, supplying and purchasing managers consider strategic
sourcing as an effective supply chain practice for mitigating supply chain risks.
Prior literature showed that implementing strategic sourcing results improves a firms
performance (Carr and Pearson 1999; Das and Narasimhan 2000; Narasimhan and Das 2001;
Chen, Paulraj, and Lado 2004). Adding to previous research, implementing strategic sourcing
leads not only to the enhancement of the firms performance but also the mitigation of supply
chain risks. The many benefits of implementing strategic sourcing encourages firms to adopt
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Table 31. Cross loadings for measurement indicators of strategic sourcing
The purchasing function has a good knowledge of the firms strategic 0.835
goals.
The research results supported hypothesis 2: e-business technologies mitigates supply chain
risks. Eight of the measurement items of e-business technologies strategic sourcing contained
two main dimensions: usage of e-business technologies and extensive use of e-business
technologies. E-business technologies are measured in two dimensions because this research
investigated what kinds of e-business technologies are utilized in supply chains, for what purpose
E-business technologies are utilized for various reasons. E-business technologies provide
savings in transaction costs, reduce inventory and establish communication networks between
buyers and suppliers (Min and Galle 1999; Deeter-Schmelz et al. 2001). More importantly, e-
business technologies give supply chain members real time information so that they can
collaborate easily, a key element in supply chain risk management (Vakharia 2002). Based on
the benefits of supply chain e-business technologies, this research investigated the impact of e-
chain risk. E-business technologies have become very useful to the minimization of the
probability and magnitude of supply chain disruption risk for one main reason: e-business
technologies enable buyer firms to communicate with suppliers and collect real-time information
in the supply chain. Thus, buyer firms can monitor all activities in the supply chain. Even if
supply disruptions occur, buyers and suppliers can communicate and work together very easily to
minimize the magnitude of supply chain disruption so that they can reduce the damage to the
supply chain. E-business technologies become more effective when suppliers are located outside
of US. The cost of communication is less expensive and there is significantly less lag time when
managers regard e-business technologies as valuable and helpful for mitigating supply chain
risks.
Prior literature has confirmed that implementing e-business technology results in better
performance for firms (Johnson et al. 2007; Devaraj, Krajewski, and Wei 2007; Wu, Mahajan,
generates improved outcomes in performance as well as supply chain risk mitigation. The
technologies in order to enhance their productivity and become more cost effective. Table 32
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Table 32. Cross loadings for measurement indicators of e-business technologies
The research results supported hypothesis 3: supply chain integration mitigates supply chain
risks. Eight of the measurement items of supply chain integration included two dimensions:
internal integration and supplier integration. These two aspects of supply chain integration were
measured because this research investigated the inbound perspective, which made this research
focus on internal integration within buyer firms and integration with suppliers, but not with
customers.
Like strategic sourcing and e-business technologies, supply chain integration also
(Frohlich and Westbrook 2001). Adding to this benefit, supply chain integration has been
receiving a lot of attentions in the area of supply chain risk management. Supply chain
integration, including both internal and external, is considered one of the key antecedents of
supply chain agility, which is empirically confirmed (Braunscheidel and Suresh 2009). In supply
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chain risk management literature, supply chain agility is considered one of the most important
supply chain components because it allows for an increased ability to mitigate supply chain risk
and respond to supply chain disruptions (Christopher and Peck 2004). Based on the benefits of
supply chain integration, this research examined the direct impact of supply chain integration in
The research results empirically support that supply chain integration decreases supply
chain risks. Supply chain integration is very effective in improving performance as well as
supply chain agility. More importantly, it happens to be a good mitigating strategy for
diminishing the probability and magnitude of supply chain disruptions for one main reason:
supply integration helps establish strong networks with suppliers in the supply chain. Like
strategic sourcing, supplier integration enabled suppliers and buyers to share the information,
increase communication levels and improve the responsiveness. Due to these benefits, the
damages of supply disruptions can be prevented or minimized even if supply disruptions occur.
Internal integration within the firm plays a very similar role with supplier integration. It increases
communication levels and improves teamwork so that the firm can react quickly toward supply
chain disruptions. Because of these reasons, supply chain integration is a very popular practice in
supply chain management, not only for improving performance but also mitigating supply chain
risks.
performance as well as supply chain agility in supply chain risk management (Frohlich and
Westbrook 2001; Braunscheidel and Suresh 2009). Adding to previous research, this research
confirmed that implementing supply chain integration makes a direct impact on mitigating
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supply chain risk. Table 33 describes the measurement indicators as well as loadings for supply
chain integration.
Table 33. Cross loadings for measurement indicators of supply chain integration
Sharing of information via the internet is important to our supply chain. 0.774
Our supply chain employs rapid response initiatives. (e.g. continuous 0.955
replenishment (CR) or vendor managed inventory (VMI).
Interestingly, the research results did not support an association between organizational cultures
and supply chain risks. Although previous literature pointed out the significance of
organizational culture in supply chain risk management, there was a lack of prior literature that
set up the relationship between organizational culture and supply chain risks. Thus, this research
attempts to investigate the association between organizational culture and supply chain risks.
This research approached perspective of Schein (1985) for organizational culture, which are the
espoused values and beliefs of purchasing and supply managers. Organizational culture was
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measured in beliefs in three dimensions, belief in team works, belief in autonomy in management
control and beliefs in efforts to maximize the organizations benefits. Although prior studies
indicated that organizational cultures make an impact on various supply chain practices,
purchasing managers beliefs in the three dimensions state above do not have any significant
In this study, organizational culture was regarded as an internal factor in supply chain
risk management. Supply chain risk management categorizes supply chain risk in three ways:
internal risk to the firm, external risk to the firm with internal risk in the supply chain and
environmental risk and external risk in the supply chain (Christopher and Peck 2004). Because
this proposes that organizational culture influence supply and purchasing managers attitude
toward supply chain risks, our data analysis result is expected to empirically support this
inside of organizations, (Schein 1985) so that external risk from outside of organizations does
management control and decision making to maximize the organizations profits did not work in
this research. Because purchasing managers think supply chain risk is an external risk, they
consider organizational culture, which might be related to internal risk, as having nothing to do
with supply chain risks. Therefore, organizational culture established inside of the firm does not
have any relationship with supply chain risks. Table 31 describes the measurement indicators as
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Table 34. Cross loadings for measurement indicators of organizational culture
The research results supported hypothesis 5a and 5b: dynamic and competitive business
environments make a direct impact on strategic sourcing and dynamic and competitive business
environments have a moderating impact on the relationship between strategic sourcing and
supply chain risks. The twelve measurement items of business environments have four
of change in design, technology and customer preference, hostility, the degree of competition
and external control, and heterogeneity level of dissimilarity (Kocabasoglu, Prahinski, and
Klassen 2007). In other words, munificence indicates growth opportunities for the firms.
environments positively affect strategic sourcing and have a moderating effect on the
relationship between strategic sourcing and supply chain risks. Uncertainty in business
environments which manager should consider increases risks because they affect managers
perception toward supply chain risk and decision making in the supply chain. More importantly,
business environments are reflected as risk sources which influenced risks in the supply chain
(Ritchie and Brindley 2007b). The research of Chen and Paulraj also pointed out that business
environments are crucial influencing factors on both strategic purchasing and buyer-supplier
relationships within the supply chain (Chen and Paulraj 2004). Because business environments
are impossible to control, they are often ignored in supply chain management. This research
confirms the important influence of business environments on strategic sourcing as well as the
relationship between strategic sourcing and supply chain risks, which emphasizes the point that
This research presents the positive relationship between dynamic and competitive
business environments and strategic sourcing. If business environments experience high change
and growth in a competitive environment, high change in design, technology and customer
preference, high competition and external control and a high level of dissimilarity, then strategic
sourcing becomes more effective and helpful for firms. In other word, if business environments
become more dynamic, competitive and complex, firms need to implement strategic sourcing for
wide usage in order to react to dynamic, competitive and complex markets. This research
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This research also confirms the moderating effect of dynamic and competitive business
environments have on the relationship between strategic sourcing and supply chain risks. This
indicates that the decrease in supply chain risks caused by strategic sourcing are strengthened in
more competitive and dynamic markets. In other words, if business environments experience
high change in technology, competition and customer preferences, mitigating effects of strategic
sourcing on supply chain risks becomes greater. Due to the characteristic of strategic sourcing,
purchasing managers can find a solution for dealing with volatile markets.
The research results supported hypothesis 5c and 5d, dynamic and competitive business
environments make a direct impact on e-business technologies and dynamic and competitive
technologies and supply chain risks. Prior literature indicates that e-business technologies help
firms improve operational agility when responding to competitive and dynamic environments
should be considered when dealing with business environments and mitigating supply chain
risks, this research investigated how business environments influence e-business technologies,
and the results provide empirical support that business environments increase e-business
technology usage while having a moderating effect on the relationship between e-business
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This research confirms the positive relationship between dynamic and competitive
business environments and e-business technologies. If firms face very competitive and dynamic
business environments, then e-business technologies become more practical and helpful. In other
word, if the market suffers high change in dissimilarity, competition, design, technology and
customer preference, then firms should implement e-business technologies for wide and
extensive usage in order to deal with dynamic, competitive and complex business environments.
This research also found that there is a moderating effect of dynamic and competitive
business environments on the relationship between e-business technologies and supply chain
risks. This indicates that the decrease in supply chain risks caused by e-business technologies
becomes more powerful in more competitive and dynamic markets. In other words, if business
environments experience rapid change in the market, the mitigating effect of e-business
technologies on supply chain risk becomes stronger. Because of the advantages of implanting e-
business technologies, e-business technologies offer key solutions on how to deal with dynamic
The research results supported hypothesis 5e and 5f, dynamic and competitive business
environments make a direct impact on supply chain integration and dynamic and competitive
business environments have a moderating impact on the relationship between supply chain
integration and supply chain risks. The research of Stonebraker and Liao established a
conceptual framework in which business environments had a moderating effect on supply chain
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integration (Stonebraker and Liao 2006). Because competitive and dynamic business
environments encourage firms to boost integration level, both within the firms themselves as
well as within the supply chain, and mitigate supply chain risks, this study examined both the
direct and moderating effects of business environments and supply chain integration. The
empirical data shows that business environments make a positive impact on supply chain
integration and have a moderating effect on the relationship between supply chain integration
This study uncovered the positive relationship between dynamic and competitive
business environments and supply chain integration. If buyer firms need to bear rapid change and
turbulent business environments, supply chain integration becomes one of their most useful
supply chain practices. In other words, if the market experiences tremendous competition,
dynamic changes in technology and customer preference and very short product life cycles, firms
should raise their integration level with suppliers as well as the flexibility of functional teams
within their organization toward dynamic and competitive markets. Previous literature already
confirmed that supply chain integration improved performance. Adding to this finding, this
research suggests that supply chain integration is also an effective supply chain management
relationship between supply chain integration and supply chain risks was examined in this study.
The results of this research showed that the decrease in supply chain risks associated with supply
chain integration technologies grows stronger when business environments become more
competitive and unstable. To put it differently, if the market becomes more volatile and viable,
supply chain integrations mitigating effect on supply chain risk becomes stronger. Supply chain
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integration enabled firms to be flexible in adjusting their supply chain strategy toward dynamic
Like the research result showing that organizational culture does not have any association with
supply chain risks, this research result does not support hypothesis 5g and 5h, dynamic and
competitive business environments make a direct impact on organizational culture and dynamic
and competitive business environments have a moderating impact on the relationship between
organizational culture and supply chain risks. Because this research utilized the survey
methodology, purchasing managers could be asked directly what their espoused values and
beliefs regarding the direct effect of business environments on their beliefs as well as their
beliefs about the moderating effect of business environments on the relationship between supply
organizational culture significantly, based on managers beliefs about team works, autonomy in
management control and efforts to maximize the organizations benefits. In addition, business
environments do not have a moderating effect on the relationship between organizational culture
and supply chain risks. Because the results did not support the direct associations between
organizational culture and supply chain risks, moderating effects turned out to be insignificant.
This research results support hypothesis 5i: dynamic and competitive business environments
make a direct impact on supply chain risks. The risk in the supply chain is affected by business
environments, external sources of risk from the supply chain. The supply chain risk is
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categorized with internal risk, the risk in the supply chain and external risk from the supply chain.
Therefore, this research empirically confirms that business environments which can be a source
of the external risk from the supply chain have a positive relationship with supply chain risks. If
the market becomes very competitive and dynamic, the risk in the supply chain is increased.
Although the business environments are very hard to be controlled by the managers, it is very
important for managers to consider business environments in the context of supply chain risk
management. Table 35 describes the measurement indicators as well as loadings for dynamic and
Market activities of your key competitors have become less predictable. 0.755
Market activities of your key competitors have become more hostile. 0.817
Market activities of your key competitors now affect your plant in more 0.889
ways than in the past.
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6.10. The Moderating Effect of Business Characteristics on the Relationship
between Supply Chain Practices and Supply chain risk
The research results support hypothesis 6: the relationship between supply chain practices and
characteristics. Previous research has generally neglected to empirically examine the influence of
business characteristics on supply chain management (Van der Vaart and Van Donk 2008).
Although there is a lack of empirical studies reflecting the effect business characteristic have on
supply chain management, prior literature highlighted the importance of considering various
business characteristics in supply chain management (Fisher 1997; Ramdas and Spekman 2000;
This study investigates the relationship between supply chain practices and supply chain
risks as they are modified from the following four perspectives: firm size, manufacturing
approach, supplier and market globalization. Because organizational culture does not have a
significant relationship with supply chain risks, the moderating effect of business characteristics
between organizational culture and supply chain risks is not examined. In addition, the
moderating effect of firm size is tested through a moderating effect analysis and manufacturing
approach as well as supplier and market globalization are tested by a subgroup analysis.
Beginning with the moderating effects of firm size, the effect size of the interaction
between supply chain practices and supply chain risks appears to be different. The effect size of
the interaction between supply chain integration and supply chain risks was the greatest among
strategic sourcing and e-business technologies, which shared the same effect size. Because f-
statistics are all significant in all three effect sizes of interaction, this research empirically
supports that as firm size become larger, the mitigating effect of supply chain practices on supply
chain risks become more powerful. In addition, based on the effect size, supply integration was
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most influenced by firm size in moderating the effect of the relationship between supply chain
risk and supply chain integration. In order to mitigate the supply chain risk, the large firms need
Based on the firms manufacturing approach, the path coefficients compared the
relationships between strategic sourcing, e-business technologies, supply chain integration and
supply chain risks. The research results show a statistically significant path coefficient
relationship between supply chain practices and supply chain risks, which means that the
moderating effects exist depending upon manufacturing approach. Interestingly, the path
coefficients in the pull approach between supply chain practices and supply chain risks are
greater than those in the push approach. Because firms subscribing to the push approach need to
react with the demand from market, it has an increased probability and magnitude of supply
chain disruption risk compared to the pull approach. On the other hand, the push approach is
scheduled to manufacture the orders stably, which minimizes the supply chain disruption risk.
Managers conception toward push and pull approach is different based on our empirical result.
They consider that pull approach has less probability of supply disruption risk comparing with
the push approach, leading to the different mitigating effects of supply chain management
Thus, strategic sourcing, e-business technologies and supply chain integration become
more effective in mitigating the supply chain risk when firms use the push strategy rather than
the pull strategy in manufacturing their products. Another interesting point is that, like the firm
size result, the relationship between supply chain integration and supply chain risks shows the
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The push approach enabled firms to maximize the effectiveness of supply chain integration in
technologies, supply chain integration and supply chain risks are compared depending on the
suppliers location, i.e., whether they are within the US or outside of the US. The research results
indicate statistical significant path coefficients for the relationship between supply chain
practices and supply chain risks, finding moderating effects based on suppliers location.
Ironically, the path coefficients for the relationship between supply chain practices and supply
chain risks for global suppliers are greater than those of US suppliers. If firms receive supplies
from outside of the US, strategic sourcing, e-business technologies and supply chain integration
become more effective and reduce the probability and magnitude of supply chain disruption risk
long distance appears to cause no problems for supply chain management practices. This
research result can also be interpreted in this way: if firms have global suppliers, they pay more
attention to maintaining close relationships with their supply network, and they also
In addition, the firms are more willing to actively implement supply chain management
practices to improve their performance and diminish risk in the supply chain when they have
global suppliers. Another interesting point is that the relationship between e-business
technologies and supply chain risks shows the largest supplier-location-dependant difference
with the f-statistics 5.186. E-business technologies are very popular investments for firms
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The path coefficients for the relationships between strategic sourcing, e-business
technologies, supply chain integration and supply chain risks are compared based on whether
firms sell their products in the US or outside of the US. The research results found that the
moderating effects, as shown by the path coefficients, for the relationship between supply chain
speaking. Unlike the above two business characteristics, market location makes no difference in
the relationships. Because this research examined supply chain risk from the inbound perspective,
the market location focusing on the outbound supply chain does not have a moderating effect on
the relationships between supply chain practices and supply chain risks. Therefore this research
supports hypothesis 6: the relationship between supply chain practices and supply chain risks
will be differentiated depending upon organizations business characteristics, except for market
location. Table 36 describes the measurement indicators as well as loadings for supply chain
risks.
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Table 36. Cross loadings for measurement indicators of supply chain risk
There is a high probability that our suppliers will fail to provide supplies 0.875
to us.
We worry that suppliers may not provide suppliers as specified within 0.818
out purchase agreement.
An interruption in the supplies from our suppliers would have severe 0.759
negative financial consequences for our business.
We would incur significant costs and/or losses in revenue if our suppliers 0.903
failed to provide supplies.
The research results empirically confirmed that supply chain risks decreased significantly as
performance improved. The association between supply chain risks and performance has not
been seen to be investigated previously. The study of Ritchie and Brindley (2007b) suggested the
linkage between risk and performance as a topic for future study. Therefore, this research also
investigates the causal relationship between risk sources and performance in supply chains.
The supply chain risks have two dimensions which are probability and magnitude of
disruptions in the supply chain. Thus, it is assumed that the total effect of supply chain risks
influence the performance negatively. However, because this research asked supply and
purchasing managers regarding two dimensions of supply chain risk, their answers are based on
their perceived supply chain risks. It is very crucial to investigate their perceived supply chain
risks because this research also makes great contributions to help the purchasing and supply
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managers to recognize the importance of the supply chain risks and reflect them seriously in
Although this is the first study to investigate the relationship between the supply chain
risks and the performance, the measurement on the performance was carefully evaluated. In the
supply chain risk management, the conventional measurement of the performance has been
emphasized leading to the effective supply chain risk management (Ritchie and Brindley 2007a).
Following the study of Ritchie and Brindley (2007a), this research measured the performance
into three dimensions: fanatical, operational and supply chain performance. It helps this research
to not only evaluate the performance correctly but also examine which dimensions of the
performance supply chain risks affect negatively most. This research can compare the area that
As this research proposed, the results statistically support hypothesis 7: mitigating supply
chain risks by supply chain practices influences the performance. High probability and
magnitude of supply chain disruption risk decreases a firms performance as low probability and
magnitude of supply chain disruption risks increase a firms performance. It is very significant
for supply and purchasing managers to perceive that supply chain risks influence negatively on
the performance. They have to recognize the negative relationship with the supply chain risks
and performance meaning that high supply chain risks become sources for decreasing firms
performance. This represents that purchasing and supply managers spend much money and times
on establishing the risk mitigating strategies in the supply chain in order to improve the
performance.
this research measures the performance in three dimensions: financial, operational and supply
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chain performance. Supply chain risks decrease the impact of financial, operational and supply
chain performance. This research utilizes the multi-dimensions of the performance because of
two main reasons. First, it prevents the controversial issues on measuring the performance.
Second, this research can provide the impact of the supply chain risks on three aspects of the
performance. In other words, this research result can provide the evidence that which area of the
Among three dimensions of the performance, the financial aspects were the most
damaged the performance caused by the supply chain risks. If disruptions occur in the supply
chain, the loss generates the financial area of the firms. With the supply disruptions, the firms
production is delayed, leading to the loss in the sales and revenues. Eventually, it would hurt the
The second area was the operational performance. Operational performance focuses on
saving the cost. Actually, supply disruptions would increase the cost for the firms. Finally, the
supply chain performance was the last. The supply disruptions would decrease customers
satisfactions and the speed of reacting to the market in the supply chain. Table 37 describes the
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Table 37. Cross loadings for measurement indicators of performance
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7. Significance & Impact of Research
The purpose of this study is to establish a research framework for supply chain risk management
and empirically to investigate how supply chain practices and organizational culture influence
supply chain risks from the business environment perspective. In addition, this research also
examines whether successful supply chain risk management will improve the performance.
Because this research serves to close a gap in the literature of supply chain risk management, this
research will make a significant contribution to the academic and business world.
This research makes meaningful contributions for both academics and practitioners. First, this
processes for using and allocating resources to match and adjust to market changes as a
theoretical background. Because this research investigated the impact of business environments
on supply chain practices as well as supply chain risk management, it contributes that empirical
result of to the support of dynamic capability theory. In responding to market change, firms
allocated resources to strategic sourcing, e-business technologies and supply chain integration in
Second, this research establishes a research framework of supply chain risk management.
In this research framework, the relationship between supply chain practices, such as strategic
sourcing, supply chain e-business technologies and supply chain integration, and supply chain
risks were investigated. This research also examined the relationship between supply chain risks
and performance. In the main research framework, this research also considered organizational
culture an internal factor and business environments and characteristics an external factor. This
research framework makes useful contributions to the literature by not only considering the
136
implementation of supply chain practices for mitigating supply chain risk, leading to improved
performance, but also by considering the internal and external factors of the supply chain risk
management. More importantly, this research emphasized the importance of recognizing supply
chain risk as well as helping purchasing and supply managers institute risk mitigating strategy.
This research investigates the role of strategic sourcing on supply chain risk management.
The strategic sourcing is only considered as the purchasing function in the supply chain
management. However, this research contributes that strategic sourcing can also play an
important role in mitigating the supply chain risks. Additionally, it also expands the concept of
strategic sourcing from the purchasing function to the supply chain practices that can help
developing the relationships and communications between suppliers and buyers. More
importantly, dynamic and competitive business environments are reflected in the context of
strategic sourcing and supply chain risk management. It has managerial implications that
strategic sourcing is an effective supply chain practices to respond to dynamic and business
environments as well as risk mitigating strategy in dynamic and business environments. It also
emphasizes that managers need to consider business environments to imply strategic sourcing
This study examines the role of e-business technologies on supply chain risk management.
The e-business technologies are only considered as the information technologies for saving the
cost in the supply chain management. However, this study contributes that e-business
technologies can also play a critical role in mitigating the supply chain risks. In addition, because
managers worry about cost on information technology in the supply chain, leading to hesitation
business technologies helps mangers to invest the money on risk mitigating tools in the supply
137
chain practices. More importantly, dynamic and competitive business environments are reflected
in the context of e-business technologies and supply chain risk management. It has managerial
respond to dynamic and business environments as well as risk mitigating strategy in dynamic and
business environments although it may be costly. It also emphasizes that managers need to
consider business environments to implement e-business technologies in their supply chain and
This research explores the role of supply chain integration on supply chain risk
relationship strategic sourcing. However, this research contributes that supply chain integration
can be applied in mitigating the supply chain risks. Additionally, supply chain integration is one
of the best solutions in setting up risk mitigating strategies in the supply chain. Because supply
chain integration is the most popular supply chain practices, it will have no risk in applying the
supply chain integration to reduce the supply chain risks. More importantly, dynamic and
competitive business environments are reflected in the context of supply chain integration and
supply chain risk management. It has managerial implications that supply chain integration is an
useful supply chain practices to react with dynamic and business environments as well as risk
mitigating strategy in dynamic and business environments. It also emphasizes that managers
need to consider business environments to imply supply chain integration and risk mitigating
strategies.
Third, there was a lack of empirical literature on supply chain risk management. As far as
I know, this is the first empirical study of supply chain risk management. This research makes
138
implementing supply chain practices, such as strategic sourcing, supply chain e-business
technologies and supply integration, mitigates supply chain disruption risk. Previous literatures
discuss the role of strategic sourcing, e-business technologies in the supply chain and supply
chain integration in hypothetical levels. However, this research contributes towards filling the
gap by empirically validating the impact of strategic sourcing, e-business technologies and
supply chain integration in mitigating the supply chain risks. The research results indicate that
strategic sourcing, e-business technologies and supply chain integration mitigates the supply
chain risks.
In supply chain risk management, previous literature introduces various risk mitigating
strategies. The solutions, suggestions and recommendations are mentioned although no research
manages to investigate the impact of supply chain practices in supply chain risk management.
More importantly, there is a lack of empirical validation. Because it is very important for
researchers to generate material implications, this research provides contributions that can give
purchasing and supply managers in the field solutions on mitigating the supply chain risks.
Fourth, it uncovered how purchasing managers perceived supply chain risk negatively
affects performance. The successful supply chain risk mitigating strategy improves performance.
This research presents why supply chain risks should be minimized. High supply chain risks
diminish the performance while low supply chain risks improve the performance. Another
operational and supply chain, thus avoiding the controversy surrounding these measurements.
aspect of the performance is the most affected by the supply chain risks. Financial performance
139
was the area where the supply chain risks affect the most negatively comparing with operational
Fifth, this research makes contributions by emphasizing the role of business environment
and characteristics in supply chain management areas. While this research identifies supply chain
risk, it assesses the level of managers perceived risk depending on business environments and
business characteristics. It is expected that managers consider supply chain risk at different levels
because all organizations have to deal with different business characteristics and environments in
their own industry. It is very hard to control business environments because it is outside the
scope of the supply chain. However, they must not to be ignored because members of the supply
This research contributes that dynamic and competitive business environments should be
considered in establishing the risk mitigating strategies. If business environments are dynamic
and competitive, the effectiveness of supply chain practices such as strategic sourcing, e-business
technologies and supply chain integration become stronger. When managers make a decision on
implementing the supply chain practices, they conduct the cost and benefit analysis to figure out
whether benefits outweigh the cost or not. If firms are facing with dynamic and business
environments, supply and purchasing managers need to consider their business environments in
their calculation. Therefore, this research emphasizes how important business environments are
in supply chain management and their roles for moderating the relationships between supply
chain practices and supply chain risks. It also shows supply managers directions and implications
strategies for each type of organization based on different business characteristics. By comparing
140
the research model based on manufacturing approach, suppliers and market location, the
effectiveness and impact of supply chain practices turned out to be varied. Firms that subscribe
to the push strategy benefit more from supply chain strategies relating to mitigating supply chain
risks. On the relationship between strategic sourcing and supply chain risks, between e-business
technologies and supply chain risks, and between supply chain integration and supply chain risks,
path coefficients turn out to be larger in the push approach comparing with pull approach. In the
supply chain risk management, reacting to the market demand like pull approach creates higher
supply chain risks than push approach. Therefore, in order to minimize the risk in a supply chain,
the firms need to switch their manufacturing approach from pull to push approach.
Firms with global suppliers establish close relationships by implementing supply chain
practices so that they can successfully minimize risk in their supply chain networks. Interestingly,
the path coefficients happen to be larger in US suppliers comparing with global suppliers on the
relationship between strategic sourcing and supply chain risks, between e-business technologies
and supply chain risks, and between supply chain integration and supply chain risks. If the firms
have global suppliers, they focus more on the supply chain practices and invest more money in
implementing the supply chain practices. E-business technologies play a crucial role on
communicating with suppliers as the path coefficients are the greats among three supply chain
practices. This result gives managers implications that e-business technologies help to
communicate and interact with global suppliers and overcome long distance relationship.
The disadvantages of having suppliers from outside of the US were discussed in the prior
literatures. However, this research makes contributions that although the firms have global
suppliers, they can develop many strategies to mitigate the supply chain risks. Thus, this research
also introduces another advantage of having global suppliers. Additionally, the firms keep
141
following the current trend, global supply chain management. This research emphasizes the
points that managers have to deal with different risks and use different strategy depending on
where their organizations are and what business characteristics their organizations have.
7.2. Limitations
This study has many of the same limitations as past empirical studies. First, this research surveys
only a single respondent within each firm. Although the respondent is in a high enough position
to answer all survey questions properly, a single respondent cannot represent all aspects of the
firm. Although the single respondent is randomly selected, it is not guaranteed that a single
respondent is the person who knows all aspects of the survey questions.
Second, the single firm is considered as a focal firm in the supply chain like previous
studies. This study has a buyer perspective, not a supplier perspective. Therefore, this research
focuses on buyer firms, resulting in the distribution of the survey to purchasing and supplying
managers. In order to overcome this limitation, future studies can distribute the surveys to both
supply and purchasing managers and marketing and sales managers. It will be very interesting to
Third, due to the inherent limitations of the survey research methodology, responses are
subjective, though this research tries to minimize the subjective aspects, especially in measuring
performance and supply chain risks. In order to be objective on performance, the survey
questions asked for performance in comparison to the industry average, one of the objective
measures of performance. In addition, the supply chain risk in this study is the managers
perceived risk, not actual risks. Even though survey measurement items adapted the
measurements of supply chain risk from prior literatures, the risk measurements are considered
subjective.
142
In order to validate the measurements, this research conducted the content validity check
based on previous literatures, interviews with supply chain professionals receiving the feedbacks
and comments on the survey and the pilot study. This research also drops the measurement items
which are below acceptable measurements scores. However, like other studies which use the
Finally, response bias may influence results, despite the best efforts of this study. For
survey participants who did not pay any attention when answering questions, dummy items were
included in order to filter out such participants. This research conducted several response bias
tests between early and later responders and between responders and non responders. Therefore,
This research can be extended in at least four ways. First, this research establishes a research
framework in the supply chain risk management focuses on the manufacturing industry. A future
research can apply this research framework in the service industry like a health care industry. It
will be very interesting to investigate the role of supply chain practices on mitigating the supply
Second, in this research, organizational culture was not found to have any significant
relationship to supply chain risks. A future study might consider the cultural impact in other
countries. The research framework from this research in supply chain risk management might be
applied in China and Korea. The future study might show some direction in terms of how
purchasing managers in China and Korea perceive the supply chain risks as well as supply chain
practices. Since this research collected surveys from managers in the US, future research can
143
Third, this research has an inbound perspective, which means that the surveys were
distributed to purchasing and supply managers. However, future research can consider the
opposite perspective. The focal firms could be suppliers. Thus, the future study might suggest
Fourth, this research applies three supply chain practices, strategic sourcing, e-business
technologies in supply chain and supply chain integration. Future research can be extended to
investigate the joint impacts of the supply chain practices on mitigating the risk in the supply
chain. Future research can examine the synergy impact of two or more supply chain practices
together on supply chain risk management. More importantly, future study can be extended to
investigate the relationship among supply chain practices. It can empirically examine that e-
business technologies help promoting supply chain integration. It will be very interesting to see
how various supply chain practices influence each other in the context of supply chain risk
management.
Finally, because this research considers and reflects the impact of business environments,
future research can be extended to environmental practices. The future study can investigate how
environmental practices and regulations can influence supply chain practices as well as supply
144
Appendix. Survey Measurements
Dear Supply Chain Professionals:
In todays highly competitive and global marketplace firms such as yours must be constantly assessing
their customers needs and competitive environment. A research team headed by Mr. Kim, at the State
University of New York at Buffalo is conducting an investigation entitled: Supply Chain Risk Management
in Purchasing/Procurement. The study investigates how managers can deal with supply chain risk caused
by dynamic business environment. Your participation in this study is completely confidential and
voluntary. However, you have the right not to answer any question if you so choose without penalty or
loss of benefits to which you are otherwise entitled. You are free not to answer any questions you
do not wish to answer. All surveys collected are anonymous. None of the data collected will be used
to identify particular individuals or companies. All data will be presented in aggregate form only. There
are no known risks involved in participating in this research. Your response to this survey indicates your
consent to participation. You are implicitly acknowledging your voluntary participation by
answering and returning the questionnaire.
If you have any questions regarding this survey please feel free to contact me at 716-645-3251 or by
email (mk94@buffalo.edu). This research study has been reviewed by the Social and Behavioral
Sciences Institutional Review Board, University at Buffalo. For questions regarding the rights of
participants in research, the IRB may be contacted at 716/645-6474 or 515 Capen, University at Buffalo,
Amherst, NY 14260.
Thank you very much for your participation in this research. We are looking forward to your response.
Sincerely,
Minkyun Kim
Principal Investigator
Supply Chain Risk Management Research
Demographic Information
Business Title:
Kind of Industry:
145
Part I. Environmental Uncertainty
A. Indicate your assessment of change in your plants Dramatically Dramatically
competitive environment: Decreased Increased
1. Economic growth in your market 1 2 3 4 5 6 7
2. Growth in consumer demand within the industry 1 2 3 4 5 6 7
3. Growth in industry sales 1 2 3 4 5 6 7
B. Indicate the rate of change in your industry for the Slow Rapid
following:
1. Rate at which products and services become outdated 1 2 3 4 5 6 7
2. Rate of introduction of new products and services 1 2 3 4 5 6 7
3. Rate of change in tastes and preferences of customers 1 2 3 4 5 6 7
in your industry
146
Part III. Internal Integration, External Integration with key Suppliers & Customers
A. Indicate your assessment of supply chain integration: Strongly Strongly
Disagree Agree
1. We use cross functional teams to solve problems. 1 2 3 4 5 6 7
2. Internal management communicates frequently 1 2 3 4 5 6 7
about goals & priorities.
3. Our firm does not encourage openness and 1 2 3 4 5 6 7
teamwork
4. Formal meetings are routinely scheduled among 1 2 3 4 5 6 7
various departments.
5. When problems or opportunities arise, informal, 1 2 3 4 5 6 7
face-to-face meetings never occur.
6. Our customers give us feedback on quality and 1 2 3 4 5 6 7
delivery performance.
7. Customers are actively involved in our new product 1 2 3 4 5 6 7
development process.
8. Customers frequently share demand information 1 2 3 4 5 6 7
with our firm.
9. Our production plans are shared with our customers. 1 2 3 4 5 6 7
10. Our inventory levels are shared with our customers. 1 2 3 4 5 6 7
11. Our inventory levels are shared with our suppliers. 1 2 3 4 5 6 7
12. Our key suppliers deliver to our plant in a JIT basis. 1 2 3 4 5 6 7
13. We have high corporate level communication on 1 2 3 4 5 6 7
important issues with key suppliers.
14. Sharing of information via the Internet is important 1 2 3 4 5 6 7
to our supply chain.
15. We work with our suppliers to seamlessly integrate 1 2 3 4 5 6 7
our inter-firm processes (e.g. order placement).
16. Our supply chain employs rapid response initiatives. 1 2 3 4 5 6 7
(e.g. continuous replenishment (CR) or vendor managed
inventory (VMI).
17. We jointly develop new products/services with our 1 2 3 4 5 6 7
suppliers.
147
B. We believe that ________________________________ Strongly Strongly
Disagree Agree
1. Functional departments should work together as a 1 2 3 4 5 6 7
team.
2. Employees from one department should work with 1 2 3 4 5 6 7
employees from other departments.
3. Employees should work together as a team. 1 2 3 4 5 6 7
4. Departmental managers should make decisions that 1 2 3 4 5 6 7
benefit the whole company.
5. When making decisions, the overall effects of a 1 2 3 4 5 6 7
decision should be considered.
6. Decisions should be based on overall company 1 2 3 4 5 6 7
objectives.
7. We should be willing to make sub-optimal decisions in 1 2 3 4 5 6 7
local scale for maximum performance in global scale.
8. Please circle on number 7 for this question. 1 2 3 4 5 6 7
9. Managers should take tight control upon their 1 2 3 4 5 6 7
subordinates.
10. Command and control is the best way to manage. 1 2 3 4 5 6 7
11. Workers should simply follow the directions given by 1 2 3 4 5 6 7
their managers.
12. Our suppliers can be part of our success in our 1 2 3 4 5 6 7
business.
13. Our suppliers are strategic partners in building up our 1 2 3 4 5 6 7
competitive capabilities.
14. The best suppliers are the ones who enable us to 1 2 3 4 5 6 7
provide value to customers.
Part V. E-business
A. In our company, we use e-business tools to Strongly Strongly
_____________________ Disagree Agree
1. Facilitate internal communication between 1 2 3 4 5 6 7
employees in different departments and different locations.
2. Regularly update employees about developments 1 2 3 4 5 6 7
within the strategic business unit (SBU).
3. Facilitate discussions and feedback on various issues 1 2 3 4 5 6 7
of importance to our SBU.
B. In our company, we use e-business tools to Strongly Strongly
_____________________ Disagree Agree
1. Coordinate new product and service development 1 2 3 4 5 6 7
teams.
2. Provide customers with general information about our 1 2 3 4 5 6 7
SBU (e.g., via Web sites and information boards).
3. Send customers regular updates about new products 1 2 3 4 5 6 7
and other developments within our SBU (e.g., via e-mail).
4. Provide after-sales service to our customers (e.g., via 1 2 3 4 5 6 7
online information about installation and troubleshooting).
148
5. Provide information in response to consumer 1 2 3 4 5 6 7
questions or requests (e.g., via searchable online databases).
6. Send suppliers regular updates about new product 1 2 3 4 5 6 7
and service plans and developments within our SBU (e.g., via
e-mail).
7. Provide specific online information about product and 1 2 3 4 5 6 7
service specifications that our suppliers must meet.
8. Share product and inventory planning information 1 2 3 4 5 6 7
with our suppliers.
9. Permit suppliers to directly link up to our databases 1 2 3 4 5 6 7
(e.g., via Enterprise Resource Planning/ERP systems).
10. Perform financial and managerial accounting. 1 2 3 4 5 6 7
11. Provide reimbursements and manage payrolls. 1 2 3 4 5 6 7
E. To what extent does your firm make use of the following None Extensive
forms of e-commerce?
1. Electronic data interchange (EDI) 1 2 3 4 5 6 7
2. Real-time electronic linkage with suppliers 1 2 3 4 5 6 7
149
3. Electronic/online supplier catalogue 1 2 3 4 5 6 7
4. Electronic/online purchase order system 1 2 3 4 5 6 7
5. Online reverse auction/e-auction. 1 2 3 4 5 6 7
6. Online bidding/tendering. 1 2 3 4 5 6 7
7. Public e-marketplaces (e.g., Global Healthcare 1 2 3 4 5 6 7
Exchange).
8. Industry-sponsored e-marketplaces (e.g., Covisint). 1 2 3 4 5 6 7
9. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
company for your suppliers.
10. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
supplier(s).
11. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
company for your customer(s).
12. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
customer(s)
B. How much do you agree with following statements regarding Strongly Strongly
financial condition of your suppliers? Disagree Agree
1. Our suppliers are financially independent. 1 2 3 4 5 6 7
2. We always evaluate our suppliers financial condition. 1 2 3 4 5 6 7
3. We make financial investments on our suppliers. 1 2 3 4 5 6 7
4. We closely communicate with suppliers regarding their 1 2 3 4 5 6 7
financial condition.
150
Part VII. Supply Chain Performance
A. Rate the performance of your firm in the following Well Below Well Above
areas: Industry Industry
Average Average
4. Average Return on investment 1 2 3 4 5 6 7
5. Average Return on Assets 1 2 3 4 5 6 7
6. Average Profit 1 2 3 4 5 6 7
7. Average Profit Growth 1 2 3 4 5 6 7
8. Increase in Market Share 1 2 3 4 5 6 7
9. Increase in Sales Volume 1 2 3 4 5 6 7
B. Rate the performance of your firm in the following Well Below Well Above
areas: Industry Industry
Average Average
4. Percent defects during production 1 2 3 4 5 6 7
5. Delivery speed of Products and Service 1 2 3 4 5 6 7
6. Delivery reliability 1 2 3 4 5 6 7
7. Production costs 1 2 3 4 5 6 7
8. Production lead time 1 2 3 4 5 6 7
9. Costs associated with held inventory 1 2 3 4 5 6 7
10. Order fill rate 1 2 3 4 5 6 7
11. Customer response time 1 2 3 4 5 6 7
C. Rate the performance of your firm in the following Well Well Above
areas: Below Industry
Industry Average
Average
1. Ability to respond to and accommodate periods 1 2 3 4 5 6 7
of poor manufacturing performance (machine
breakdowns)
2. Ability to respond to and accommodate periods 1 2 3 4 5 6 7
of poor supplier performance
3. Ability to respond to and accommodate new 1 2 3 4 5 6 7
products, New markets, or new competitors
4. Total cost of resources used 1 2 3 4 5 6 7
5. Total cost of distribution, including 1 2 3 4 5 6 7
transportation and handling costs
6. Total cost of manufacturing, including labor, 1 2 3 4 5 6 7
maintenance and re-work costs
151
Business Characteristics Please Select One
1. What is your primary manufacturing approach? Pull Push
2. Have you experience any disruptions in your suppliers? Yes No
3. Do you have suppliers from outside of the US? Yes No
4. Do you provide your service or operate plants outside of Yes No
the US?
5. Is your company in Manufacturing Industry or Service Manufacturing Service
Industry?
6. Please indicate the annual sales of your 1) Less than $10 million , 2) $10 to $50 million ,
business unit. 3) $51 to $100 million, 4) $101 to $250
million,
5) $251 to $500 million , 6) $500 million to $1
billion
7) over $1 billion
152
November 26, 2009
Introduction:
In todays highly competitive and global marketplace firms such as yours must be constantly assessing
their customers needs and competitive environment. A research team headed by Mr. Kim, at theth State
University of New York at Buffalo is conducting an investigation entitled: Supply Chain Risk
Management in Purchasing/Procurement. The study investigates how managers can deal with supply
chain risk caused by dynamic business environment. Our goal is to identify supply chain risk and find
factors that mitigate the supply chain risk in order to improve the firms performance
Volunteer Status
Your participation in this study is completely confidential and voluntary. As a former purchasing
analysis,
s, I know that your time is extremely valuable. Each question in this survey received many
feedbacks from professionals in supply chain area and tested in the previous study so that you will be able
to answer. However, you have the right not to answer any question if you so choose without penalty or
loss of benefits to which you are otherwise entitled.
Time Commitment
We have tried to minimize the page of the survey in order to reduce your time on completing this survey.
It will take about 15 minutes.
Procedure
The survey is designed to be answered by supply, supply chain, purchasing in your organizations.
Confidentiality
All surveys collected are anonymous. None of the data collected will be used to identify particular
individuals or companies. All data will be presented in aggregated form only.
Consent
Your response to this survey indicates your consent to participation.
Risk
There are no known risks involved in participating in this research.
Further Information
If you have any questions regarding this survey please feel free to contact me at 716-645-3251
716 or by
email (mk94@buffalo.edu). This his research study has been reviewed by the Social and Behavioral
Sciences Institutional Review Board, University at Buffalo. For questions regarding the rights of
153
participants in research, the IRB may be contacted at 716-645-6474 or 515 Capen, University at Buffalo,
Amherst, NY 14260.
Thank you very much for your participation in this research. First 30 participants who complete the
survey will receive $20 gift certificate of Barnes Nobles or Target (your choice) as an incentive.
We are looking forward to your response.
http://www.surveymonkey.com/s.aspx?sm=b9jS4l84PtHEPXXZHxG4Jw_3d_3d
Sincerely,
Minkyun Kim
Principal Investigator
Supply Chain Risk Management Research
You are free not to answer any questions you do not wish to answer
You are implicitly acknowledging your voluntary participation by answering and returning the
questionnaire.
154
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