An Examination of Collaborative Planning Effectiveness and Supply Chain Performance

An Examination of Collaborative Planning
Effectiveness and Supply Chain

Performance
AUTHORS
INTRODUCTION
Kenneth J. Petersen
is an assistant professor in the Department of Supply Chain
Management in the W.P. Carey School of Business at Arizona State
University in Tempe, Arizona.
Gary L. Ragatz
is an associate professor of supply chain management in the Eli Broad
Graduate School of Management at Michigan State University in East
Lansing, Michigan.
Robert M. Monczka
is distinguished research professor at Arizona State University and
director of strategic sourcing and supply chain strategy research and
Project 10X for CAPS Research in Tempe, Arizona.
Many organizations are attempting to gain a competitive advantage by integrating their suppliers
more thoroughly into key supply chain processes.
This calls for greater strategic and operational cooperation between buyer and supplier firms, often
involving some degree of collaborative planning.
Advances in information technology are making it
possible for firms to share plan-
SUMMARY
ning information more quickly

and easily. This study surveyed
purchasing executives whose firms are involved in

The Journal of Supply Chain
Management: A Global
Review of Purchasing
and Supply Copyright
& May 2005, by
Institute for Supply
Management, Inc.TM
collaborative planning with suppliers to examine

several factors that support effective planning and
the impact that effective collaborative planning has
on performance in the buying firm. The results show
that effective collaborative planning is dependent on
the level of trust and the quality of information
shared between firms.
Module 3
14
The Journal of Supply Chain Management | Spring 2005
Many organizations are attempting to gain a competitive advantage through supply chain integration, using
some degree of collaborative planning with their suppliers. Collaborative planning activities between supply
chain partners are expected to lead to better performing
supply chains. The notion that better collaborative planning has had a positive effect on joint business outcomes
has been previously studied in relation to supplier alliances
(Mohr and Spekman 1994; Monczka, Petersen, Handfield
and Ragatz 1998), supplier integration into new product
development (Ragatz, Handfield and Scannell 1997), supplier development (Krause 1995, 1997), collaborative planning, forecasting and replenishment (Barratt and Oliveira
2001), and a host of other supply chainrelated areas.
Collaborative planning processes are conceptualized in
this research as the joint buyersupplier decision-making
processes that require bilateral information flow between
supply chain partners. For instance, a supplier may inform
its customers of its manufacturing capacity constraints,
just as a buying firm will inform its suppliers of its purchase
requirements. Effective collaborative planning is expected
to improve supply chain performance by facilitating decisions that reflect a broad view of the supply chain and take
into account interactions among the firms in the supply
chain. Performance improvement might be expected in
the form of increased inventory turns, better on-time
delivery, improved responsiveness, better quality, reduced
purchase prices, and/or reduced total cost.
The eight collaborative planning processes that provide
the context for this study were selected because of their
potential criticality to effective supply chain integration
(Monczka and Morgan 1998). These processes are also
characterized by an inherent need for substantial mutual
exchange of information. The planning processes considered are:
1. Supplier scheduling controls the release of orders

and communicates priorities, needs and quantities between the buying organizations operations system and suppliers for scheduling and
rescheduling.
An Examination of Collaborative Planning Effectiveness and Supply Chain Performance
2. Forecasting and inventory positioning ensures

that required items are available at the proper
location and in the proper form when needed in
the supply chain.
3. Inventory visibility provides the ability to track
where any given item is physically located (transit,
customs, supplier, etc.) and/or where it was used.
4. Capacity planning ensures that the supplier will
have adequate capacity to produce or make
available the required items/services in the
required leadtime.
5. Post-supplier selection performance evaluation/feedback and conformance used to ensure that
there is joint understanding and agreement about
both the buying firms and the suppliers
performance.
6. Sourcing and supply proposal evaluation the
process of setting the terms and conditions of the
purchase. These terms and conditions frequently
include price, quantity, quantity discount, quality, technology, etc.
7. Joint goal/target setting attempts to ensure that
there are mutually acceptable performance targets that are rooted in common/aligned metrics.
8. Part/material standardization used to reduce the
number of unique parts/materials maintained in
the inventory system.
Collaborative planning necessitates greater communication and information sharing between organizations
than would be found in a more traditional business relationship. Moreover, effective collaborative planning can
be expected to require that the information shared will be
of high quality.
Many firms are relying on technology in the form of
linked information systems to supplement traditional
modes of communication and information sharing with
suppliers. These systems should facilitate the flow of
information across organizational boundaries and
improve the quality of the information shared. While
relationships among supply chain performance, collaborative planning, information quality, and linked information systems are widely assumed to exist, there is little
research that draws linkages between these constructs.
This study focuses on two key questions: (1) what relationship exists between effective collaborative planning
and supply chain performance and firm performance, and
(2) what factors are related to more effective collaborative
planning. The answers to these questions have important
practical implications for supply managers as they make
decisions about whether to pursue collaborative planning
activities and how to structure the information exchange
in such planning activities.
The following sections examine prior research, describe
and test a theoretical model, and then draw both applied
and theoretical conclusions.
PRIOR RESEARCH
To realize the full potential of supply chain management, it is necessary to integrate firms in a supply chain.
Troyer and Cooper (1995) suggested the intense interest
in various initiatives such as JIT, quick response, and efficient consumer response all share a common theme
supply chain integration. Lee and Billington (1992)
maintained that problems related to inventory positioning within the supply chain occur in part as a result of
a lack of information flow between supply chain members. Lee, Padmanabhan and Whang (1997) described the
bullwhip effect in supply chains and suggest that better
information flow and coordination among supply chain
members is the solution. Stank, Keller and Daugherty
(2001) found strong support for the notion that information sharing is essential to logistical service performance.
Carter and Narasimhan (1996), in a study of future
purchasing and supply chain management directions,
predicted that supply management will increasingly
emphasize a process focus through interorganizational
integration driven by the need for electronic interchange
of product and manufacturing process data. In another
study looking at the future of purchasing and supply,
Carter, Carter, Monczka and Slaight (1998) conducted
focus group studies, an environmental scan, and field
interviews in an attempt to make a 5- and 10-year forecast
of the future of purchasing and supply. Their findings
point to supply chains becoming increasingly integrated
over the next 510 years.
Some empirical evidence exists for the value of greater
integration of buyer and seller firms. Larson (1994)
defined functional integration as (1) cooperative behavior
and (2) cooperative attitudes or sentiment between purchasing and key supplier departments. This study found
that greater functional integration was associated with
lower total cost of purchased materials. Jap (1999) offered
evidence that coordination effort and idiosyncratic
investment on the part of buyer and supplier firms have a
positive impact on future profit performance and competitive advantage. Larson and Kulchitsky (2000) also
found that closer relationships between buyer and supplier firms is associated with better delivery performance
by suppliers. Buvik and John (2000), however, found that
coordination between buyer and supplier firms is only
beneficial in the face of high environmental uncertainty
and modest specific investment requirements.
An important form that cooperation between buyer and
seller companies may take is collaborative planning and
decision making. Harrington (2000) cited a variety of
potential benefits of collaborative planning, including
reduced inventories, reduced transportation and distribution center costs, improved cycle times and customer
service, fewer emergency orders, and fewer backorders
and returns.
15
In separate studies, Cachon and Fisher (2000) and

Lee, So and Tang (2000) demonstrated with simplified
analytical models the possible performance improvements resulting from information sharing between buyer
and supplier firms. Both studies show that incorporating
shared information into decision making can lead to
reduced inventories and reduced supply chain costs.
An issue that must be considered in the sharing of
information for collaborative planning in the supply
chain is the quality of the information that is shared.
Information quality has multiple dimensions representing the degree to which the information meets the needs
of the organizations. Several important dimensions of
information quality include accuracy (Whipple, Frankel
and Daugherty 2002), timeliness (Whipple et al. 2002),
completeness, ease of access (Bailey and Pearson 1983;
Raymond 1985), and compatibility across users (Goodhue
1995). Interestingly, Wisner (2003) found support for the
notion that information accuracy may be relatively more
important to buyers while information timeliness may be
relatively more important to suppliers.
From a theoretical perspective (assuming the information is used properly), perfect information, on average,
results in at least as good a decision as imperfect information (Pratt, Raiffa and Schlaifer 1995). This is to say,
higher quality information improves or at least does not
worsen decision-making results. Larson and Kulchitsky
(2000) provided empirical evidence of the importance of
information quality in supply chain management. Their
study demonstrates a positive linkage between the quality
of information exchanged between buyer and supplier
firms and delivery performance. They also found that
information quality was positively related to the closeness
of the relationship between buyer and supplier firms.
Information technology (IT) offers the potential to
enhance the information-sharing function between buyer
and seller firms by improving the speed and accuracy
of the exchange and simplifying the sharing of large
amounts of data. Radding (1998) suggested that
supply chain integration will be accomplished largely
through linking key business systems. Carter et al. (1998)
supported this view in their futures study, concluding
that information system technology will play a key role in
the integration of supply chains. Many firms have been
using linked information systems with suppliers, using
tools such as electronic data interchange (EDI), e-mail,
e-requisitioning, enterprise resource planning systems,
and e-marketplaces.
While linked information systems offer great potential,
there is also a need for caution. Walton and Marucheck
(1997) reported mixed results for the use of EDI, finding
that it has both positive and negative effects on supplier
quality and on order accuracy. Buhse (1997) pointed out
that buyers should not expect electronic linkages to
supplant the need for direct interaction between the cus-
16
tomer and supplier. Young, Carr and Rainer (1999) cautioned that exchanging proprietary transaction-level data
places a premium on trust between trading partners.
The research summarized above suggests that supply
chain integration can have a positive impact on supply
chain and/or firm performance, and further suggests that
linked information systems may be a valuable tool for
supporting supply chain integration. There are also,
however, some cautionary notes suggesting that integration is not always effective and that linked information
systems are not a complete answer for supply chain integration. The current study examines in more detail the
impact that collaborative planning between buyer and
supplier firms has on the performance of both the supply
chain and the buyer firm. Further, we sought to understand the role that information sharing through linked
information systems, as well as through more traditional
modes of communication has on the effectiveness of collaborative planning activities.
METHODOLOGY
A survey of purchasing executives was used to learn
about their experience with collaborative planning with
their first-tier suppliers. The sampling frame for the study
was firms using linked information systems to facilitate
collaborative planning with suppliers. An initial mailing
inviting participation in the study was sent to 3,500
individuals. Of these, 386 (11 percent) were returned by
the postal service as undeliverable. Of the remaining 3,114
individuals, 396 returned a fax-back response indicating
their willingness to participate or a reason for not participating. Of the responses indicating non-participation, 42
percent indicated that they do not use linked information
systems to do planning with their suppliers i.e., they
were not an appropriate part of the sampling frame.
Another 17 percent indicated that the contact person was
no longer with the company. Assuming the fax-back
responses are representative of the original mailing, 1,277
surveys were sent to valid contacts in appropriate companies. We received a total of 169 responses, representing
an effective response rate of about 13 percent. For the
analysis reported here, this sample was further reduced to
Table I
GEOGRAPHIC LOCATION
Location
United States
Percent
88.2
Western Europe
6.5
Canada
1.8
Pacific Rim
2.4
Missing Response
1.2
Table II
Table III
ANNUAL SALES REVENUE
Annual Revenue
DEGREE OF STRUCTURE IN COLLABORATIVE PLANNING ACTIVITIES

Percent
Collaborative Planning Activity
Structure
< $250 million
25.2
Supplier scheduling
High
$250 million$500 million
13.5
Forecasting and inventory positioning
High
$500 million$1,000 million
15.3
Inventory visibility
High
$1,000 million$5,000 million
22.5
Capacity planning
High
4$5,000 million
23.4
Post-selection supplier evaluation
Medium
Proposal evaluation
Medium
112 firms, who provided complete information on all

eight of the collaborative planning processes examined.
The vast majority of the responses came from the United
States (see Table I) and represented a variety of industries,
including non-manufacturing firms. The responding
firms varied widely in size, based on annual sales revenue
(see Table II).
Survey respondents were asked to provide information
about their experience with eight different types of collaborative planning with one key supplier. They were also
asked a set of questions about their broader experience
with collaborative planning with suppliers and a set of
questions about the recent performance of their supply
chain and their firm.
While many companies are engaged in collaborative
planning with suppliers during the new product/process/
service development cycle, the focus of this study was
collaborative planning for the customer order fulfillment
cycle (see Exhibit 1).
These planning activities represent a range of decisionmaking environments with respect to the structuredness
of the decision-making process. Structuredness refers to
whether there is a well-defined procedure for analyzing
and making a decision (Zack 1999). The degree of decision
structure is a spectrum that runs from structured to
unstructured. Pieptea and Anderson (1987) described the
ends of the spectrum this way: A structured decision is
. . . one which can be described by the steps of a highly
quantitative procedure, while an unstructured decision is
based on heuristic methods-experience and intuition.
Table III shows how the planning activities included in
this study vary on this dimension.
Joint goal/target setting
Low
Part/material standardization
Low
supply chain performance, and the relationship between

supply chain performance and the firms financial
performance. Exhibit 2 graphically describes the relationships studied.
Structured collaborative planning represents the
extent of improvement in the four relatively morestructured (see Table III) collaborative planning environments while unstructured collaborative planning
represents the extent of improvement in the four relatively less-structured (see Table III) collaborative planning
environments. Material cost performance is defined
in terms of change in performance on purchase price
reduction, purchase price reduction relative to market, and
total cost reduction. Inventory turns refer to change in
total inventory turnover rate in the buying firm (Robison
2001). Supplier performance consists of three items:
improvement in supplier on-time delivery, quality, and
responsiveness. Firm performance is measured by
change in return on investment, return on equity, and
profit margin (further details on the model constructs
may be found in Appendix A).
Exhibit 1
Product/Process/Service Development Cycle
Customer
Needs
Concept
COLLABORATIVE PLANNING EFFECTIVENESS

AND PERFORMANCE
Pilot
Test and
RampUp
Customer Order Fulfillment Cycle

Fo
cu
re s o
se f t
ar hi
ch s
An important issue for supply management professionals is whether their efforts at collaborative planning
pay off in terms of improved supply chain performance.
Using the survey responses, this study examined the
relationship between effective structured and unstructured collaborative planning and three dimensions of
Design
OrderPlanning Delivery
Cycle
Customer
Satisfaction
17
Exhibit 2
Material Cost
Performance
+
Structured
Collaborative
Planning
The positive impact of structured collaborative planning on supplier performance and inventory turns was
supported. The positive impact of unstructured collaborative planning on supplier performance was supported.
The positive linkage between supplier performance and
material cost performance was supported, but the linkage
between supplier performance and inventory turnover
was not. Finally, both material cost performance and
inventory turnover were found to have a significant positive impact on firm performance, but no direct linkage
could be shown between supplier performance and firm
performance. This is not surprising as the measures of firm
performance are financial measures that would be directly
affected by material cost and asset efficiency (inventory
turns), whereas supplier performance was measured in
terms of delivery quality and responsiveness should be
expected to be only indirectly related to financial results.
The significant linkages, along with their path coefficients, are shown in Exhibit 3.
+
Supplier
Performance
+
Unstructured
Collaborative
Planning
Firm
Performance
+
Inventory
Turns
The overall fit of the structural model (see Appendix B)

was indicated by a w2 of 149.58 (93 d.f.), a comparative fit
index (CFI) of 0.95, a standardized root mean-square
residual (SRMR) of 0.9, and a root mean-square error of
approximation (RMSEA) of 0.08. It may be concluded that
the overall fit of the structural model is satisfactory
(Bagozzi and Yi 1988; Hu and Bentler 1999).
TRUST AND QUALITY OF INFORMATION ARE

CRITICAL TO DECISION-MAKING
EFFECTIVENESS
Given that effective collaborative planning has a substantial positive impact on supply chain performance
and, indirectly, on firm performance, it is important for
managers to know what leads to more effective decision
Exhibit 3
0.58
0.51
0.59
MCP1 MCP2 MCP3

0.82 0.86 0.81
Material
Cost Performance
Structured
Collaborative
Planning
0.81 0.79 0.71
FP1
FP2
FP3
0.58
0.61
0.71
0.21
0.63
Supplier
Performance
Firm
Performance
0.56 0.83 0.96
0.98 0.93 0.79
0.45
Unstructured
Collaborative
Planning
0.47
0.89 0.76 0.65
18
FP1
FP2
FP3
0.46
0.65
0.76
0.51
0.41
SP1
SP2
SP3
FP1
FP2
FP3
0.18
0.37
0.62
0.24
0.83
0.55
Inventory
Turns
0.30
2 =149. 58 / 93 d.f. = 1.6

COMPARATIVE FIT INDEX (CFI) = 0.95
RMSEA = 0.08
SRMR = 0.09
Exhibit 4
making in collaborative planning. Factors that seemed

likely to have an impact on the effectiveness of decisionmaking planning processes were the level of trust that
exists between the two firms, and the quality of the
information that is exchanged between the firms. Information quality was broken down further to examine
the quality of information exchanged through linked
information systems versus that exchanged through
traditional modes of communication. Exhibit 4 shows
the predicted relationships graphically.
Trust
+
Traditional Mode
Information
Quality
Trust is defined as the confidence the buying firm has

that the supplier will behave fairly and honestly in their
business dealings. In prior work, trust has been defined as
a willingness to rely on an exchange partner in whom
one has confidence (Moorman, Zaltman and Deshpande
1992). The current study used a modified form of the
measures of trust used by Cummings and Bromiley (1996).
Information quality is defined in terms of five characteristics of the information being exchanged. Respondents
were asked whether the information is generally (1) current, (2) accurate, (3) complete, (4) consistently defined
and (5) easy to access. Decision-making effectiveness
is defined in terms of whether the planning process has
helped the buying and supplier firms make better decisions. Details of the items comprising these constructs
can be found in Appendix A.
Decision-Making
Effectiveness
+
Linked Info
System
Information
Quality
making in each of these collaborative planning processes.

The quality of information exchanged via linked information systems has a significant impact for all types of
collaborative planning, and has a larger impact than the
quality of information exchanged through traditional
modes in every collaborative planning context except for
joint goal/target setting. Traditional-mode information
quality, however, cannot be ignored. It has a significant
impact in all types of collaborative planning, except for
two of the highly structured types (supplier scheduling
and forecasting/inventory positioning), and is even more
important than the quality of information from linked
information systems when it comes to joint goal/target
setting.
The items related to information quality and decisionmaking effectiveness were asked separately for each of the
eight planning activities. The trust construct was based
on questions about the specific supplier involved in the
planning activities, but was not broken down by planning
activity.
The analyses also show the important role of trust in

effective decision making in a collaborative planning
environment trust had a significant impact on
effectiveness for five of the eight planning processes
studied. This effect may actually be understated here,
This set of relationships was tested for each of the eight

collaborative planning processes. The results of these tests
are summarized in Table IV.
The analyses show clearly that the quality of information exchanged is critical to the effectiveness of decision
Table IV
PATH COEFFICIENTS
Collaborative Planning Activity
R2
Path Coefficients
Trust
Traditional Information Quality
Linked IS Information Quality
Supplier scheduling
0.164, p50.051
0.084, p50.288
0.516, p50.000
0.339
0.232, p50.005
0.016, p50.842
0.464, p50.000
0.300
0.166, p50.035
0.181, p50.019
0.509, p50.000
0.384
Capacity planning
0.070, p50.310
0.353, p50.000
0.509, p50.000
0.496
0.300, p50.001
0.256, p50.003
0.275, p50.001
0.289
Proposal evaluation
0.079, p50.394
0.154, p50.077
0.347, p50.000
0.142
0.036, p50.651
0.472, p50.000
0.324, p50.000
0.389
0.214, p50.005
0.370, p50.000
0.410, p50.000
0.402
19
because the levels of trust that were reported by the

respondents between their firm and the supplier they
were involved with for collaborative planning were
uniformly quite high.
DISCUSSION
The results of this study clearly show the important
impact that effective collaborative planning efforts with
suppliers can have on supply chain performance and,
indirectly, on a firms financial performance. This finding
validates the interest supply managers have shown in
recent years in integrating suppliers into their planning
processes. In the firms that responded to the survey,
effective collaborative planning was associated with significant improvement in supplier quality, responsiveness,
and delivery performance, as well as inventory turnover
and material costs.
The results also provide valuable insights into some of
the antecedents of effective collaborative planning. These
include both objective (i.e., information quality) and
behavioral (i.e., trust) elements. Availability of good
information for these planning processes appears to be
a necessary but not sufficient condition for success. The
level of trust existing between the buyer and supplier
firms was positively related to effectiveness for five of the
eight collaborative planning processes. This drives home
the need to build the relationship between the firms before
real success can be expected in the planning process.
As might be expected, the quality of information
exchanged during the planning process is critical to
effectiveness. Information shared through linked information systems was found to be particularly important.
The quality of information shared in this manner was
positively associated with effectiveness in all eight collaborative planning processes we examined. As firms seek
to expand their collaborative planning efforts with suppliers, it is evident that close attention must be given to
the deployment of IT.
Exhibit 5
High
Impact of
planning process
on performance
IV.
III.
Dual emphasis
on traditional
communication
and linked
systems
I.
Rely on
traditional
communication
modes as much
as possible
Low
Low
20
Critical focus
area for linked
system
development and
enhancement
II.
Invest in linked
systems as
resources are
available and as
a byproduct of
other systems
Structuredness of
planning process
Focus on
quadrants III
and IV for
potential
breakthrough
results.
High
A second important finding is the fact that, although all

of the firms included in this study were using linked
information systems to share planning information, the
quality of information exchanged via traditional modes
of communication remained an important factor in planning effectiveness. This type of information was positively
associated with planning effectiveness for all but the most
highly structured types of collaborative planning (supplier
scheduling and forecasting/inventory positioning). The
less-structured planning activities are likely to require
exchange of both explicit and tacit knowledge
between buyer and supplier firms.
Tacit knowledge is subconsciously understood and
applied, difficult to articulate, developed from direct
experience and action, and usually shared through highly
interactive conversation, story-telling and shared experience. Explicit knowledge, in contrast, can be more
precisely and formally articulated (Zack 1999). Tacit
knowledge calls for a more information-rich communication medium, like face-to-face communication, rather
than a lean medium-like EDI (Daft and Weick 1984;
Daft and Lengel 1986).
This finding sends a strong message that while IT is
critical to effective collaborative planning with suppliers,
technology cannot be the complete solution. Firms
will continue to communicate and share information
through both the traditional modes of communication as
well as linked information systems if their planning is to
be successful.
MANAGERIAL IMPLICATIONS
The results of this study highlight findings of importance to supply chain managers:
1. Collaborative planning effectiveness positively

impacts supply chain and firm performance.
2. Linked and traditional information systems are
both critical to effective collaborative planning
processes and performance.
3. The degree of trust between buyers and suppliers
impacts collaborative planning effectiveness and
thereby supply chain and firm performance.
Given these findings, it is imperative that sourcing and
supply chain leaders develop strategies and processes to:
1. Prioritize the supply-focused collaborative planning processes most critical to their firms performance. This includes determining the current
level of collaborative planning performance and
the desired state, including overall internal and
cross-enterprise communications, degree of
bilateral trust, and the quality of communication
through both traditional means and linked
information systems.
2. Establish action steps necessary to achieve targeted competitive performance-level improvements through effective collaborative planning.
For example, what actions are required to
improve forecasting, inventory positioning,
and visibility through collaborative planning
processes?
3. Recognize the difference between truly strategic
suppliers and other suppliers, and establish strategies to further enhance collaborative planning
processes and trust between the buying firm and
strategic suppliers. One example is determining
how to most effectively share forecast and
inventory positioning information so that suppliers are better able to make good decisions
and provide improved commitments to these
forecasts.
In addition, effectively linked collaborative planning
systems, when combined with trust, provide the opportunity to transform the working relationship between
firms. A linked collaborative planning system can be
viewed as a means to achieve efficiency as well as a vehicle
for transformation. Sourcing and supply chain leaders can
establish a first-mover approach and gain competitive
advantage using effective systems to achieve improved
supply chain results.
Firms that are first movers in the innovative application
of linked information systems and also maintain the
quality of their traditional modes of communication
may gain significant benefits. For example, being able
to schedule all suppliers in the supply chain from a
customer-generated pull signal, collaboratively planning
from where suppliers should ship to various buyer locations and even ultimate customers can significantly
improve results.
Finally, a linked information system that provides highquality information about design specifications and
related costs between buyer and supplier in the new
product creation process would transform many organizations. The impact of collaborative planning on correct
design-to-cost considerations can both determine and
positively impact the profitability of new products.
Exhibit 5 suggests an approach to prioritizing efforts to
build traditional communication capabilities and linked
information systems as a function of the nature and
impact of various collaborative planning activities.
Exhibit 5 suggests that stand-alone investment in IOS is
not likely to be justified unless the impact of the related
planning process is substantial. Therefore the primary
focus for IT investment should be in quadrants III and IV.
Highly structured planning processes that have lower
impact may still benefit from the application of IOS, but
these applications should be deployed on an opportunistic basis as a part of other IT development initiatives.
Improving traditional communication and linked

information systems, combined with enhanced processes
to further bi-lateral trust, should have a positive impact on
firm performance. Failing to focus on this type of transformation may leave a firm at a competitive disadvantage.
LIMITATIONS
As with any study, there are several limitations to this
research. First, while buyersupplier collaboration is
obviously a dyadic phenomenon, the specific cases of
buyersupplier collaboration examined in the study are
informed by one member of the dyad the purchasing/
sourcing manager. Second, the informants were asked to
respond for only one case of buyersupplier collaboration
(as opposed to informing on a more complete view of
their experiences across multiple suppliers). A third limitation to this research is that the theoretical model may
not prove to be invariant across industries. While this
study cut across a number of industries, there was not a
sufficient sample from individual industries to assess
possible variations from industry to industry. Future
research should be carried out both to replicate the findings of this study as well as to assess the validity of the
theoretical model across differing industries. Limitations
notwithstanding, the results of this research are important for both practice and future research.
REFERENCES
Anderson, J. and W. Gerbing. Some Methods for Respecifying
Measurement Models to Obtain Unidimensional Construct
Measurement, Journal of Marketing Research, (14), 1982,
pp. 453-459.
Bagozzi, R. and Y. Yi. On the Evaluation of Structural Equation
Models, Journal of the Academy of Marketing Science, (16), 1988,
pp. 74-94.
Bailey, J. and S. Pearson. Development of a Tool for Measuring
and Analyzing Computer User Satisfaction, Management
Science, (29:5), 1983, pp. 530-545.
Barratt, M. and A. Oliveira. Exploring the Experiences of
Collaborative Planning Initiatives, International Journal of
Physical Distribution and Logistics Management, (31:4), 2001,
pp. 266-289.
Bentler, P. EQS Structural Equations Program Manual, Multivariate
Software Inc., Encino, CA, 1995.
Buhse, T. High-Tech Contact, Purchasing Todays, 1997.
Buvik, A. and G. John. When Does Vertical Coordination
Improve Industrial Purchasing Relationships? Journal of
Marketing, (64:4), 2000, p. 52.
Cachon, G.P. and M. Fisher. Supply Chain Inventory
Management and the Value of Shared Information,
Management Science, (46:8), 2000, p. 1032.
Carter, P., J. Carter, R. Monczka and T. Slaight. The Future of
Purchasing and Supply: A Five- and Ten-Year Forecast, Center
for Advanced Purchasing Studies, National Association of
Purchasing Management and A.T. Kearney Inc., Tempe, AZ,
1998.
Carter, J.R. and R. Narasimhan. Purchasing and Supply
Management: Future Directions and Trends, International
Journal of Purchasing and Materials Management, (32:4), 1996,
p. 2.
21
Cook, T. and D. Campbell. Quasi-Experimentation: Design &

Analysis Issues, Rand McNally, Chicago, IL, 1979.
Cummings, L. and P. Bromiley. The Organizational Trust
Inventory (OTI): Development and Validation, Sage Publications,
Thousand Oaks, CA, 1996.
Daft, R. and R. Lengel. Organizational Information
Requirements, Media Richness, and Structural Design,
Management Science, (32:5), 1986, pp. 554-571.
Daft, R. and K. Weick. Toward a Model of Organizations as
Interpretation Systems, Academy of Management Review, (9:2),
1984, pp. 284-295.
Goodhue, D. Task-Technology Fit and Individual
Performance, MIS Quarterly, (19:2), 1995, pp. 213-236.
Harrington, L.H. Collaborating on the Net, Transportation and
Distribution, (41:2), 2000, p. D8.
Hu, L. and P. Bentler. Cutoff Criteria for Fit Indexes in
Covariance Structure Analysis: Conventional Criteria Versus
New Alternatives, Structural Equation Modeling Journal, (66:1),
1999, pp. 1-55.
Jap, S. Pie-Expansion Efforts: Collaboration Processes in Buyer
Supplier Relationships, Journal of Marketing Research, (36:4),
1999, pp. 461-475.
Krause, D. Interorganizational Cooperation in Supplier
Development: Influencing Factors, Ph.D. thesis, Arizona State
University, 1995.
Krause, D.R. Supplier Development: Current Practices and
Outcomes, International Journal of Purchasing and Materials
Management, (33:2), 1997, p. 12.
Larson, P. An Empirical Study of Inter-Organizational
Functional Integration and Total Costs, Journal of Business
Logistics, (15:1), 1994, pp. 153-169.
Larson, P. and J. Kulchitsky. The Use and Impact of
Communication Media in Purchasing and Supply
Management, Journal of Supply Chain Management, (36:3),
2000, pp. 29-39.
Lee, H. and C. Billington. Managing Supply Chain Inventory:
Pitfalls and Opportunities, Sloan Management Review, (33:3),
1992, pp. 65-73.
Lee, H., V. Padmanabhan and S. Whang. The Bullwhip Effect
in Supply Chains, Sloan Management Review, (38:3), 1997,
pp. 93-102.
Lee, H., K. So and C. Tang. The Value of Information Sharing
in a Two-Level Supply Chain, Management Science, (46:5), 2000,
p. 626.
Mardia, K. Applications of Some Measures of Multivariate
Skewness and Kurtosis in Testing Normality and Robustness
Studies, Sankhya: The Indian Journal of Statistics, (36:Series B,
Part 2), 1974, pp. 115-128.
Mardia, K. Measures of Multivariate Skewness and Kurtosis
with Applications, Biometrika, (57:3), 1970, pp. 519-530.
22
Mohr, J. and R. Spekman. Characteristics of Partnership

Success: Partnership Attributes, Communication Behavior,
and Conflict Resolution Techniques, Strategic Management
Journal, (15:2), 1994, pp. 135-152.
Monczka, R. and J. Morgan. Questions You Need to Ask About
Your Supply Chain, Purchasing, (124), 1998.
Monczka, R., K. Petersen, R. Handfield and G. Ragatz. Success
Factors in Strategic Supplier Alliances: The Buying Company
Perspective, Decision Sciences Journal, (29:3), 1998, pp. 553-577.
Moorman, C., G. Zaltman and R. Deshpande. Relationships
Between Providers and Users of Market Research: The Dynamics
of Trust Within and Between Organizations, Journal of
Marketing Research, (29:3), 1992, pp. 314-328.
Pieptea, D. and E. Anderson. Price and Value of Decision
Support Systems, MIS Quarterly, (11:4), 1987, pp. 515-530.
Pratt, J., H. Raiffa and R. Schlaifer. Introduction to Statistical
Decision Theory, MIT Press, Cambridge, MA, 1995.
Radding, A. The Push to Integrate, Information Week,
1998.
Ragatz, G., R. Handfield and T. Scannell. Success Factors
for Integrating Suppliers into New Product Development,
The Journal of Product Innovation Management, (14:3), 1997,
pp. 190-202.
Raymond, L. Organizational Characteristics and MIS Success
in the Context of Small Business, MIS Quarterly, (9:1), 1985,
pp. 37-52.
Robison, J. Inventory Profile Analysis: An Aggregation
Technique for Improving Customer Service While Reducing
Inventory, Production and Inventory Management Journal, (42:2),
2001, p. 8.
Stank, T., S. Keller and P. Daugherty. Supply Chain
Collaboration and Logistical Service Performance, Journal
of Business Logistics, (22:1), 2001, pp. 29-48.
Troyer, C. and R. Cooper. Smart Moves in Supply Chain
Integration, Transportation and Distribution, (36:9), 1995,
p. 55.
Walton, S.V. and A.S. Marucheck. The Relationship Between
EDI and Supplier Reliability, International Journal of Purchasing
and Materials Management, (33:3), 1997, p. 30.
Whipple, J., R. Frankel and P. Daugherty. Information Support
for Alliances: Performance Implications, Journal of Business
Logistics, (23:2), 2002, pp. 67-82.
Wisner, J. A Structural Equation Model of Supply Chain
Management Strategies and Firm Performance, Journal of
Business Logistics, (24:1), 2003, pp. 1-25.
Young, D., H. Carr and R. Rainer. Strategic Implications of
Electronic Linkages, Information Systems Management, (16:1),
1999, p. 32.
Zack, M. Managing Codified Knowledge, Sloan Management
Review, (40:4), 1999, pp. 45-58.
Appendix A
DETAILS ON MODEL CONSTRUCTS
Trust. Respondents answered the following eight questions on a seven-point scale, where 15Strongly Agree
and 75Strongly Disagree:
& I think the people in this supplier firm tell the truth in negotiations.
& I think that this supplier meets its negotiated obligations to our department.
& In my opinion this supplier is reliable.
& I feel that this supplier negotiates honestly.
& I feel that the people at this supplier will keep their word.
& I think that this supplier does not mislead us.
& I feel that this supplier does not try to get out of commitments.
& I feel that this supplier negotiates joint expectations fairly.
Decision-Making Effectiveness. For each of the eight collaborative planning processes, respondents answered
the following two questions on a seven-point scale, where 15Strongly Agree and 75Strongly Disagree.
& (This collaborative planning process) has helped my business unit to make more effective decisions.
& (This collaborative planning process) has helped my supplier to make more effective decisions.
Traditional-Mode Information Quality. For each of the eight collaborative planning processes, respondents
answered the following five questions on a seven-point scale, where 15Strongly Agree and 75Strongly
Disagree.
When using traditional methods of communication, the information shared between my business unit and this
supplier in support of (this collaborative planning process) was:
&
&
&
&
&
Current
Accurate
Complete
Compatible
Convenient to access
Linked Information System Information Quality. For each of the eight collaborative planning processes,
respondents answered the following five questions on a seven-point scale, where 15Strongly Agree and
75Strongly Disagree.
When using linked information systems, the information shared between my business unit and this supplier in
support of (this collaborative planning process) was:
& Current
& Accurate
& Complete
& Compatible
& Convenient to access
Construct
Trust
Number of Items
Cronbachs a
0.94

& Effectiveness
0.89
& Traditional info quality
0.92
& Linked IS info quality
0.95
& Effectiveness
0.90
0.92
0.97
23
Capacity planning
& Effectiveness
2
5
5
0.92
0.96
0.97
2
5
5
0.88
0.94
0.97
2
5
5
0.81
0.93
0.96
2
5
5
0.95
0.95
0.97
2
5
5
0.87
0.96
0.96
2
5
5
0.87
0.95
0.98

& Effectiveness
Proposal evaluation
& Effectiveness
& Effectiveness
Supplier scheduling
& Effectiveness
& Effectiveness
Responses for the items included in the following five constructs were on a seven-point scale where 15Much
Better and 75Much Worse.
Overall Collaborative Planning Effectiveness. Respondents were asked to indicate the degree to which each of the
eight collaborative planning processes has improved over the past 2 years.
Material Cost Performance. Respondents were asked to indicate the degree to which their business units
performance had changed over the past 2 years for each of the following dimensions:
& Purchase price reduction
& Purchase price reduction compared to market
& Total cost reduction
Inventory Turns. Respondents were asked to indicate the degree to which their business units performance had
changed over the past 2 years on:
& Total inventory turnover rate
Supplier Performance. Respondents were asked to indicate the degree to which their business units
performance had changed over the past 2 years for each of the following dimensions:
& Supplier on-time delivery
& Supplier quality performance
& Supplier responsiveness
Firm Performance. Respondents were asked to indicate the degree to which their business units performance
had changed over the past 2 years for each of the following dimensions:
& Return on investment
& Return on equity
& Profit margin
24
Construct
Overall collaborative planning effectiveness
Material cost
Inventory turns
Supplier performance
Firm performance
Number of Items
Cronbachs a
8
3
1
3
3
0.84
0.87
N/A
0.79
0.91
Appendix B
CONFIRMATORY FACTOR ANALYSIS (CFA) AND SEM
Measurement Development
To ensure face validity (Cook and Campbell 1979), all measures were thoroughly examined by a group of
industry executives and subject-area experts. All univariate distributions were examined and were found to be
free from excessive skewness, kurtosis and outliers. Mardia (1970, 1974) coefficient was used as a measure of
multivariate kurtosis and provided an indication that the data were relatively free from multivariate kurtosis.
CFA
CFA with maximum likelihood method (Bentler 1995) was used to validate the measurement model. The
measurement model specifies the associations between the observed variables or indicators and the underlying
latent variables or theoretical constructs, which are presumed to determine responses to the observed
measures (Anderson and Gerbing 1982).
The overall fit of the measurement model provided for a w2 of 198.96 (100 d.f.), a CFI of 0.90, an SRMR of
0.125, and a root mean-square error of approximation (RMSEA) of 0.1. From this we conclude that the overall
fit of the measurement model is satisfactory (Bagozzi and Yi 1988; Hu and Bentler 1999).
Convergent Validity
Convergent validity was assessed by examining both the magnitude of the factor loadings of the manifest
variables on their respective latent variables as well as whether or not those factor loadings were statistically
different than zero. All factor loadings were of sufficient magnitude and significantly different from zero at the
p < 0.05 level.
Discriminant Validity
Discriminant validity was assessed by examining the cross-factor loadings of one manifest variable onto all
latent constructs on which high loadings were not expected. This analysis was conducted by examining the
matrix of factor loadings and by using Lagrangian Multiplier (LM) tests (Bentler 1995). Factor loadings were
generally of greater magnitude with the expected latent construct than with other latent constructs in the
measurement model. The LM tests revealed only a very small number of minor fixed parameters that could be
released to gain an improved model fit.
The results of this CFA provide evidence in support of the notion that the measurement model is adequate for
use in the testing of the structural model.
Structural Model
The measurement model assessed in the previous section using CFA was subsequently modified to allow for the
inclusion of structural relationships between the independent and dependent constructs.
The structural equations were estimated using the EQS 6.1 structural equation modeling software (Bentler
1995). The structural model with standardized parameter estimates is shown in Exhibit 2.
The overall fit of the structural model was indicated by a w2 of 149.58 (93 d.f.), a CFI of 0.95, an SRMR of 0.9,
and an RMSEA of 0.08. We may conclude that the overall fit of each of the structural models is satisfactory
(Bagozzi and Yi 1988; Hu and Bentler 1999).
25

An Examination of Collaborative Planning Effectiveness and Supply Chain Performance

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

An Examination of Collaborative Planning Effectiveness and Supply Chain Performance

Transféré par

Droits d'auteur :

Formats disponibles

An Examination of Collaborative Planning

Effectiveness and Supply Chain

ning information more quickly

purchasing executives whose firms are involved in

collaborative planning with suppliers to examine

The Journal of Supply Chain Management | Spring 2005

1. Supplier scheduling controls the release of orders