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SCI comprises internal, supplier and customer integration (Swink et al., 2007),
although some academics focus independently on examining integration with suppliers
(Das et al., 2006) or customers (Fynes et al., 2004) to isolate their separate effect on
performance. Internal integration refers to the extent to which functions within a firm
work together in a collaborative manner and interact to solve problems and achieve
mutually acceptable outcomes (Danese et al., 2013). External integration depicts the
extent to which a manufacturer develops collaborative relationships, exchanges
information and jointly plans supply chain activities or processes with both suppliers
and customers (Danese et al., 2013). Internal integration is mainly concerned with a
comprehensive integrated planning and control system (Stevens, 1989). It helps cross-
functional teams to utilize each others resources and capabilities to reduce duplicated
tasks, improve product quality and jointly design products (Flynn et al., 2010; Huo et
al., 2014).
Supplier integration is a state of syncretism among the supplier, purchasing and
manufacturing constituents of an organization (Das et al., 2006). When developing new
product, supplier integration helps to decrease time-to-market, quality problems and
cost (Quesada et al., 2008). Customer integration occurs when firms work closely with
customers and consider them as a crucial part of the supply chain (Zailani and
Rajagopal, 2005). It entails firms to engage in their customers activities with frequent
contact to certify high product quality, low price and operational effectiveness (Danese
and Romano, 2013). Interaction with customers to obtain feedback on the output
delivered for better customer satisfaction is vital for customer integration (Zailani and
Rajagopal, 2005).
and services when required at acceptable cost in the quantities required by customers
(Green et al., 2008). There are hard measures of logistics performance such as net
income and soft measures such as customer satisfaction, each of which has strengths
and weaknesses (Chow et al., 1994). This study employs various logistics performance
indicators which have been frequently used by a large number of studies, including (1)
ability to provide desired quantities on a consistent basis; (2) flexibility to modify order
size, volume or decomposition during logistics operation; (3) customer lead time and
load efficiency; (4) reliable delivery performance; (5) inventory visibility; and (6) total
logistics cost (Boon-itt and Wong, 2011; Green et al., 2008; Li et al., 2009; Stank et al.,
2001)
Supplier integration enables firms and supply chain partners to reduce production costs
through economies of scale and scope (Das et al., 2006). Also, it enables the focal firm
and supplier to share information, diminishing information asymmetry and the potential
for opportunism (Rosenzweig et al., 2003). Customer integration promotes openness of
communication and a problem-sharing attitude, so manufacturers can receive feedback
on quality, logistics and delivery performance (Danese and Romano, 2011). This creates
opportunities to leverage the intelligence embedded in both focal firms and customers
when seeking solutions to solve customer problems (Swink et al., 2007). Moreover,
sharing demand information with customers can enhance accurate forecast and order
quantity decisions in multi-stage serial systems, lowering total inventory costs. Both
supplier and customer integration enable firms to gain greater supply chain benefits
overall since integration enhances the visibility of supply and demand in supply chains,
making it possible to plan and execute adequate operations (Richey et al., 2009).
H4: The association between internal integration and logistics performance will be
moderated by SCD.
H5: The association between supplier integration and logistics performance will be
moderated by SCD.
H6: The association between customer integration and logistics performance will be
moderated by SCD.
<insert Figure 1 around here>
3. Methodology
Tests for non-response bias check for any significant difference between early and
late responses by considering late respondents as non-respondents as suggested by
Armstrong and Overton (1997). Student t-tests show no significant difference at p<0.05,
implying that non-response bias is unlikely. In addition, a Harmans one-factor test is
conducted because the data are collected from a single type of respondent at a single
point in time. If no one general factor accounted for the majority of covariance, there is
no concern due to common method variance. The result shows that the first factor
accounted for 35.57% of total variance, suggesting no concern for common method
variance.
Discriminant validity is also ensured (Table 4). All chi-square differences between
8
all pairs of constructs of the constrained and unconstrained model are significant at the
0.001 level, indicating strong discriminant validity (Bagozzi et al., 1991). Also, each of
the square roots of the AVEs is greater than each pairwise correlation between
constructs, suggesting an acceptable level for discriminant validity (Fornell and
Larcker, 1981).
4. Results
This study uses a hierarchical moderated regression to test the hypotheses as Aiken
and West (1991) recommended. First, the control variable is entered into the regression.
Then, the independent variables are entered. Next, the moderating variable, SCD is
entered as a block. Finally, the interaction terms of SCD and each dimension of SCI
(internal, supplier and customer integration) is entered as a block. If the inclusion of the
interaction term accounts for a significant amount of incremental variance in the
dependent variable, there is evidence of a moderating effect of SCD on the given
relationships. The following equation indicates the moderated model for this study.
positively moderate the association between each dimension of SCI and logistics
performance.
5. Discussion
and structure of the supply chain inescapably alter its dynamism and so need to raise the
capability to rapidly adjust to changing levels of dynamism by forming superior ways of
innovating supply chain operations. By effectively sharing information, manufacturers
are able to properly cope with SCD and reduce uncertainty. They must evaluate current
levels of SCD before further implementing SCI, because it is not guaranteed to raise
logistics performance. Furthermore, they should simultaneously develop SCI and
measure SCD to facilitate their interaction, rather than trying to implement SCI
practices only. Higher levels of SCD present an opportunity, not a threat. This is
because a high innovation rate in production forces the manufacturers with suppliers
and customers to quickly adapt their manufacturing, production, delivery and
forecasting in order to reflect actual demand and supply from suppliers and customers.
Zailani and Rajagopal (2005) echoed the paramount importance of rapidly recognising
reading market signals and reacting to the environment for innovative products, services
and processes as well as the products short life cycle. Maintaining the high degree of
integration and building the ability to rapidly reflect the high degree of SCD needs
substantial investment in money and time. Senior managers need to view such an
investment as a potential revenue rather than a cost.
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Figure 2. The moderating effect of SCD on associations between each dimension of SCI and
logistics performance
3
Position
Staff 7 (6)
Assistant manager 5 (4)
Manager 9 (7)
Deputy general manager 10 (8)
Department manager 39 (31)
Managing director 24 (19)
CEO 32 (25)
5
Table 4. Chi-square difference test and square root of AVE versus correlation.
Pair-construct test Square root of AVE versus correlation
Pairs Constrained Unconstrained
2 difference II SI CI SCD LP
2 df 2 df
II-SI 68.94 28 47.44 27 21.50*** II 0.78
II-CI 80.25 27 52.04 26 28.21*** SI 0.71*** 0.76
II-SCD 67.64 14 13.95 13 53.70*** CI 0.66*** 0.65*** 0.74
II-LP 81.96 35 54.81 34 27.15*** SCD 0.10 0.22* 0.20 0.77
SI-CI 81.54 35 49.76 34 31.78*** LP 0.42*** 0.48*** 0.32** 0.63*** 0.75
SI-SCD 70.91 20 22.89 19 48.02***
SI-LP 94.90 44 67.06 43 27.84***
CI-SCD 105.19 20 50.17 19 55.02***
CI-LP 135.76 44 94.53 43 41.22***
SCD-LP 103.56 27 85.01 26 18.56***
Note: ***p<0.001; **p<0.01; *p<0.05; p<0.1; Square root of AVE is on the diagonal; II: internal integration; SI: supplier integration; CI:
customer integration; SCD: supply chain dynamism; LP: logistics performance.
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Table 5. Hierarchical moderated regression analysis for each dimension of SCI and LP.
Variable entered Step 1 Step 2 Step 3 Step 4
Firm size -0.055 -0.003 -0.002 0.027
II 0.362*** 0.320*** 0.329***
SCD 0.546*** 0.549***
II x SCD 0.247***
F change 0.371 18.231*** 63.291*** 14.231***
F for the regression 0.371 9.327*** 30.464*** 28.883***
R2 0.003 0.132 0.428 0.488
Adjusted R2 -0.005 0.118 0.414 0.472
Firm size -0.055 -0.039 -0.036 -0.052
SI 0.437*** 0.333*** 0.347***
SCD 0.502*** 0.527***
SI x SCD 0.213**
F change 0.371 29.077*** 51.959*** 10.190**
F for the regression 0.371 14.766*** 31.242*** 27.744***
R2 0.003 0.194 0.434 0.478
Adjusted R2 -0.005 0.181 0.421 0.461
Firm size -0.055 -0.023 -0.027 -0.034
CI 0.291** 0.195** 0.208**
SCD 0.536*** 0.527***
CI x SCD 0.232***
F change 0.371 11.235** 53.532*** 11.124**
F for the regression 0.371 5.819** 23.380*** 21.771***
R2 0.003 0.086 0.365 0.419
2
Adjusted R -0.005 0.072 0.349 0.399
Note: ***p<0.001;**p<0.01; II: internal integration; SI: supplier integration; CI: customer
integration; SCD: supply chain dynamism.