Assignment 3Targeted journal: Strategic Management Journal

Competitive advantage and organizational performance through Supply Chain

Management practices

By Thanapat Panthanapratez*

Keywords: Cometitve advantage, organizational performance, supply chain

management practices, supply chain management, structural equation modeling

*Correspondence to Thanapat Panthanapratez, 80/51 Moo3, Krisadanakorn 29,

Paholyothin Road, Klong Neung, Klong Laung, Patumthani 12120, Thailand ,

e-mail address: thanapat@thanapatoffice.com

Abstract

Ececutive supply chain management (SCM) has become a potentiially valuable way of

securing competitive advantage and improving organizational performance since

competition is not longer between organizations, but among supply chains. Much of the

empirical research in SCM focuses on only the upstream or downstream side of supply

chain. This research conceptualizes and develop five dimentions of SCM practice

(strategic supplier partnership, customer relationship, level of communication sharing,

quality of infiormation sharing, and postponement) and test relationships between SCM

practices, competivie advantage, and organizational performance. Data for the study will

be collected from 240 Thai auto parts manufacturers through e- survey and the

relationships proposed in the framework will be tested using strutural equation modeling.

The expected result is that the higher levels of SCM practices can lead to enhanced

competitive advantage and improved organizational performance. Also competitive

advantage can have a direct, positive imapct on organizational performance.

1

Introduction

As competition in the intensified and markets became global, so did the challenges

associated with getting a product and service to the right place at the right time at the

lowest cost. Organizations began to realize that it is not enough to improve efficiencies

within an organization, but their whole supplychain has to be made competitive. The

understanding and practicing of supplychain management (SCM) has become an

essential prerequisite for staying competitive in the global race and for enhancing

profitably (Childhouse P. et al., 2003; Moberg CR. et al., 2002; Power DJ. et al., 2001;

Tan KC. et al., 2002).

Council of Logistics Management (CLM) (Council of Logistics Management., 2000)

defines SCM as the systemic, strategic coordination of the traditional business functions

and tactics across these businesses functions within a particular organization and

across businesses within the supplychain for the purposes of improving the long-term

performance of the individual organizations and the supplychain as a whole. SCM has

been defined to explicitlyrecognize the strategic nature of coordination between trading

partners and to explain the dual purpose of SCM: to improve the performance of an

individual organization, and to improve the performance of the whole supplychain. The

goal of SCM is to integrate both information and material flows seamlesslyacross the

supplychain as an effective competitive weapon (Childhouse P. et al., 2003; Feldmann

M. et al., 2003). The concept of SCM has received increasing attention from

academicians, consultants, and business managers alike (Croom S. et al., 2000;

Feldmann M. et al., 2003; Tan KC. et al., 2002; Van Heok RI., 1998). Many

organizations have begun to recognize that SCM is the keyto building sustainable

competitive edge

2

for their products and/or services in an increasingly crowded marketplace. The concept

of SCM has been considered from different points of view in different bodies of literature

(Croom S. et al., 2000) such as purchasing and supply management, logistics and

transportation, operations management, marketing, organizational theory, and

management information systems. Various theories have offered insights on specific

aspects or perspectives of SCM, such as industrial organization and associated

transaction cost analysis (Ellram LM., 1990; Williamson O., 1975), resource-based and

resource-dependencytheory (Rungtusanatham M. et al., 2003), competitive strategy

(Porter ME., 1985), and social–political perspective (Stern L. et al., 1980).

However, despite the increased attention paid to SCM, the literature has not been able

to offer much by way of guidance to help the practice of SCM (Cigolini R. et al., 2004).

This has been attributed to the interdisciplinary origin of SCM, the conceptual confusion,

and the evolutionary nature of SCM concept. There is no generally accepted definition of

SCM in the literature (Feldmann M. et al., 2003). The concept of SCM has been involved

from two separate paths: purchasing and supply management, and transportation and

logistics management (Tan KC. et al., 1998). According to purchasing and supply

management perspective, SCM is synonymous with the integration of supply base that

evolved from the traditional purchasing and materials functions (Banfield E., 1999;

Lamming R., 1993). In the perspective of transportation and logistics management, SCM

is synonymous with integrated logistics systems, and hence focus on inventory

reduction both within and across organizations in the supply chain (Alvarado UY. et al.,

2001; Bechtel C. et al., 1997; Romano P. et al., 2001; Rudberg M. et al., 2003; Van

Heok RI., 1998). Eventually, these two perspectives evolved into an integrated SCM that

integrates all the activities along the whole supply chain.

3

The evolutionary nature and the complexity of SCM are also reflected in the SCM

research. Much of the current theoretical/ empirical research in SCM focuses on only the

upstream or downstream side of the supplychain, or certain aspects/perspectives of

SCM (Shah R. et al., 2002). Topics such as supplier selection, supplier involvement, and

manufacturing performance (Choi TY. et al., 1996; Vonderembse MA. et al., 1999), the

influence of supplier alliances on the organization (Stuart FI., 1997), success factors in

strategic supplier alliances (Narasimhan R. et al., 1998), supplier management

orientation and supplier/buyer performance (Shin H. et al., 2000), the role of

relationships with suppliers in improving supplier responsiveness (Handfield RB. et al.,

2002), and the antecedence and consequences of buyer–supplier relationship (Chen IJ.

et al., 2004) have been researched on the supplier side. Studies such as those by Clark

and Lee (Clark TH. et al., 2000), and Alvarado and Kotzab (Alvarado UY. et al., 2001),

focus on the downstream linkages between manufacturers and retailers. A few recent

studies have considered both the upstream and downstream sides of the supplychain

simultaneously. Tan et al. (Tan KC. et al., 1998) explore the relationships between

supplier management practices, customer relations practices and organizational

performance; Frohlich and Westbrook (Frohlich MT. et al., 2001) investigate the effects

of supplier–customer integration on organizational performance, Tan et al.(Tan KC. et

al., 2002) study SCM and supplier evaluation practices and relate the constructs to firm

performance, Min and Mentzer [34] develop an instrument to measure the supplychain

orientation and SCM at conceptual levels. Cigolini et al. (Cigolini R. et al., 2004) develop

a set of supply chain techniques and tools for examining SCM strategies. Extensive

case studies about the implementation of SCM have been conducted by the IT service

providers (such as SAP, Peoplesoft, i2 and JDEdwards) and the research firms (such as

4

Forrester Research and AMR Research) (http://www.supply-chain.org) and many case

histories of successful implementations of SCM have been reported in the literature.

Taken together, these studies are representative of efforts to address various diverse

but interesting aspects of SCM practices. However, the absence of an integrated

framework, incorporating all the activities both upstream and downstream sides of the

supply chain and linking such activities to both competitive advantage and

organizational performance, detracts from usefulness of the implementation of previous

results on SCM.

Two preliminary empirical studies, Li et al., (2004) and Koh et a.l., (2007) did the

empirical studies that test a framework identifying the relationships among SCM

practice, competitive advantage and organizational performance and SCM practice

among, operational performance and SCM-related organizational performance

respectively.

Lt et al., (2004) identified the supply chain management practice into five dimensions,

strategic supplier partnership, customer relationship, level of information sharing, quality

of information sharing and postponement with three research questions; RQ1: Do

organizations with high levels of SCM practices have high levels of organizational

performance?, RQ2: Do organizations with high level of SCM practices have high levels

of competitive advantage?, RQ3: Do organizations with high levels of competitive

advantage have a high level of organizational performance? The study finding that firms

that implement SCM practices can have a bottom line influence on the organizational

performance which is supported question 1, SCM practice also direct impact on

competitive advantage which is supported question 2, firms that has higher levels of

5

competitive advantage may lead to improved organizational performance which is

supported to question 3.

The purpose of this study is the extending and take consideration the limitations and

recommendation in the aspect of limited the observation and enhance the research

finding as is more generalization from the preliminary empirical study of Li et al., (2004)

that have been done to determine the underlying dimensions of SCM practices and to

empirically test a framework identifying the relationships among SCM practices,

competitive advantage and organizational performance with special emphasis on

manufacturing firms in automotive industry in Thailand.

This study is therefore to empirically test a framework identifying the relationships

among SCM practices, competitive advantage and organizational performance. SCM

practices are defined as the set of activities undertaken by an organization to promote

effective management of its supplychain. The practices of SCM are proposed to be a

multi-dimensional concept, including the downstream and upstream sides of the

supplychain. Operational measures for the constructs will be developed and tested

empirically, using data collected from respondents to a survey questionnaire. Structural

equation modeling will be used to test the hypothesized relationships. It is expected that

the current research, by addressing SCM practices simultaneouslyfrom both upstream

and downstream sides of a supply chain, will help researcher better understand the

scope and the activities associated with SCM and allow researcher to test the

antecedences and consequences of SCM practice. Further, by of fering a validated

instrument to measure SCM practices, and by providing empirical evidence of the

impact of SCM practices on an organization’s competitive advantage and its

performance, it is expected that this research will offer useful guidance for measuring

6

and implementing SCM practices in an organization and facilitate further research in this

area.

The remainder of this paper is organized as follows. Section 2 presents the research

framework, provides the definitions and theory underly ing each dimension of SCM

practices, discusses the concepts of competitive advantage and organizational

performance, and develops the hypothesized relationships. The research methodology

and analysis of results are then presented, followed by the implications of the study.

Research framework

Figure 1, the SCM framework that predetermined in the preliminary study by Li, et al.,

(2004) that proposed SCM practices will have an impact on organizational performance

both directly and also indirectly through competitive advantage. SCM practice is

conceptualized as a five-dimensional construct. The five dimensions are strategic

supplier partnership, customer relationship, level of information sharing, quality of

information sharing, and postponement. A detailed description of the development of the

SCM practices construct is provided in the following paragraphs. Competitive advantage

and organizational performance are concepts that have been operationalized in the

existing literature (Koufteros XA. et al., 1997; Zhang QY., 2001). Using literature

support, the expected relationships among SCM practices, competitive advantage, and

organizational performance are discussed, and hypotheses relating these variables are

developed.

7

SCM practices

SCM practices have been defined as a set of activities under taken in an organization to

promote effective management of its supply chain. Donlon (Donlon JP., 1996) describes

the latest evolution of SCM practices, which include supplier partnership, outsourcing,

cycle time compression, continuous process flow, and information technologysharing.

Tan et al. (Tan KC. et al., 1998) use purchasing, quality, and customer relations to

represent SCM practices, in their empirical study. Alvarado and Kotzab (Alvarado UY. et

al., 2001) include in their list of SCM practices concentration on core competencies, use

of inter-ganizational systems such as EDI, and elimination of excess inventory levels by

postponing customization toward the end of the supply chain. Tan et al. (Tan KC. et al.,

2002) identify six aspects of SCM practice through factor analysis: supply chain

integration, information sharing, supply chain characteristics, customer service

management, geographical proximity and JIT capability. Chen and Paulraj (Chen IJ. et

al., 2004) use supplier base reduction, long-term relationship, communication, cross-

functional teams and supplier involvement to measure buyer–supplier relationships.

Thus the literature portrays SCM practices from a varietyof different perspectives with a

common goal of ultimately improving organizational performance. In reviewing and

consolidating the literature, five distinctive dimensions, including strategic supplier

partnership, customer relationship, level of information sharing, quality of information

sharing and postponement, are selected for measuring SCM practice. The five

constructs cover upstream (strategic supplier partnership) and downstream (customer

relationship) sides of a supply chain, information flow across a supplychain (level of

information sharing and qualityof information sharing), and internal supplychain process

(postponement). It should be pointed out that even though the above dimensions

8

capture the major aspects of SCM practice, theycannot be considered complete. Other

factors, such as geographical proximity, JIT/lean capability (Tan KC. et al., 2002), cross-

functional teams, logistics integration (Chen IJ. et al., 2004), agreed vision and goals,

and agreed supplychain leadership are also identified in the literature. Though these

factors are of great interest, theyare not included due to the concerns regarding the

length of the surveyand the parsimonyof measurement instruments. The present study,

therefore, proposes SCM practices as a multi-dimensional concept. Table 1 lists these

dimensions along with their definitions and supporting literature. A more detailed

discussion of these dimensions is provided below.

Strategic supplier partnership: is defined as the longterm relationship between the

organization and its suppliers. It is designed to leverage the strategic and operational

capabilities of individual participating organizations to help them achieve significant

ongoing benefits (Balsmeier PW. et al., 1996; Monczka RM. et al., 1998; Nobel D.,

1997; Sheridan JH., 1998,247; Stuart FI., 1997). A strategic partnership emphasizes

direct, long-term association and encourages mutual planning and problem solving

efforts (Gunasekaran A. et al., 2001). Such strategic partnerships are entered into to

promote shared benefits among the parties and ongoing participation in one or more key

strategic areas such as technology, products, and markets (Yoshio M. et al., 1995).

Strategic partnerships with suppliers enable organizations to work more effectively with

a few important suppliers who are willing to share responsibility for the success of the

products. Suppliers participating earlyin the product-design process can offer more

costeffective design choices, help select the best components and technologies, and

help in design assessment (Tan KC. et al., 2002). Strategically aligned organizations

can work closelytogether and eliminate wasteful time and effort (Balsmeier PW. et al.,

9

1996). An effective supplier partnership can be a critical component of a leading edge

supplychain (Nobel D., 1997).

Customer relationship: Comprises the entire array of practices that are employed for the

purpose of managing customer complaints, building long-term relationships with

customers, and improving customer satisfaction (Claycomb C. et al., 1999; Tan KC. et

al., 1998). Noble (Nobel D., 1997)[45] and Tan et al. (Tan KC. et al., 1998) consider

customer relationship management as an important component of SCM practices. As

pointed out by Day (Day GS., 2000) committed relationships are the most sustainable

advantage because of their inherent barriers to competition. The growth of mass

customization and personalized service is leading to an era in which relationship

management with customers is becoming crucial for corporate survival (Wines L., 1996).

Good relationships with supplychain members, including customers, are needed for

successful implementation of SCM programs (Moberg CR. et al., 2002). Close customer

relationship allows an organization to differentiate its product from competitors, sustain

customer loyalty, and dramatically extend the value it provides to its customers

(Magretta J., 1998).

Level of information sharing: Information sharing has two aspects: quantityand quality.

Both aspects are important for the practices of SCM and have been treated as

independent constructs in the past SCM studies [2,40]. Level (quantityaspect) of

information sharing refers to the extent to which critical and proprietaryinformation is

communicated to one’s supplychain partner (Monczka RM. et al., 1998). Shared

information can varyfrom strategic to tactical in nature and from information about

logistics activities to general market and customer information (Mentzer JT. et al., 2000).

Many researchers have suggested that the key to the seamless supply chain is making

10

available undistorted and up-to-date marketing data at everynode within the supplychain

[(Balsmeier PW. et al., 1996; Childhouse P. et al., 2003; Towill DR., 1997; Turner JR.,

1993). By taking the data available and sharing it with other parties within the supply

chain, information can be used as a source of competitive advantage (Novack RA. et al.,

1995). Lalonde (Lalonde BJ., 1998) considers sharing of information as one of five

building blocks that characterize a solid supply chain relationship. According to Stein

and Sweat (Stein T. et al., 1998) supplychain partners who exchange information

regularly are able to work as a single entity. Together, they can understand the needs of

the end customer better and hence can respond to market change quicker. Moreover,

Tompkins and Ang (Tompkins J. et al., 1999) consider the effective use of relevant and

timely information byall functional elements within the supply chain as a key competitive

and distinguishing factor. The empirical findings of Childhouse and Towill (Childhouse P.

et al., 2003) reveal that simplified material flow, including streamlining and making highly

visible all information flow throughout the chain, is the key to an integrated and effective

supplychain.

Quality of information sharing includes such aspects as the accuracy, timeliness,

adequacy, and credibility of information exchanged (Moberg CR. et al., 2002; Monczka

RM. et al., 1998). While information sharing is important, the significance of its impact on

SCM depends on what information is shared, when and how it is shared, and with whom

(Holmberg S., 2000). Literature is replete with example of the dysfunctional effects of

inaccurate/delayed information, as information moves along the supplychain. Divergent

interests and opportunistic behavior of supplychain partners, and informational

asymmetries across supply chain affect the qualityof information (Feldmann M. et al.,

2003). It has been suggested that organizations will deliberately distort information that

11

can potentially reach not only their competitors, but also their own suppliers and

customers (Mason-Jones R. et al., 1997). It appears that there is a builtin reluctance

within organizations to give awaymore than minimal information (Berry D. et al., 1994)

since information disclosure is perceived as a loss of power. Given these

predispositions, ensuring the qualityof the shared information becomes a critical aspect

of effective SCM (Feldmann M. et al., 2003). Organizations need to view their

information as a strategic asset and ensure that it flows with minimum delayand

distortion.

Postponement is defined as the practice of moving forward one or more operations or

activities (making, sourcing and delivering) to a much later point in the supplychain

(Beamon BM., 1998; Johnson ME. et al., 1998; Naylor JB. et al., 1999; Van Heok RI.,

1998). Two primary considerations in developing a postponement strategyare:

(Childhouse P. et al., 2003) determining how manysteps to postpone, and (Moberg CR.

et al., 2002) determining which steps to postpone (Beamon BM., 1998). Postponement

allows an organization to be flexible in developing different versions of the product in

order to meet changing customer needs, and to differentiate a product or to modifya

demand function. Keeping materials undifferentiated for as long as possible will increase

an organization’s flexibilityin responding to changes in customer demand. In addition, an

organization can reduce supply chain cost by keeping undifferentiated inventories (Lee

HL. et al., 1995; Van Heok RI. et al., 1999). Postponement needs to match the type of

products, market demands of a company, and structure or constraints within the

manufacturing and logistics system (Fisher ML., 1997; Fisher ML. et al., 1994; Fuller JB.

et al., 1993; Pagh JD. et al., 1998). In general, the adoption of postponement maybe

appropriate in the following conditions: innovative products (Fisher ML., 1997; Fisher

12

ML. et al., 1994); products with high monetary density , high specialization and wide

range; markets characterized by long delivery time, low delivery frequency and high

demand uncertainty; and manufacturing or logistics systems with small economies of

scales and no need for special knowledge (Pagh JD. et al., 1998).

Competitive advantage

Competitive advantage is the extent to which an organization is able to create a

defensible position over its competitors (McGinnis MA. et al., 1999; Porter ME., 1985). It

comprises capabilities that allow an organization to differentiate itself from its

competitors and is an outcome of critical management decisions (Tracey M. et al.,

1999). The empirical literature has been quite consistent in identifying price/cost, quality,

delivery, and flexibility as important competitive capabilities (Tracey M. et al., 1999). In

addition, recent studies have included time-based competition as an important

competitive priority. Research by Stalk (Stalk G., 1988), Handfield and Pannesi

(Handfield RB. et al., 1995), Kessler and Chakrabarti (Kessler E. et al., 1996), Zhang

(Zhang QY., 2001) identifies time as the next source of competitive advantage. On the

basis of prior literature, Koufteros et al. (Koufteros XA. et al., 1997) describe

a research framework for competitive capabilities and define the following five

dimensions: competitive pricing, premium pricing, value-to-customer quality, dependable

delivery, and production innovation. These dimensions are also described by (Cleveland

G. et al., 1989; Rondeau PJ. et al., 2000; Safizadeh HM. et al., 1996; Tracey M. et al.,

1999; Vickery S. et al., 1999). Based on the above, the dimensions of the competitive

advantage constructs used in this studyare price/cost, quality, deliverydependability ,

product innovation, and time to market.

13

Organizational performance

Organizational performance refers to how well an organization achieves its market-

oriented goals as well as its financial goals (Yamin S. et al., 1999). The short-term

objectives of SCM are primarilyto increase productivity and reduce inventory and cycle

time, while long-term objectives are to increase market share and profits for all members

of the supply chain (Tan KC. et al., 1998). Financial metrics have served as a tool for

comparing organizations and evaluating an organization’s behavior over time (Holmberg

S., 2000). Any organizational initiative, including supplychain management, should

ultimatelyl ead to enhanced organizational performance. A number of prior studies have

measured organizational performance using both financial and market criteria, including

return on investment (ROI), market share, profit margin on sales, the growth of ROI, the

growth of sales, the growth of market share, and overall competitive position (Stock GN.

et al., 2000; Vickery S. et al., 1999; Zhang QY., 2001). In line with the above literature,

the same items will be adopted to measure organizational performance in this study.

Research hypotheses

The SCM framework developed in this study proposes that SCM practice has a direct

impact on the overall financial and marketing performance of an organization (Prasad S.

et al., 2000; Shin H. et al., 2000). SCM practice is expected to increase an

organization’s market share, return on investment (Prasad S. et al., 2000; Shin H. et al.,

2000), and improve overall competitive position (Carr AS. et al., 1999; Stanley LL. et al.,

2001). For example, strategic supplier partnership has been reported to yield

organization-specific benefits in terms of financial performance (Carr AS. et al., 1999;

De Toni A. et al., 2000; Lamming RC., 1996; Stanley LL. et al., 2001; Stuart FI., 1993;

14

Stuart FI., 1997; Tan KC. et al., 1998). Advanced design and logistic links with suppliers

are related to better-performing plants (De Toni A. et al., 2000). Customer relation

practices have also been shown to lead to significant improvement in organizational

performance (Tan KC. et al., 1998). The higher level of information sharing is associated

with the lower total cost, the higher-order fulfillment rate and the shorter-order cycle time

(Lin F. et al., 2002). The bottom-line impacts of SCM practices have been confirmed

byreal-w orld examples. A recent survey finds that organizations that are best at SCM

hold a 40% to 65% advantage in their cash-to-cash cycle time over average

organizations and the top organizations carry 50% to 85% less Inventory than their

competitors (Sheridan JH., 1998,247). Based on the above it is hypothesized that:

Hypothesis 1. Firms with high levels of SCM practices will have high levels of

organizational performance. SCM practices impact not onlyo verall organizational

performance, but also competitive advantage of an organization. They are expected to

improve an organization’s competitive advantage through price/cost, quality, delivery

dependability , time to market, and product innovation. Prior studies have indicated that

the various components of SCM practices (such as strategic supplier partnership) have

an impact on various aspects of competitive advantage (such as price/cost). For

example, strategic supplier partnership can improve supplier performance, reduce time

to market (Ragatz GL. et al., 1997), and increase the level of customer responsiveness

and satisfaction (Power DJ. et al., 2001). Information sharing leads to high levels of

supplychain integration by enabling organizations to make dependable delivery and

introduce products to the market quickly. Information sharing and information quality

contribute positively to customer satisfaction (Spekman RE. et al., 1998) and partnership

quality (Lee J. et al., 1999; Walton LW., 1996). Postponement strategy not only

15

increases the flexibility in the supply chain, but also balances global efficiency and

customer responsiveness (Van Heok RI. et al., 1999). The above arguments lead to

Hypothesis 2. Firms with high levels of SCM practices will have high levels of

competitive advantage. Having a competitive advantage generally suggests that an

organization can have one or more of the following capabilities when compared to its

competitors: lower prices, higher quality, higher dependability, and shorter delivery time.

These capabilities will, in turn, enhance the organization’s overall performance (Mentzer

JT. et al., 2000). Competitive advantage can lead to high levels of economic

performance, customer satisfaction and loyalty, and relationship effectiveness. Brands

with higher consumer loyalty face less competitive switching in their target segments

thereby increasing sales and profitability (Moran WT., 1979). An organization offering

high quality products can charge premium prices and thus increase its profit margin on

sales and return on investment. An organization having a short time-to-market and rapid

product innovation can be the first in the market thus enjoying a higher market share

and sales volume. Therefore, a positive relationship between competitive advantage and

organizational performance can be proposed. Hypothesis 3. The higher the level of

competitive advantage, the higher the level of organizational performance. The above

three hypotheses, taken together, support the SCM framework resented in Fig. 1.

Research methodology

Quantitative approach will be applied for this study as to empirically test a framework

identifying the relationships among SCM practice, competitive advantage and

organizational performance with special emphasis on manufacturing firms in automotive

industry in Thailand.

16

To answer research questions, the mail survey research will be conducted survey via

electronic survey (e-survey).

Population and Sample

Population for this study will be 6,404 of automotive manufacturing firms that located in

Bangkok and Metropolitan area. The number of factory and investment of automotive

industry in Thailand. As the limitation of time and capability therefore, this study will be

focus only those 6,404 factories of automotive industry which located in Bangkok

Metropolitan as it is equal to 34% of total number of factories as well as 44% of total

investment.

Sample Size

According to figure 1 the using structural equation model which is estimated maximum

Likelihood, they recommended the calculation of sample size by multiply 20 times to

number of variables (Weiss, 1972: Lindeman, Merenda and Gold, 1980:, Stevens,

1996). Therefore, the target respondents of this study is at least the sample size should

be 240 (12 variables x 20 times) detail of variables as follows: five independent variables

(supply chain management practices as strategic supplier partnership, customer

relationship, level of information sharing, level of information quality, and

postponement), five mediate variables (competitive advantage as price/cost, quality,

delivery dependability, product innovation, and time to market) and two dependent

variables (operational performance as marketing performance and financial

performance). In addition, Sekaran (1992) suggested that for most research the sample

size should be in a range of 30-500. The multivariate analysis is utilized. The literature

17

review which related to the sample size illustrated by Hair, et al. (1998) who suggested

acceptable sample size between 200 and 400. Taking the results of the principles the

target respondents are 240 thus satisfying the guideline.

Probability Sample

Systematic Random sampling based on SPSS will be used in this study. Every

respondent in the population had a chance of being selected. Normally this is an equal

chance of being selected.

Participants

The respondent will be the senior officer/executive in charge of SCM practice of the

targeted companies who can be expected to have the best knowledge about the

operation and management of supply chain practice in their organization such as VP or

Manager of Logistics, VP or Manager of Supply Chain, VP or Manager of Materials, VO

or Manager of Operations, and VP or Manager of Purchasing, Procurement and

Sourcing, include VP or Manger of Sales and Marketing.

Data collection

This study will be hired professional webmaster who cooperate with researcher and

responsible to develop and maintain the website architecture. Website construction will

be tested its reliability. The e-survey questionnaire will be posted to the website after

pilot testing.

18

Instrument

To carry out this study a structure questionnaire on Website will be developed and pre-

tested. The instrument is an adapted version of a questionnaire used in a previous study

with organization in the US. (Li, et al., 2004).This origin questionnaire was developed in

2004, based on literature review. And the Q-sort method was used in order to assess

the reliability. This questionnaire is indicated a high level of reliability and construct

validity. Besides, it has been used in different contexts. Three parts of questionnaire

shown at appendix A.

Instrument Development and Pilot study.

Although the instrument was developed and used in a previous study, it will be

translated into Thai version. So, the discrimination and reliability should be re-

investigated with 30 companies in order to calculate correlation of the item designed

with the summated score for all items (Corrected Item-Total Correlation) for

discrimination coefficient. The values should be at least 0.40 (Glime&Glime, 2003), and

to calculate Cronbach’s alpha reliability coefficient for internal consistency of the item in

the scale (Cronbach, 1970). The acceptable coefficient should greater than 0.70

(Nunnally, 1978).

Data Analysis

Due to the relatively large number of variables in the structure equation model. Data

analysis will be facilitated using the LISREL computer software version 8.0 package

operating in conjunction with SPSS. The LISREL package will allow a statistic

comparison of the data and the research model. The data analysis is divided into 2 parts

19

as follows: a) the descriptive statistic is used to describe the characteristic of sample:

frequency, percentage, mean and standard deviation, b) the inferential statistic used to

test research hypothesized relationships are Linear Structure Relationship Modeling,

Latent Variables Path and Test of Goodness of fit analysis with LISREL version 8.0 . In

this study the statistic which is selected to assess fitting are Chi-square, Goodness-of-fit

Index (GFI) fit index (AGFI) and Root mean squared residual (RMR), respectively.

Linear Structure Relationship Model is illustrated the relationship between Supply Chain

Management Practice, Competitive advantage and Organization performance Supply

from the conceptual framework. Thus, causal modeling, or path analysis, which

hypothesizes construct conceptual framework model. (Figure 2: Structure Equation

Model)

The Competitive advantage is designed to be manifest variable among SCM Practice

and Organization Performance. The relationships of SCM Practice are explained by

direct effect to competitive advantage (H2). Otherwise, the Competitive advantage has

effect to Organization Performance (H3). Besides, the SCM Practice has direct effect to

OP (H1), as well.

The Latent Variables Path analysis of the latent variable: SCM Practice. There are 5

observed-variable: Strategic supplier partnership (SSP), Customer relationship (CP),

Level of information sharing (IS), Level of information Quality (IQ) and Postponement

(POS).

20

For the other Latent variable: Organizational Performance. There are 5 observed –

variable: Price/cost (PC), Quality (QL), Delivery Dependability (DD) Product innovation

(PI) and Time to market (TM).

The last Latent Variable is Competitive advantage which consists of 2 observed –

variable: Market performance and financial performance.

The objective of analysis of causal analysis or path analysis or Analysis of LISREL

model which provide theory testing. This test is based to construct LISREL model and

explain causal relationship from LISREL model in order to find out the size of influence

and direction of the causal variable. LISREL is designed for structural equation

modelling. The LISREL model is introduced to deal with causal relationships among

latent variables and structural equation models for directly observed variables. The

LISREL program may also be utilized to handle standard multivariate methods, such as

analysis of variance, regression analyses, and multivariate analysis of variance. The

researcher specifies a theoretical model and inputs a covariance matrix for analysis. The

program estimates the population covariance matrix and compares that with the

estimated one. Besides, LISREL provides several powerful tools to assess fit and detect

lack of fit of a model. As in all statistical analyses, the assessment of fit must be made

with very careful subjective judgment based on knowledge of the substantive area and

the quality of the data.

The next step, that one of important LISREL analysis because this step will evaluate the

model or test of goodness of fit among empirical data and the model. The Test of

Goodness of fit analysis with LISREL In this study the statistic which is selected to

assess fitting are Chi-square, Goodness-of-fit Index (GFI) .(JÖreskog, K.G. and

SÖrbom, D. ,1989).

21

Analysis and result

This study is in the processing of data collection therefore, there is no analysis and

result part to present at this stage.

Contribution

This study is additional to the body of knowledge by providing new data and empirical

insights into the relationship between SCM practices, competitive advantage and

organizational performances. This paper provides empirical justification for a framework

that offer useful guidance for organizations to establish SCM strategies in terms of

measuring and implementing SCM practices in order to improve competitiveness and

organizational performance in an organization. This study is as well facilitate further

research in this area.

Reference

22