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The Relationship ofSupply Chain Visibility toFirm Performance
32Supply Chain Forum An International Journal Vol. 12 - N°2 - 2011 www.supplychain-forum.com
Mary C. Holcomb University of Tennessee, United States
Serhiy Y. Ponomarov University of Tennessee, United States
Karl B. ManrodtGeorgia Southern University, United States
The ability to “see” from one end of the supply chain to the other isneeded to effectively and efficiently manage and control global supplychain processes that span multiple firms. Supply chain visibility relies onthe shared data and information among the members. The analysis of 278responses from global logistics and supply chain professionals revealedthat only a few visibility factors significantly affect the firm's marketshare, return on assets, and competitive positive. The results indicate thatalthough North American firms have significantly more visibility in someareas than European Economic Area firms, the size of the firm does notaffect visibility.
Keywords: supply chain visibility, firm performance, North Americanversus European Economic Area firms
Introduction
In the late 1990s competition beganto shift from firm to firm to supplychain against supply chain(Christopher, 2000; Christopher &Towill, 2001). This shift can beattributed to a businessenvironment that is characterizedby constant change, shorterproduct life cycles, increasingcustomer requirements, productproliferation, and global sources ofsupply, manufacturing, anddemand that has resulted in longerlead times. To compete in thisenvironment, the firm and othermembers of the supply chain mustbe capable of delivering goods andservices to consumers as quicklyand inexpensively as possible (Lee,2004). In addition, firms must becapable of operational excellencein multiple channels of productdistribution and customer valuemust be delivered (Chikan & Gelei,2010). Achieving these goals in themost efficient and effective mannerpossible necessitates thatinformation regarding all aspects ofsupply chain activities be availableto supply chain members. Ideallythe information flows should beseamless from end to end andavailable on a real-time (or near
real-time) basis and visible to allmembers to create the desiredvalue (Lee, 2000; Holcomb et al.,2004, Holweg & Pil, 2008). Theability to “see” from one end to theother in the supply chain implies aclear view of upstream anddownstream inventories, demandand supply conditions, andproduction and purchasingschedules.
A supply chain event begins with atransaction. An order is negotiated,placed, fulfilled, shipped, anddelivered to a customer. Each ofthese activities generates one ormore information flows. In an integrated supply chain,connectivity would enable theinternally integrated focal firm, itssuppliers, logistics providers, andcustomers to share the transactionand other data related to thesupply chain event. This data is abasic building block that will beused and aggregated to provideinformation for planning purposes.A study of U.S. manufacturersreported that eight out of 10participants have disparatesystems that make it difficult tocoordinate with their supply chainpartners (Bradley, 2002). Themajority of the respondents also
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An International JournalSupply Chain Forum
stated that they used supply chainmanagement applications that weredifferent than their partners andthat this lack of compatibilitybarred access to valuable externaldata. This lack of data access isanother way of saying that they hadno visibility into the supply chain.
The reality is that there isfrequently only a limited exchangeof information between adjacententities in a network (Christopher& Peck, 2004). Many firms areforecast driven rather than demanddriven because of lack of visibility,forcing them to make decisions inisolation of other supply chainmembers. The presence offunctional silos also inhibits theflow of and access to data andinformation. Lee et al. (2000) notethat the benefit of informationsharing lies in the manufacturer'sability to be responsive to theretailer's needs. This can best beachieved through knowledge of theretailer's inventory levels andvisibility of “real” demand.
Research to date suggests thatvisibility is a critical capability forimproving supply chainperformance (Lee et al., 1997, 2000;Simatupang & Sridharan, 2002). Ithas been stated that informationsharing is the “glue” that holds allthe activities and resourcestogether along the supply chainfrom raw materials procurement tocustomer service (Kopczak, 1997;Simchi-Levi et al., 2003). Mason-Jones and Towill ( 1998; 1999)demonstrated that “information-enriched” supply chains performsignificantly better than those thatdo not have access to informationbeyond their corporateboundaries. Market-driven firmsare noted for their ability to senseevents and trends, therebyenabling them to more accuratelyimplement actions that will retainor attract customers, improvechannel relations, or impedecompetitors. They are able to do sobecause they have access to timely,coherent information (Day, 1994).According to Fliedner (2003),however, it is forward visibility thatleads to a variety of benefits for therespective supply chain partners.
The purpose of this article is to addto the current body of research on
visibility through an assessment ofthe impact that this capability hason firm performance. As noted inthe previous discussion, visibility iscomposed of multiple elements andinvolves the firm and its supplychain partners. For this reason, thisresearch considers multipleelements of upstream anddownstream visibility as well asintra-firm visibility. Previousresearch has not examined whatinfluence, if any, that size of firm orgeographic region has on visibility.This research addresses that gap inthe current knowledge base. Thearticle is organized in four mainsections beginning with a review ofthe relevant literature on the role ofvisibility in the supply chain. Thissection is followed by the researchhypotheses that endeavor toformulate the relationship betweenthe various visibility elements andfirm performance. Research resultsare presented and discussed in thethird section, and conclusions andfuture research direction areprovided in the final section of thearticle.
Defining the Role of Visibilityin the Firm and the SupplyChain
Although the concept of visibilityand information sharing issometimes used interchangeably inthe literature, they are two differentviews (Swaminathan & Tayur,2003). Barratt and Oke (2007)suggest that information sharing isan activity and visibility is anoutcome. Zhang et al. (2008) statethat supply chain visibility remainsa poorly understood concept in the
literature. Although visibility hassimply been described asthe“ability to see from one end tothe other” (Holcomb, Fugate &Ross, 2004), Gattorna (2009)defines this concept as “theidentity, location, and status ofentities transiting the supply chain,captured in timely messages aboutevents, along with planned andactual dates/times for theseevents” (p. 179). Furthermore henotes that this definition along withall its detail seems to depend on anidentifiable object such as aproduct or customer order. Barrattand Oke (2007) define supply chainvisibility as “the extent to whichactors within a supply chain haveaccess to or share informationwhich they consider as key oruseful to their operations andwhich they consider will be ofmutual benefit” (p. 1218). Thus,visibility has a range of levelsdetermined by the amount of usefulinformation that is shared acrossthe supply chain.
For many companies the firstchallenge is gaining internalvisibility (Holcomb et al., 2004).Companies with intra-companysales involving great distances andcross-border transactions involvingmany hand-offs experience highfrustration trying to obtainaccurate, timely information. Thetechnical difficulties often areexacerbated by the lack of leverageone firm has over another supplychain member to ensurecompliance (Clark et al., 2001). Forthis reason, compliance is mostoften accomplished throughcooperation and collaboration.Supply chains with a low degree ofcollaboration further complicatethe goal of achieving the desiredstate of visibility.
Because most systems havetypically evolved over the years,often on a functional basis, varioussupply chain processes aredisconnected (Romano, 2003). Thisgreatly hinders the ability of thefirm and the supply chain as awhole to achieve end-to-endseamless visibility. Researchindicates that significantopportunities exist for companiesto become more integrated withtheir suppliers and customers(Fawcett & Magnan, 2002).
33Supply Chain Forum An International Journal Vol. 12 - N°2 - 2011 www.supplychain-forum.com
Supply chain
visibility relies
on the shared
data and
information among
the members.
Specifically, firms having real-time(or near real-time) informationavailable about product,customers, and order fulfillmentacross the supply chain canachieve two significant objectives:improve customer service andincrease operating efficiencies andeffectiveness (Holcomb et al.,2004). Not surprisingly, thecurrency of data and informationaffects firms and their supply chainpartners. The growing interest insupply chain management, alongwith the development ofinformation and communicationtechnologies such as electronicdata interchange (EDI) and theInternet, have assisted firms inmanaging complex buyer-sellerrelationships (Gunasekaran & Ngai,2004). Competing in today'sbusiness environment requiresmanagers to fully grasp the benefitsof information technology (IT),particularly in relation to theirinvestments in legacy systems thatmay hinder them from acquiringnewer, more sophisticated tools.Watson et al. (1998) found that theInternet increases the richness ofcommunication due to increasedinteraction between the firm and itscustomers. Moreover, Graham andHardaker (2000) suggest that thechallenges faced by virtualenterprises can best be metthrough the use of technology.Technology must assist inincreasing competitive advantagethrough quicker and betterdecision making, enabling visibilityin the supply chain, and facilitatingaccess to needed informationamong supply chain members.Achieving connectivity in thesupply chain presents varyingdegrees of challenges for the firm(Gunasekaran & Ngai, 2004;Holcomb et al., 2004). Srinivasan etal. (1994) noted that uncertaintycan be reduced and shipmentperformance of suppliers can beimproved with information sharingbetween members of a supplychain that are connected bytechnology such as EDI. EDI,however, is not an option for manyfirms due to the requiredinvestment for this technology. Inan ideal state, a single, electronic,communications hub wouldautomate the exchange oftransactional data between a firm'sbusiness management systems
(such as an enterprise resourceplanning [ERP] system) and theequivalent system(s) at suppliers,service providers such as third-party logistics (3PL) firms andtransportation providers, andcustomers. This ideal connectivitywould eliminate the need tomaintain multiple connections tosupply chain partners and movethe supply chain towards the ideallevel of visibility.
Linking Visibility and Firm Performance
The missing link in many researchstudies examining the role ofinformation sharing and improvedperformance is visibility (Barratt &Oke, 2007). These authors arguethat information sharing is notdirectly linked to firm performance.Instead, linking information sharingto visibility could be viewed as atwo-stage process. First, therecipient of the informationdetermines the extent to which it isaccurate, timely, and useful. If theinformation passes these tests thenit provides visibility. The secondstage involves incorporating theinformation into the recipients'decision-making processes to makemore informed decisions. The logicextends that more informeddecision making leads to informedperformance.
Previous research has demonstratedthat information-enriched supplychains perform significantly betterthan those that do not have accessto information beyond theircorporate boundaries (Mason-Jones & Towill, 1999). Simatupangand Sridharan (2002) noted thatsupply chain visibility on a globalscope is the key to improvingsystem performance. It is often thecase that one member of a supplychain has no detailed knowledge ofwhat goes on in other parts of thechain. Therefore, the key toimproving supply chain visibility issharing information among supplychain members (Christopher & Lee,2004). The impact that visibility hason performance is notable. Holweget al. (2005) state that when endcustomer sales are taken intoconsideration when generating theforecast at the supplier level - evenif complete visibility is notavailable - there is a major
improvement over simply relyingon orders sent by the retailer. Theultimate goal for a firm, Day (1994)asserts, is to be market driven. Thisinvolves being aware of events andtrends, thereby implementing moreaccurate actions that will retain orattract customers, improve channelrelations, or thwart competitors.Firms are able to do this becausethey can act on information that istimely and coherent. Visibilitycreates this capability.
The key to improving supply chainvisibility is shared informationamong supply chain members(Christopher & Lee, 2004). Sharinginformation in supply chainssignificantly increases its powerdue to the fact that informationreduces uncertainty and thusreduces the amount of bufferinventory that is needed. Withoutvisibility in the supply chain therespective members bufferinventory to hedge againstuncertainties and risks. For thisreason, the authors advocate thatinformation about inventory,demand, forecasts, production,shipment plans, work in process,yields, capacities, and backlogs beaccessible by key supply chainmembers. Moreover, lack ofvisibility into shipment orrequirements schedules oftenresults in unnecessary coststhrough the use of expeditedservices or the wrong mode oftransportation.
Swaminathan and Tayur (2003)raise the issue of what degreeinformation-sharing protocolshould be standard or proprietaryand the amount and type ofinformation that should be sharedwith the rest of the supply chainmembers. Enterprise resourceplanning (ERP) systems haveallowed firms to have access todata across their supply chains,making it possible for them tocoordinate and collaborate withtheir suppliers and customers aswell as synchronize their in-houseoperations. Simatupang et al.(2002) note that IT applicationsenable supply chain members togain visibility in three broad areas:(1) customer demand, (2) resourceplanning, and (3) contract status. Inother words, IT is the means bywhich supply chain members can
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monitor the order fulfillmentprocess from manufacturing,shipping, and order receiving.Technology such as warehousemanagement systems (WMS);transportation managementsystems (TMS); collaborativeplanning, forecasting, andreplenishment (CPFR); materialsrequirement planning (MRP); andERP integrate and coordinatevarious phases of supply chainplanning on a real-time basis thatenhances visibility throughout thesupply chain.
Sell-through data and informationon inventory status at downstreamnodes are also critical forimproving channel coordinationand dampening the bullwhip effect(Lee et al., 1997). The research byLee et al. (1997) demonstrated that
when an upstream supplier reliesonly on order data from thedownstream retailer, the supplierloses track of true demand.Ultimately the distortedinformation will negatively affectthe supplier's inventory control.The researchers surmise that whensales and inventory data are sharedamong supply chain members thesupply chain as a whole yieldsinventory control performance thatis superior to an individualmember's inventory control efforts.Furthermore, the productionschedule based on distortedsignals is inevitably inefficient. Thedistortion effect gets amplified asthe number of intermediaries in thechannel increases.
The preceding discussion promptsthe question, What information
needs to be shared in order tocreate visibility? Previous researchon visibility has examined a varietyof elements individually and oncategorical bases such asoperational and strategic. Table 1presents a summary of the factorsfrom earlier studies.
Based on the review of the relevantliterature, this study explores therelationship of 16 visibility factorsto five measures of perceived firmperformance. These are shown inTable 2.
The visibility factors shown inTable 2 are the basis forformulating the hypotheses ofinterest to this study. A 7-pointLikert scale is used to measure theextent to which the respective dataand information are available (1 =
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Factor Research citation “Real” demand – point -of-sale data Barratt and Oliveira, 2001; Aviv, 2002; Croson and
Donahue, 2003; Barratt and Oke, 2007 Custom ers’ inventory position Barratt and Oliveira, 2001; Aviv, 2002; Karkkainen,
2003; Peterson et al., 2005; Barratt and Oke, 2007 Work in process Christopher and Lee, 2004 Product flows Karkkainen, 2003; Prater et al., 2005 Distribution center stock levels Barratt and Oke, 2007; Christopher and Lee, 2004 Product orders Moberg et al., 2002; B arratt and Oke, 2007 Production schedule Moberg et al., 2002; B arratt and Oke, 2007 Shipping schedules; advanced ship notices Simatupang et al., 2002; Moberg et al., 2002 Production yields and capacities Simatupang et al., 2002; Christopher and Lee, 2004 Order status tracking Simatupang et al., 2002
Table 1Visibility factors
Visibility Factors
Firm Performance Variables
Custom er finished goods inventory levels Custom er point -of-sale ( POS) data Custom er demand forecasts Custom er order -processing status Firm finished goods inventory at plant Firm work-in-process inventory Firm raw materials inventory Firm inbound shi pments Firm production schedules Firm fi nished goods inventory at field distribution center Firm outbound shi pments Inbound shipments fr om suppliers Suppliers ’ finished goods inventory Suppliers ’ order status information Supplier ’s supplier inbound shipments Supplier ’s supplier finished goods inventory
Competitive position Market share
Return on assets Custom er service levels
Table 2The relationship of visibility to firm performance
very visible; 7 = not very visible). Itis theorized that the higher thelevel of visibility for eachrespective factor the greater thefirm's perceived performancerelative to competitive position,market share, return on assets(ROA), or customer service levels.Firm performance is a perceptualmeasure relative to the firm'scompetition; the various measuresare assessed using a 5-point Likertscale. Previous research has shownthat using perceptual measures areindeed reliable measures of firmperformance (Hansen & Wernerfelt,1989). In addition to the macro-level relationship between visibilityand firm performance, previousresearch has not explored theimpact that regional (domestic orinternational) visibility may haveon perceived firm performance.Therefore, the 16 visibility factorswill also be analyzed on this basis.The role of regional boundaries willbe explored through thecomparison of North American(NA) and European Economic Area(EEA) firms.
Research Method
Since 1991, the University ofTennessee and the GeorgiaSouthern University have beeninvolved in an annual study on thetrends and issues in transportation,logistics, and supply chainmanagement. Subscribers toLogistics Management magazine arethe targeted population for theannual study. The readers of thispractitioner journal (andsubsequent participants in thestudy) are primarily directors, vice
presidents, and mid- to high-levelmanagers of logistics,transportation, and/or supplychain activities. They are invited toparticipate in the web-based studythough an e-invite. After the initialinvitation to participate in thestudy is sent out, a follow-uprequest to take part in this researcheffort is sent the following week.Incentives to participate in thestudy are offered through a drawingof respondents. The incentivesinclude the choice of a monetarycontribution to the recipient'scharity of choice or a gift card tothe participant. An additionalincentive is a comprehensivereport of the study findings that ismade available to all respondents. In 2009 some 830 individuals acrossthe globe participated in the study.Study respondents have primaryresponsibility in domestic andinternational transportation andlogistics. Although the main groupof respondents represented NorthAmerican (NA) firms, accountingfor 76% of study participants,respondents overall were a diverseglobal group representing variousregions including the EuropeanEconomic Area (EEA), China, SouthAmerica, and India. EEA firmscomprise the second largestproportion of study participantsaccounting for 14% of the total.Aggregated as a profile group,63.4% of the companies thatresponded to the survey haveannual revenues under $1 billion,and those with annual sales of $1billion to $3 billion accounted for12.1% of the sample. Those firmswith sales greater than $3 billionaccounted for 24.6%.
The annual study covers a widerange of topics of interest to thelogistics and transportationprofession including items
such as inventory performance,transportation modal spending andperformance, the use of technologyfor managing transportation anddistribution activities, visibilitymeasures, and perceived firmperformance. The last twocomponents of the annual studyare used for this research.Approximately one-half of the totalrespondents are directed to asubsection of the survey thatfocuses on visibility based on theiranswers to previous questions.After the data for these responseswere cleaned and prepared, a totalof 278 usable responses remained.
Research Findings and Discussion
Descriptive Statistics
On a scale of 1 (very visible) to 7(not very visible), the meanvisibility scores (Appendix 1)indicate that information about thefirm's outbound shipments is themost visible element within thefirm's domestic borders (x bar =2.08), followed by customer order-processing status (x bar = 2.23). Asexpected, the least visibleinformation in the supply chaindeals with the supplier's supplierinbound shipments (x bar = 4.02)and its finished goods inventorylevels (x bar = 4.12). The result forinformation that is outside thefirm's boundaries (international) isquite similar to the domestic
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Figure 1Composite domestic visibility scores
outcomes, that is, the samevisibility factors are the best andthe worst; the mean scores for the16 factors are also not significantlydifferent for domestic versusinternational groups.
The 16 visibility elements shown inTable 2 were grouped in sixcategories and a mean averagescore was calculated for eachgroup. The results in Figure 1 showthat the “best” visibility in thesupply chain exists for the productflows - both inbound and outbound.The data also indicate thatupstream supply chain positionshave the worst visibility ofinformation. Because the visibilityfactors have been collected as partof the annual study for the pastseveral years it is possible tocompare the 2009 results with theprevious year. The data indicatethat except for the supplier'ssupplier, domestic supply chainvisibility has improved from 2008 to2009. When the individual factorsare examined, the data show thatthere has been a fair amount ofimprovement in visibility for thesupplier's finished goods inventoryas well as the supplier's inboundshipments, 16% and 17%improvement, respectively, from2008 to 2009. What is dismaying,however, is the lack of progress inimproving domestic visibility in theextended supply chain. The scorefor supplier's supplier is relativelyunchanged for the past severalyears.
With the exception of the supplier'ssupplier and the customer,international visibility seems to be
headed in a negative direction.Since 2007 the internationalvisibility scores have declined forinbound and outbound shipments.Much like domestic visibility, theupstream portion of the supplychain has the worst visibility.Perhaps the most unanticipatedresult was the loss of downstreamvisibility. The data indicate thatvisibility of customer informationsuch as POS data and demandforecasts show a smallimprovement from 2008 to 2009(Figure 2). This improvement,however, is not statisticallysignificant and could be attributedto differences in the sample groupfrom one year to the next. The moreconcerning decline in visibility isthat for transportation shipments.This loss may possibly beattributed to changes in serviceproviders who themselves mighthave less capability in this area.Economic conditions haveprompted many firms to pursuecost-reduction strategies.Transportation has beenspecifically targeted as supply hasbeen much greater than demand,leading to deep discounting in ratesfor most modes. The concern isthat firms' quest for short-term costreduction may result in long-termstrategic disadvantage.
Statistical Analysis
A correlation analysis was done forthe visibility factors and thedependent variables of interest(Appendixes 2 and 3). The resultspresented in the correlation matrixindicate that there is a positive andstatistically significant relationship
(p<=0.01) among the domesticoutcome variables - market share,competitive position, return onassets, and customer servicelevels. The analysis of the visibilityfactors shows that the customer'sfinished goods inventory levels andthe firm factors - raw materialslevels, customer order-processingstatus, and outbound shipments -are significantly related to eachother (p<=0.05). It is interesting tonote that the supplier's supplierinbound shipments are notcorrelated with the firm orcustomer visibility factors. Thiswas not the case for internationalvisibility (Appendix 3). The fivevisibility factors, including thesupplier's supplier inboundshipments, are significantlycorrelated (p<=0.01). The analysisindicates that in general most of thevisibility variables - both domesticand international - are correlatedwith each other. The 16 visibilityvariables can be categorized intothree main groups: internal,downstream, and upstream. It wasanticipated that there would be asignificant association amongvariables in these groups. It wasunexpected that the majority of thefactors displayed significantassociations. The results bringconcerns related to the level ofdiscriminant validity among thevisibility factors.
The correlation analysis wasfollowed by tests of between-subject effects. Of the fourdependent variables used for firmperformance, customer servicelevels did not yield any statisticallysignificant results for any of the
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Figure 2Composite international visibility scores
analyses and therefore theseresults are not presented. Theresults indicate that of the 16visibility elements, only four werefound to be statistically significantat the p<=0.05 level (Table 3). Theelements are customer finishedgoods inventory levels, customerorder processing, the firm's rawmaterials inventory levels and thefirm's outbound shipments. Onlythe firm's raw materials inventorylevels was significant for the threedependent variables: competitiveposition, market share, and returnon assets. Customer orderprocessing and the firm's outboundshipments were significant only forcompetitive position; customerfinished goods inventory levels wassignificant for return on assets only.
The analysis for internationalvisibility presented in Table 4indicates that only two of the 16visibility variables - finished goodsinventory levels at the plant andsupplier's supplier inboundshipments are statisticallysignificant (p<=0.05) for thedependent variable return onassets. None of the visibility factorswere found to be significant for theother two firm performancevariables: competitive position andmarket share. It is interesting tonote that domestic visibility factorsthat were significant for this groupfocused on the customer's finishedgoods inventory levels, andinternational visibility indicated anassociation with the firm's finishedgoods inventory levels.
North American (NA) versusEuropean Economic Area (EEA)Visibility
A comparison of mean scores forNA and EEA firms for 2009(Appendix 4) shows that overall NAfirms have higher visibility scoresthan EEA firms in the followingareas: • Customer demand forecasts• Firm's raw materials inventory• Order status information• Supplier's supplier inbound
shipments and finished goodsinventory levels (p<= 0.05)
Further analysis indicates that ofthe 16 domestic visibility factors,only customer order processingshows a significant differencebetween the NA and EEA firms(t=3.144, p<= 0.05). NA firms havesignificantly more visibility thanEEA firms in this area of visibility.Relative to visibility beyond theircountry's borders (international),seven factors were found to besignificantly different for NA versusEEA firms (p<= 0.05). These werethe (1) firm's finished goodsinventory at the plant (t=-2.193, p<=0.05), (2) firm's raw materials levels(t=-2.645, p<= 0.01), (3) firm'sinbound shipments (t=-2.956, p<= 0.01), (4) firm's productionschedules (t=-3.112, p<= 0.01), (5)firm's finished goods inventorylevels at the field DC (t=-2.488, p<= 0.05), (6) firm's outboundshipments (t=-2.262, p<= 0.05), and(7) supplier's finished goodsshipments (t=-3.338, p<= 0.05).
Of interest, but not significantlydifferent, is that NA firms rated ashigh to moderately high theirdomestic visibility into customer'sPOS data; this score was betterthan EEA firms. However, EEA firmsrated as high to moderately hightheir domestic visibility of thefinished goods inventory levels atthe plant. Why do these differencesmatter? Today's supply chains areglobal entities that reach acrossvast distances and multiple timezones and languages. All of thisreinforces the need to have real-time access to data and informationthat have no boundaries. The gapin visibility between NA and EEAfirms suggests that there is still asignificant amount of work thatremains to be done before we have
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Source F test Significance(p value)
Competitive Position
Corrected model a 1.398 .025
Custom er order processing 2.011 .048
Firm’s raw materials inventory levels 5.132 .000
Firm’s outbound shipments 2.053 .031
Market Share
Corrected model b 1.318 .053
Customer finished goods inventory levels 2.304 .037
Firm’s raw materials inventory levels 2.893 .011
Return on assets
Corrected model c 1.708 .001
Firm’s raw materials inventory levels 3.153 .006 aAdjus ted R squared = 0 .144
bAdjus ted R squared = 0 .118
cAdjust ed R squared = 0.230
Table 3Impact of domestic visibility on firm performance - Competitive position
Source F test Significance(p value)
Return on assets
Corrected model a 1.105 .278
Firm’s finished goods inventory levels at theplant
2.152 .034
Supplier’s supplier inbound shipments 2.323 .028
aAdjus ted R squared = 0 .045
Adjus ted R squared 0 .118 c
Adjust ed R squared = 0.230 Table 4Impact of international visibility on firm performance - Return on assets
a seamless, end-to-end flow of dataand information between these twoimportant trading blocks.
Respondents to the study wereasked to indicate where effortwould be expended in the next yearto increase visibility. A comparisonof NA to EEA firms indicates thatinternational visibility is the solearea where regional differences aresignificant. The results presented inTable 5 indicate that across thesupply chain NA firms will beexpending different levels of effortthan EEA firms on theirinternational visibility capability.For example, EEA firms areplanning to invest more effort oninternational visibility forfunctional areas inside the firmthan NA firms, 33.9% and 24.1%,respectively. Conversely, 28.4% ofNA firms versus 17.7% of EEA firmswill be working on improvinginternational visibility withsuppliers.
Impact of Size of Firm onVisibility
An analysis was done to determineif significant differences existed indomestic and internationalvisibility by size of firm. Twogroups were tested - medium tolarge firms (annual sales > $250million) and small firms (annualsales < $250 million). The resultsindicate no significant differencesbetween the mean scores based onsize.
Principal Component Analysis
The final phase of the analysisinvolved principal componentanalysis (PCA) in an attempt to
reduce the dimensionality of thevisibility factors. PCA identifiedfour components from the 16original variables. The firstcomponent (FIRM) is composed ofthe eight international visibilityfactors internal to the firm(Appendix 5). The secondcomponent - TIER2 - captures thetwo elements for the supplier'ssupplier for domestic andinternational visibility. TIER 1combines the three factors for thesupplier for domestic visibility butnot international visibility. Finallythe CUST variable is composed ofthe three domestic visibilityelements that represent thedownstream (or customer) portionof the supply chain. The reliabilitycoefficient did not indicate acomparable component forinternational visibility. Overall, theresults indicate that the 16 visibilityfactors can be reduced to fourcomponents. These also representfour distinct positions in the supplychain: within the firm, two tiers ofsupply, and the customer. It wasanticipated that the domesticvisibility factors would also form afirm-level component. This,however, did not occur. Therefore,further investigation of domesticwithin-firm factors is warranted.
Conclusions and FutureResearch Direction
The growing importance ofvisibility to the supply chain toenable greater efficiency andeffectiveness has propelled firms toinvest in improving this capability.In today's competitive businessenvironment the winning supplychain is one that can reduceoperating costs while delivering
increasing levels of customerservice. Research and practice hasshown that one of the ways toachieve the dual objectives ofefficiency and effectiveness isthrough end-to-end seamlesssupply chain visibility. Yetachieving this visibility goal is achallenge to many firms.
This research has attempted to addto the body of knowledge onvisibility by examining therelationship among 16 factors eachfor domestic and internationalvisibility and four perceived firmperformance measures. The resultsindicate that overall these visibilityfactors are not a good predictor ofcustomer service levels. Thehypotheses regarding therelationship among each of the 16factors for domestic andinternational visibility andperceived service levels arerejected. This result suggests thatother variables not examined bythis study need to be identified.
The analysis for the remaininghypotheses regarding visibility andfirm performance had mixedresults. For domestic visibility,customer finished goods inventorylevels was found to be significantfor market share. Visibility of thefirm's raw materials inventorylevels was statistically significantfor market share, the return onassets, and competitive position.From a managerial perspective,these findings are important forfirms trying to determine how toprioritize their efforts andresources for purposes ofimproving visibility. In addition, theanalysis indicated that visibility ofcustomer order processing is
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Visibility improvem ent within the next year
Within firm With customers
With suppliers
With service providers
Total
Domestic EEA = 31.6; NA = 31.3
EEA = 47.4; NA = 38.2
EEA = 12.3; NA = 22.4
EEA = 8.8; NA = 8.1
100%
Within region EEA = 16.1; NA = 21.3
EEA = 60.7; NA = 45.0
EEA = 17.9; NA = 22.5
EEA = 5.4; NA = 11.2
100%
International EEA = 33.9; NA = 24. 1*
EEA = 4 1.9; NA = 31. 9*
EEA = 17.7; NA = 28. 4*
EEA = 6.5; NA = 15. 5*
100%
No effort will be expended
EEA = 12.2; NA = 20.4
EEA = 7.3; NA = 12.0
EEA = 29.3; NA = 19.0
EEA = 51.2; NA = 48.6
100%
*S ignificant at the p<= 0.05 level.
Table 5Composite international visibility scores
significantly related to the firm'scompetitive position. Manycustomers have long understoodthe value of this type of informationand worked with their suppliers todevelop this capability. The resultsfor international visibility werevery different than domesticvisibility; only the firm's finishedgoods inventory levels at the plantwere found to be significant for thereturn on assets. This suggests thathaving broad geographicalvisibility of this important and largeasset base is critical to the firm'sperformance in this area.
The findings, however, must bebalanced with other lessencouraging results. Strongcorrelations among the variousvisibility factors trigger concernsrelated to discriminant validityamong the chosen factors.Additionally, the principalcomponent analysis extracted fourcomponents from the 16 originalvariables. These components andthe relationships among them anddependent variables of interestrequire further investigation, whichis the next planned step of ourongoing research. Moreover, thelack of significant findings for the16 visibility factors suggests thatmuch more work is needed todefine visibility scales. Additional understanding of thephenomena of interest could begained by using a qualitativeapproach. For example, supplychain visibility could be researchedfrom the managerial perspectiveusing grounded theory qualitativemethodology. This approach isproven to be useful in generatingdepth of understanding when notmuch is known about aphenomenon of interest and whenit concerns complex processes thatcross domestic and internationalboundaries.
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About the Authors
Mary C. Holcomb is associate professor oflogistics and supply chain management at theUniversity of Tennessee, Knoxville. She holdsBS, MBA, and PhD degrees from theUniversity of Tennessee. Her professionalcareer involved some eighteen years at theOak Ridge National Laboratory intransportation research and policy issues forthe U.S. Departments of Energy,Transportation, and Defense. Dr. Holcomb'sbackground also includes various industryexperiences with the former BurlingtonNorthern Railroad, General Motors, andMilliken & Company. She is a principalresearcher in one of the longest runningannual studies - “Logistics and Supply ChainTrends and Issues” - which has beenconducted for nineteen years. Dr. Holcomb'sresearch has appeared in the Journal ofBusiness Logistics, Transportation Journal, theInternational Journal of Logistics Management,and Supply Chain Management Review.
Serhiy Y. Ponomarov is a PhD candidate inlogistics and supply chain management at theUniversity of Tennessee, Knoxville. Hisresearch interests focus on global supplychain strategy, supply chain riskmanagement, dynamic capabilities,resilience, and sustainability. His research hasbeen published in International Journal ofLogistics Management and various conferenceproceedings.
Karl B. Manrodt serves as a professor in theDepartment of Management, Marketing andLogistics at Georgia Southern University,located in Statesboro, Georgia. He is also thedirector of the Southern Center for Logisticsand Intermodal Transportation. His degreesinclude a BA in philosophy and psychologyfrom Wartburg College, Waverly, Iowa; an MSin logistics from Wright State University,Dayton, Ohio; and a PhD in logistics from theUniversity of Tennessee, Knoxville. He is therecipient of the Chancellor's Citation forProfessional Promise and the Walter MelvilleBonham Dissertation Scholarship, both at theUniversity of Tennessee, and the E. GrosvenorPlowman Award awarded by the Council ofLogistics Management. His research hasappeared in journals such as the Journal ofBusiness Logistics, Transportation Journal, theInternational Journal of Physical Distributionand Materials Management, Journal ofTransportation Management, and Interfaces.His research on top shippers has appeared inLogistics Management for the last nineteenyears. His survey of warehousing metrics isnow in its seventh year and is done inpartnership with WERC and DC Velocitymagazine. Dr. Manrodt is a recognizedspeaker, having made over one hundredpresentations to government, industry, andacademic groups in Sweden, Austria, Brazil,Denmark, China, Germany, Canada, Australia,Africa, Turkey, and the United States. He co-authored his first book, Customer ResponsiveManagement: The Flexible Advantage, in 1992.His second book on logistics and supply chainmeasurement - Keeping Score: Measuring theBusiness Value of Logistics in the Supply Chain- was published in 1999. Palgrave Macmillanpublished his latest book, Vested Outsourcing,in February 2010.
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Domestic Mean score International Mean score
Customer’s finished goods inventory 2.92 Customer’s finished goods inventory 3.72
Customer’s POS data 3.48 Customer’s POS data 3.95
Customer’s demand forecast 3.87 Customer’s demand forecast 3.93
Firm’s customer order processing 2.23 Firm’s customer order processing 2.88
Firm’s finished goods inventory levels atthe plant
2.31 Firm’s finished goods inventory levelsat the plant
3.05
Firm’s work-in-process inventory 3.07 Firm’s work-in-process inventory 3.47
Firm’s raw materials inventory 3.03 Firm’s raw materials inventory 3.53
Firm’s inbound shipments 2.77 Firm’s inbound shipments 3.33
Firm’s production schedules 2.96 Firm’s production schedules 3.51
Firm’s finished goods inventory levels atfield DC
2.34 Firm’s finished goods inventory levelsat field DC
3.14
Firm’s outbound shipments 2.08 Firm’s outbound shipments 2.87
Supplier’s inbound shipments 3.12 Supplier’s inbound shipments 3.68
Supplier’s finished goods shipments 3.67 Supplier’s finished goods shipments 3.89
Supplier’s order status information 3.30 Supplier’s order status information 3.67
Supplier’s supplier inbound shipments 4.02 Supplier’s supplier inbound shipments 4.03
Supplier’s supplier finished goodsinventory levels
4.12 Supplier’s supplier finished goodsinventory levels
4.10
MKS CPT PQ ROA CSL CFG FCO FRM FOS SSI
MKS 1
CPT .514** 1
PQ .202** .250** 1
ROA .345** .411** .157** 1
CSL .172** .409** .551** .327** 1
CFG .129* .241** .025 .174** .226** 1
FCO .140* .123* .184** .162** .229** .172** 1
FRM .166** .098 .208** .129* .180** .004 .287** 1
FOS .071 .157** .211** .065 .252** .142* .485** .271** 1
SSI .030 .113 .120* -.013 .039 .099 -.033 -.018 .095 1
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
MKS - Market shareCPT - Competitive positionPQ - Product qualityROA - Return on assets CSL - Customer service levelCFG - Customer's finished goods inventory FCO - Firm's customer order-processing status FRM - Firm's raw materials inventory FOS - Firm's outbound shipments SSI - Supplier's supplier inbound shipments
Appendix 1
Current state of visibility
Appendix 2
Correlations among domestic indicator and dependent variables
43Supply Chain Forum An International Journal Vol. 12 - N°2 - 2011 www.supplychain-forum.com
MKS CPT PQ ROA CSL CFG FCO FRM FOS SSI
MKS 1
CPT .514** 1
PQ .202** .250** 1
ROA .345** .411** .157** 1
CSL .172** .409** .551** .327** 1
CFG .154* .255** .103 .088 .136* 1
FCO .074 .137* .110 .144* .105 .394** 1
FRM .164** .183** .214** .160** .182** .171** .571** 1
FOS .115 .155** .147* .168** .155** .352** .719** .516** 1
SSI .077 .102 .105 .047 .085 .370** .273** .242** .348** 1
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).
Appendix 3
Correlations among international indicator and dependent variables
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NA Mean score
EEA Mean score
Customer’s finished goods inventory 2.73 Customer’s finished goods inventory 4.64
Customer’s POS data 3.32 Customer’s POS data 5.25
Customer’s demand forecast 3.85 Customer’s demand forecast 5.07
Firm’s customer order processing 2.14 Firm’s customer order processing 3.51
Firm’s finished goods inventory levels atthe plant
2.25 Firm’s finished goods inventory levelsat the plant
3.52
Firm’s work-in-process inventory 2.97 Firm’s work-in-process inventory 3.98
Firm’s raw materials inventory 2.94 Firm’s raw materials inventory 4.16
Firm’s inbound shipments 2.89 Firm’s inbound shipments 3.91
Firm’s production schedules 2.95 Firm’s production schedules 3.98
Firm’s finished goods inventory levels atfield DC
2.21 Firm’s finished goods inventory levelsat field DC
3.86
Firm’s outbound shipments 2.04 Firm’s outbound shipments 3.41
Supplier’s inbound shipments 3.11 Supplier’s inbound shipments 4.66
Supplier’s finished goods shipments 3.71 Supplier’s finished goods shipments 5.08
Supplier’s order status information 3.24 Supplier’s order status information 4.60
Supplier’s supplier inbound shipments 3.98 Supplier’s supplier inbound shipments 6.62
Supplier’s supplier finished goodsinventory levels
4.17 Supplier’s supplier finished goodsinventory levels
6.75
Appendix 4
Comparison of visibility factors - NA versus EEA firms
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FIRM TIER2 TIER1 CUST
Domestic
Customer’s finished goods inventory .594
Customer’s POS data .605
Customer’s demand forecast .506
Firm’s customer order processing
Firm’s finished goods inventory levels
Firm’s work-in-process inventory
Firm’s raw materials inventory
Firm’s inbound shipments
Firm’s production schedules
Firm’s finished goods inventory levels at field DC
Firm’s outbound shipments
Supplier’s inbound shipments .584
Supplier’s finished goods shipments .511
Supplier’s order status information .570
Supplier’s supplier inbound shipments .560
Supplier’s supplier finished goods inventory levels .527
International
Customer’s finished goods inventory
Customer’s POS data
Customer’s demand forecast
Firm’s customer order processing .718
Firm’s finished goods inventory levels .732
Firm’s work-in-process inventory .739
Firm’s raw materials inventory .670
Firm’s inbound shipments .740
Firm’s production schedules .765
Firm’s finished goods inventory levels at field DC .746
Firm’s outbound shipments .738
Supplier’s inbound shipments .641
Supplier’s finished goods shipments .663
Supplier’s order status information .688
Supplier’s supplier inbound shipments .571
Supplier’s supplier finished goods inventory levels .569
Appendix 5
Correlations among international indicator and dependent variables