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BIJ
18,6 Supply chain management
practices in the electronics
industry in Malaysia
834
Consequences for supply chain performance
Veera Pandiyan Kaliani Sundram
Department of Business, Universiti Teknologi MARA, Segamat, Malaysia
Abdul Razak Ibrahim
Department of Business, University Malaya, Kuala Lumpur, Malaysia, and
V.G.R. Chandran Govindaraju
Malaysian Industry-Government Group for High Technology,
Selangor, Malaysia

Abstract
Purpose – The purpose of this paper is to explore the effects of different dimensions of supply chain
management practices (SCMP) on supply chain performance (SCP) in the electronics industry in
Malaysia.
Design/methodology/approach – The study employed the quantitative method where
convenience sampling and self-administrated survey questionnaires were sent to 125 electronics
firms in Malaysia. The research framework was tested using variance-based structural equation
model, the partial least squares (PLS) method.
Findings – The empirical results of PLS indicate that six of the seven dimensions of SCMP have a
significant positive effect on SCP. Furthermore, agreed vision and goals shows a greater influence than
other dimensions of SCMP.
Research limitations/implications – This study took a narrow focus solely on the electronics
manufacturing industry with a relatively small sample size of respondents. Also the data were only
collected from single respondents in an organization. However, being the first study to explore the
dimensions of SCMP and how those dimensions relate to SCP, the study shapes the pathway for future
research.
Practical implications – The results offer insights to SCM practitioners and policy makers on the
importance of SCMP to increase the competitiveness of manufacturing industry in terms of SCP.
Originality/value – This study employs a newly developed framework based on existing theoretical
arguments to empirically examine the relationship between two important factors, the SCMP and SCP.
This study is perhaps one of the first to address the effect of SCMP that includes combination of
comprehensive practices and system approach towards the overall performance of the supply chain.
Keywords Supply chain management practices, Performance, Manufacturing industries,
Partial least squares, Malaysia, Electronics industry
Paper type Research paper

Benchmarking: An International
Journal
Vol. 18 No. 6, 2011
pp. 834-855 The authors are grateful to James Kunaratnam for his comments and editorial work. They also
q Emerald Group Publishing Limited
1463-5771
thank IAMOT conference participants, the anonymous referees and the Editor of this journal for
DOI 10.1108/14635771111180725 their valuable comments.
1. Introduction Supply chain
Globalization has driven many corporations to widen their resources and capability management
enhancement from internal environmental practices to greater heights. Attention is
increasingly shifting towards external collaboration and networking outside the practices
boundaries of the organization. This requirement has became essential in order to be
competitive locally and across the borders (Oliver and Webber, 1982; Lambert et al.,
1998). As to achieving this, organizations need to have strong upstream and 835
downstream integration of their elaborate network of business relationships. Therefore,
there is an imminent need for supply chain management (SCM) in all sectors across each
value chain entities. SCM has drawn increasing attention from many practitioners and
scholars in recent years (Bechtel and Jayaram, 1997; Burgess et al., 2006) due to the
benefits of SCM for operational success (Croom et al., 2000). In the corporate world, in
order to meet customer requirement, the integration of various business processes such
as demand planning and forecasting, procurement, manufacturing and assembly,
distribution and return of effective and efficient management of flow of resources from
point of origin to point of destination has become important parts of SCM (Lummus and
Vokurka, 1999; Mentzer et al., 2001; New, 1997). SCM also includes the total connectivity
between the upstream (supply and manufacturing) and downstream (distribution) value
chain entities in order to achieve competitiveness (Hong and Jeong, 2006; Boddy et al.,
2000). Similarly, Hong and Jeong (2006) referring to the works of Carmignani (2009),
Lambert and Cooper (2000) and Zhao and Simchi-Levi (2002), defined SCM as:
[. . .] is a set of approaches utilized to effectively integrate suppliers, manufacturers, logistics,
and customers for improving the long-term performance of the individual companies and the
supply chain as a whole.
As such, the primary role of SCM is to meet customer requirement in terms of providing
customer with the right product (Dale et al., 1994) of right quality (Carmignani, 2009;
Brewer and Speh, 2000) and quantity (Chan et al., 2001) from a right source (Carr and
Smeltzer, 1999) at right price (Chin et al., 2004), and finally the utilizing the right
technology (Boubekri, 2001; Basnet et al., 2003). The strategic nature of SCM practices
(SCMP) will be able to explain the dual purpose of SCM namely to improve the
performance of an individual organization and to improve the performance of the entire
supply chain (Wong et al., 1999). In order to be highly competitive and to achieve
sustainable profitability growth, SCM seeks close integration of internal functions
within firm and external linking with suppliers, customers, and other channel members.
This could be achieved through effective construction of various SCMP (Kim, 2006).
Literatures have highlighted on the need to understand SCMP, which is becoming an
essential prerequisite, to staying in the competitive global race and to grow profitably
(Power et al., 2001; Moberg et al., 2002; Sezen, 2008).
However, in spite of the key role of SCMP, far limited and scant scholarly investigation
has been undertaken to present a theoretical viewpoint, supported by empirical evidence
(Basnet et al., 2003), on how SCMP yield performance gains at firm level and improve the
total supply chain performance (SCP). In addition, although some organizations
have realized the importance of implementing SCMP, they often do not know exactly
what to implement, due to a lack of understanding of what constitutes a comprehensive
set of SCMP (Li et al., 2006b) especilly in emerging markets. For instance, in the case of
the semiconductor industry in Malaysia, Rajagopal et al. (2009a) discussed on why
BIJ firms were reluctant to focus on supply chain partnering despite its importance for
18,6 performance. Furthermore, given the failure of so many SCMP efforts to yield the desired
improvements in performance, the question remains whether SCMP can positively
impact performance (Handfield and Nichols, 1998; Tan et al., 1999) especially in countries
that are still developing. This study describes a research effort that addresses these
questions. The study has a single main underlying purpose that is to disclose the
836 interrelationships among the two main constructs; SCMP and SCP. Accordingly, the
main research question is of whether the SCMP affect SCP.
The theoretical gaps this study addresses are of importance because the SCMP
construct developed in this study incorporates combination of new dimensions of
SCMP. For instance, due to the lack of understanding on other dimensions of SCMP,
Li et al. (2006b) suggest future research to use additional dimensions like agreed supply
chain leadership. This study identified new dimensions of SCMP which combines
components of SCMP proposed by Li et al. (2006b) (comprehensive model) and Min and
Mentzer (2004) (system approach model). In addition, to our knowledge, there are only
a limited number of studies (Kim et al., 2006; Rai et al., 2006; Wu et al., 2006; Zolait et al.,
2010) available for examining the issue using the resource-based view (RBV) that
emphasize the role of firms’ capability and competence. Studies using RBV in the
context of SCM is also limited to examining only the link between information
technology (IT) and SCM performance ( Jean et al., 2008). Therefore, this study proposes
linking the SCMP and SCP using RBV as the underpinning theory.
In addition to the above motivation, apparently, studies on the issues for emerging
countries are limited and there is no published studies on comprehensive SCMP in
Malaysia, particularly in manufacturing industry. To date, the limited research conducted
in the area of SCMP were largely concerning countries such as New Zealand (Basnet et al.,
2003), Pakistan (Bhutta et al., 2007), Hong Kong (Chin et al., 2004), the USA (Gowen and
Tallon, 2003; Hong and Jeong, 2006), the UK (Holt and Ghobadian, 2009), and Turkey
(Koh et al., 2007). Despite lacking developing countries’ case study, there are several
other reasons that prompted this study to focus on Malaysia, specifically the electronics
industry. The electronics manufacturing industry contributed over a quarter of
manufacturing value added and over 50 percent of manufactured export in Malaysia over
the period of 1980-2005 (Chandran, 2010). Owing to a small domestic market, electronics
manufacturing is always driven by the export market through global orientation. Since
the 1970s, electronics industries in Malaysia have also managed to attract huge amount of
foreign direct investment. Now with the relocation of multinational corporations (MNCs),
learning among local firms with respect to SCMP has especially improved among firms
that have desires to benefit by integrating into the global supply chain. However, despite a
long and steady reputation of electronics manufacturing, effort to embed high-tech
environment and large-scale innovation is still moderate and slow. Thus, the notion that
SCMP will significantly contribute to SCP should not be taken for granted without
empirically testing the relationship. As such, Malaysia offers an interesting case for a
middle income economies to examine the SCMP and its relationship to the performance.
The remainder of the study is organized as follows. Section 2 outlines the main
conceptual issues on SCMP and SCP. Section 3 describes the research model and
explicates the theoretical basis for the hypotheses development. Sections 4 and
5 describes the research methodology and reports the results, respectively. Section 6
presents the discussion and the conclusions.
2. Main conceptual issues Supply chain
2.1 SCM practices management
SCMP are viewed from a variety of different perspectives and multi-dimensional
concept. SCMP have been defined as the set of activities undertaken in an organization practices
to promote effective management of its supply chain. Pioneering research conducted
by Donlon (1996) describes the SCMP to include supplier partnership, outsourcing,
cycle time compression, continuous process flow, and IT sharing. Tan et al. (1998a) 837
empirically assessed the inclusion of purchasing, quality, and customer relations
dimensions to represent SCMP. Tan (2001) also recommended that SCMP to include the
flow of materials and information and postponement (POS) strategy and mass
customization. Similarly, Tan et al. (2002) identify six other dimensions of SCMP
through factor analysis namely supply chain integration, information sharing (IS),
supply chain characteristics, customer service management, geographical proximity,
and just-in-time capability. Chen and Paulraj (2004) use supplier-base reduction,
long-term relationship, communication, cross-functional teams, and supplier
involvement to measure SCMP. In addition, Min and Mentzer (2004) identify the
concept SCMP through system approach which includes dimensions such as agreed
vision and goals, IS, risk and reward (RR) sharing, co-operation, process integration,
long-term relationship, and agreed supply chain leadership. Subsequently, realizing
the importance of the SCMP, Li et al. (2005) conceptualizes, develops, and validates six
dimensions (strategic supplier partnership (SSP), customer relationship (CR), IS,
information quality (IQ), internal lean practices, and POS) of SCMP and conducted
a test on its relationship with the firms competitive advantage and performance
(Li et al., 2006b). In reviewing and consolidating the literature, two important concepts
are identified to develop the total SCMP which will be able to structure complete
multi-dimensional practices, comprising seven constructs. The seven constructs
constitute the combination of comprehensive model (Li et al., 2006b, 2005) and system
approach model (Min and Mentzer, 2004). In other words, the proposed total SCMP in
this study will cover all the important dimensions such as upstream (SSP) and
downstream (CR) sides of a supply chain, information flow across a supply
chain (IS and IQ), internal supply chain processes (POS), and system approach
(Min and Mentzer, 2004) that includes agreed vision and goals and risk and award
sharing.

2.2 Supply chain performance

Performance measurement has been defined as a systematic process of effectively and
efficiently quantifying a concept or an action (Neely et al., 1997). In SCM, performance
measurement enables collaborative integration among the supply chain partners. In
addition, there are short-term objectives of SCM (enhance productivity and reduce
inventory and lead time) and long-term objectives (increase market share and
integration) (Li et al., 2006b; Lyons et al., 2004). The traditional methods focus solely on
well-known financial measures, which are best, suited to measure the value of simple
SCM applications. Unfortunately, evaluation methods that rely on financial measures
are not well suited for newer generation of SCM applications. As such, a balanced
approach to evaluate SCP is needed to measure the short- and long-term objectives that
includes financial and non-financial aspect. Based on this discussion, in this study,
following Koh et al. (2007) wider approach is adopted to measures SCM-related
BIJ organizational performance. The construct measurements incorporate items that relates
18,6 to sales growth, costing accuracy, and coordination between department, supplier, and
customer.

2.3 SCMP and performance

838 Kim et al. (2006) stated that supply chain efficiency can only be realized through the
various interaction of SCMP. This view is supported by others studies (Dawe, 1994;
Ballou, 1992) and consensus emerged in that SCMP should shift from function to
integrative in order to value its performance effectiveness. Specifically, Kim et al. (2006)
provided empirical evidence to show how SCMP could potential enhance
organization’s competitive capabilities such as cost leadership, customer service, and
product differentiation. Recent studies (Koh et al., 2007; Li et al., 2005, 2006b) also
indicated that the SCMP have a common goal of ultimately improving organizational
performance. For instance, Koh et al. (2007) identified that SCMP have significant
direct positive impact on organizational performance event in small and medium
enterprises. As a whole, previous literature forms a strong consensus on the positive
link between SCMP and SCP.

3. Research model and hypotheses

Figure 1 shows the framework of the study. The framework proposes that
implementation of SCMP, in electronics manufacturing industry, to influence the SCP.
The influence of seven critical dimensions of SCMP on SCP namely supplier strategic,
CR, IS, IQ, POS, agreed vision and goals, and RR sharing were examined. Consequently,
based on the extent literature, the following sections discus the RBVs, the proposed
relationships between SCMP and SCP, and the hypotheses of this study. Likewise,
Section 4 discusses the construct measurements for the proposed framework.

Supplier
Strategic Partnership
Customer
Relationship

Information
Sharing
Supply Chain
Performance
Information
Quality

Postponement

Agreed Vision
& Goals
Figure 1. Risk & Reward
Framework of study
Sharing
3.1 RBV and SCMP capability Supply chain
The underpinning theory for the research framework is the RBVs of firm. management
RBV emphasizes the role of the firms’ internal and external resources for performance
(Barney, 1991). Firm resources include assets, capabilities, organizational processes, practices
firm attributes, information, and knowledge (Barney, 1991). The unique bundle of
resources owned by firms that are heterogeneous is expected to explain the variation in
firm performances (Penrose, 1959; Wernerfelt, 1995). These resources include 839
organizational capability (Praest, 1998) as well as the firms’ basic competence and
dynamic capability such as coordination of different types of knowledge and integration
of multiple flow of technology (Prahalad and Hamel, 1990). One important form of
capability is the SCM capability, i.e. SCMP capability (Sari, 2008; Trkman et al., 2007;
Maheshwari et al., 2006; Sanchez-Rodrıguez et al., 2005). Wu et al.(2006) stressed that
supply chain capabilities as a unique set of organizational capabilities and proposed four
such capabilities namely, information exchange, coordination with partners, integration
ability, and supply chain responsiveness. In this context, supply chain capabilities is
viewed as the ability of the firms in identifying, utilizing and assimilating information,
and resources to facilitate the SCP (Wu et al., 2006).
In this study, similar to the RBV definition of capability, SCMP are viewed as the
firms’ ability or potential ability to form SSP, establish CR and ability to share
information, vision, goals, and risks. In other words, this study conceptualizes SCMP
as the supply chain capability to include the seven main constructs mentioned in the
proposed framework. These capabilities can also be viewed as business coordination
and integration processes that are important to utilize the resources. As such,
organizations embarking on supply chain need to focus on the ability of organizational
skills and processes in practicing those elements of SCMP. Thus, organizations that
have better SCMP are likely to develop a competitive advantage. Recent studies using
RBV in the context of SCM include Kim et al. (2006), Rai et al. (2006), Wu et al. (2006)
and Zolait et al. (2010). These studies, although limited in the context of emerging
markets, provide interesting accounts on the use of RBV in the context of IT, supply
chain capability, and SCP. These studies also confirm that IT capability facilitates the
SCP. Our study emphasizes RBV from the capability centric lens that focuses mainly
on SCMP as the main capabilities of firms.
3.1.1 Strategic supplier partnership. SSP is defined as the long-term relationship
designed to leverage the strategic and operational capabilities of individual
participating organization to achieve significant benefits to each party (Li et al.,
2006b, 2005). A true supplier partnership, encourages mutual planning and problem
solving efforts (Gunasekaran et al., 2001), and is critical in operating a leading-edge
supply chain. Azar et al. (2009) have investigated the impact of supplier management on
the performance and have found that effective supplier management is directly related to
higher level of performance conformance. Similarly, Boddy et al. (2000) and Bordonaba
and Cambra (2009) also viewed supply chain partnering (which is the broader concept of
supplier strategic partnering) as crucial asserting that such strategic collaboration will
definitely enhance performance among supply chain collaborative partners. From the
RBV perspective, SSP is viewed as the firm’s ability to coordinate and integrate
resources with their respective partners. Griffith and Harvey (2001) considered
the ability to coordinate inter-organizational relationships effectively as one of the
important resources of the firms. Wu et al. (2006) views SSP as one of the key supply
BIJ chain capability and refers SSP to the ability in coordinating the partner’s
18,6 transaction-related activities. These capabilities improve operational efficiency and
performance between the partners. Similarly, proponents of RBV viewed the ability to
integrate strategies in an effort to jointly execute a collective activity as an important
capability (Grant, 1996). In a similar notion, SSP represents this ability. Hence, strategic
partnering with suppliers will be able to enhance the supply chain efforts to better
840 performances. The following hypothesis was developed on this premise:
H1. The SSP has positive relationship with SCPs.
3.1.2 Customer relationship. CR is defined as the practice to manage customer
complaints, build long-term relationships with customers, and improve customer
satisfaction (Tan et al., 1998b). Close CR allows an organization to differentiate its
product from competitors and dramatically extend the value it provides to its customers
and sustain customer loyalty through customer satisfaction (Cox, 2004; Dadzie and
Winston, 2007). RBV views dynamic capability of the firms in terms of reconfiguration
of resources to meet evolving customer demands (Zahra and George, 2002). The ability
to learn from customers and integrate with customers is a unique form of firm capability.
The ability to respond to customers’ changing demands also helps firms create new
products and processes. Therefore, maintaining good CR and getting customer feedback
represents valid dimensions of SCMP. This construct also captures the capability notion
of RBV. Analyzing the empirical data collected from Hong Kong, Chin et al. (2004) have
identified that maintaining effective CR will be able to promote open communication
among members of supply chain and eventually engage in joint problem solving
effort with long-term commitment. Therefore, customer relation practices can bring
significant impact in managing the total value chain entities across the supply chain in
order to improve the performance of the total supply chain. Based on the above
discussion, this study consequently proposes the following hypothesis:
H2. The CR has positive relationship with SCPs.
3.1.3 Information sharing. IS refers to the extent to which critical and proprietary
information is communicated among supply chain members with regards to market,
product, and customer information (Mentzer et al., 2001; Li et al., 2006a). The RBV
emphasize on the ability of firms in generating new knowledge and ability in facilitating
IS. Knowledge acquisition, assimilation, transformation, and exploitation which
are termed as absorptive capacity in the RBV literature are important dimensions of
organizational capability. Therefore, IS with partners is considered as important
elements of supply chain capability. Wu et al. (2006) conceptualized information
exchange as one of the constructs representing supply chain capabilities. The effort in
providing information and making it visible to other parties in the supply chain allows
for faster and accurate business decisions that translates as a source of competitive
advantage (Moberg et al., 2002). As such, IS is regarded as the terminator of “bullwhip
effect” (Fiala, 2005) that reduces the total cost of the supply chain in delivering efficient
SCP (Gavirneni, 2006). This study therefore proposes the following hypothesis:
H3. The IS has positive relationship with SCPs.
3.1.4 Information quality. IQ refers to the extent of which the information flow and
exchange is accurate, timely, adequate, and credible (Li et al., 2006b). Numerous studies
(Li et al., 2006a; Lyons et al., 2004; Moberg et al., 2002) have shown that well-managed Supply chain
IQ within and across the organization will directly lead to improved SCP. Further, management
Forslund and Jonsson (2007), through their recent research, have indicated
that different IQ deficiency could impact the usefulness of forecast and its ability to practices
influence SCP. Hence, this will also provide managers to make precise business
decision for effective management of supply chain (Raisinghani and Meade, 2005).
Based on this assumption, the following hypothesis was developed: 841
H4. The IQ has positive relationship with SCPs.
3.1.5 Postponement. POS is defined as the practice of moving forward one or several
operations or activities to a much later point in the supply chain (Beamon, 1998). From
the RBV standpoint, POS capability characterize the organizational and strategic
routines of firms by which they achieve new resources configuration especially in
postponing manufacturing activities to meet changing market conditions. Increasingly,
POS has become a manufacturing strategy at firm level (Yeung et al., 2007). POS enables
an organization to meet a high level of product customization through production
flexibility (Hoek et al., 2001). Inventories are kept undifferentiated for a certain period
until customer demand is certain. Hence, this enables an organization to be highly
responsive towards change in customer demand (Li et al., 2005, 2006b). Yang et al. (2010)
compared the translating implementation of manufacturing POS to service POS and its
benefit to members of the supply chain in total. Overall, POS can reduce inventory cost
along the supply chain and eventually increase SCP (Yang et al., 2007). Based on existing
work, this study consequently proposes the following hypothesis:
H5. POS has positive relationship with SCPs.
3.1.6 Agreed vision and goals. Successful and effective chain requires collaboration
among partners (Boddy et al., 2000; Lambert et al., 1998). This collaboration is obtained
through IS, trust, and commitment. Unfortunately, this cannot be achieved without
agreed vision and common goals (VIGOAL) among members of the supply chain
(Spekman et al., 1998). RBV emphasize the need to develop capability in the forms of
integrating strategies and coordinating collective activities between partners. Agreed
vision and goals capture such forms of capability. Several authors (Cooper and
Ellram, 1993; Cooper et al., 1997a, b) concur strongly on the fact that agreed vision and
goals are the key component of SCM. Therefore, agreed vision and goals are imminent
to orchestrate the roles and responsibilities of the supply chain members. Subsequently,
this will ensure the success of supply chain practices in capturing a high level of SCP
(Wisner, 2003). As discussed, this study proposes the following hypothesis:
H6. Agreed vision and goals have positive relationship with SCPs.
3.1.7 RR sharing. The term risk is defined as the extent to which there is uncertainty
about whether potentially significant or disappointing outcomes of decisions
(Finch, 2004). What most definitions of risk have in common are the three dimensions
(Juttner, 2005):
(1) likelihood of occurrence of a particular event or outcome;
(2) consequences of the particular event or outcome occurring; and
(3) causal pathway leading to the event.
BIJ Previous studies (Cooper and Ellram, 1993; Cooper et al., 1997a, b) regarded the RR
18,6 sharing among the supply chain partners as a collective effort in managing SCM. The
capability to share RR will help to divide the level of risk and return between strategic
partners on technology, customer, or market-focused initiatives (Hall, 1999; Ritchie and
Brindley, 2007) whereby, it provides trustworthy and coordinated relationship
partnering among members of supply chain. As a result, RR sharing practices act as an
842 impetus for effective supply chain (Ellram and Cooper, 1990). Consequently, in the long
run, this will be able to improve the SCP (Towill, 2005). Therefore, the following
hypothesis was developed:
H7. RR sharing has positive relationship with SCPs.

4. Research methodology
4.1 Development of the survey instrument
The questionnaire for this study consisted of three main sections, namely the
background of the company, the motivation, and implementation of SCMP and specific
questions designed to measure the SCP constructs. A total of seven-dimensional
constructs (Table I) perceived to be important for effective SCMP were proposed to
represent the SCMP. Construct measuring SSP, CR, IS, IQ, and POS follows Li et al. (2005,
2006a, b). As mentioned earlier, following Min and Mentzer (2004) and Bowersox et al.
(1999), we included two other dimensions of SCMP namely, agreed vision and goals, and
RR sharing.
Overall, this new SCMP are measured by considering SCMP from within the whole
system of supply chain that includes upstream, downstream, internal process, across
supply chain, and system orientation. Hence, the new SCMP could be viewed as a more
comprehensive concept in comparison to the narrow view taken in previous researches
(Alvarado and Kotzab, 2001; Basnet et al., 2003). All items of SCMP are measured using
seven-point scales ranging from “strongly disagree” to “strongly agree”. Likewise,
construct measuring dimensions of SCP were adopted from Koh et al. (2007). We use a
seven-point scale as a unit of measurement ranging from “definitely worse” to
“definitely better” in relative to their major competitor.
The collective evidence from past literatures (Li et al., 2005, 2006b; Min and Mentzer,
2004; Bowersox et al., 1999; Koh et al., 2007) suggested that the SCMP and SCP constructs
demonstrate good measurement properties. Table I summarizes the variables and
number of measurement items and supporting literature for each measurement
variable[1]. In addition, the questionnaire was pre-tested by two professionals in practice
for accuracy and validity of the question interpretation (content validity). Based on the
opinions of the professionals and significant support from the previous literatures we
find that the measurement fulfill the content validity and clarity of content.

4.2 The sample

A total of 600 electronics firms were randomly selected from the Information Service of
Statistical Department, Malaysia. The survey, through the mailed questionnaire, was
carried out for a period of six months in early 2009. As a measure to speed up and
improve response rate, follow-up calls with a promised presentation of findings to
respective firms for managerial insights yielded encouraging results. However, only
when there is no significant difference between the initial respondents and respondents
 Supply chain
Numbers
Construct Description of items Sample survey question Source management
SSP A long-term relationship 6 We regularly solve Li et al.
practices
designed to leverage the problems jointly with our (2005, 2006a, b)
strategic and operational suppliers
capabilities of individual 843
participating organization
to achieve significant
benefits to each party
CR A practices to manage 5 We frequently measure and Li et al.
customer complaints, build evaluate customer (2005, 2006a, b)
long-term relationships with satisfaction
customers, and improve
customer satisfaction
IS IS refers to the extent to 6 Our trading partners keep Li et al.
which critical and us fully informed about (2005, 2006a, b)
proprietary information is issues that affect our
communicated to among business
supply chain members with
regards to market, product,
and customer information
IQ IQ refers to the extent of 5 Information exchange Li et al.
which the information flow between our trading (2005, 2006a, b)
and exchange is accurate, partners and us is timely
timely, adequate, and
credible
POS POS is defined as the 4 We delay final product Li et al. (2005,
practice of moving forward assembly activities until 2006a, b)
one or several operations or customer orders have
activities to a much later actually been received
point in the supply chain
VIGOAL An effort to establishing 4 Our supply chain members Min and
commonly agreed vision have common, agreed to Mentzer (2004)
among supply chain goals for SCM and
partners to achieve specific Bowersox et al.
common objectives (1999)
RR sharing A mutual sharing of risk 3 Our supply chain members Min and
factors and reward factors share risks and rewards Mentzer (2004)
among members of supply and
chain Bowersox et al.
(1999)
SCP A performance measure 5 How did your business Koh et al. (2007)
which enhances short-term perform over the last three
goals (reduce cost) and long- years relative to their major
term goals (increase market competitors in terms of Table I.
share and integration) increase in sales? Variable measurement

after the follow-up calls, will the findings be representation of the population. We tested
for such difference between the groups but were unable to find any significant
differences[2]. Finally, after eliminating incomplete survey, there were 110 complete
and useable responses, representing a response rate of 18 percent. Demographic data
showed in Table II depict that majority (60.3 percent) of the firms represent
BIJ the component electronics industry. In terms of employment size the majority of the
18,6 firms are in the category of 251-500 workers and greater. Almost 73 percent of the
selected firms have between 10 and 20 years of operational experience.

4.3 Analytical procedures and variable measurements

Data processing involve two stages. In the first stage, descriptive statistics was
844 employed to identify the characteristics of the sampled firms. The second stage
involved estimating the measurements validity and reliability, structural parameters
of the structural equation model, and testing the research hypotheses using the partial
least squares (PLS) method (Chin et al., 2003). PLS method were preferred over the
better-known LISREL method because its structural equation model allowed us to test
the research model and, at the same time, assess the properties of the underlying
empirical model. PLS has enjoyed increasing popularity in recent years because of its
ability to model latent construct under the conditions of non-normality and ability of
testing the theoretical framework partially without needing to fully crystallize the
model (Chin, 1998). PLS is known to be particularly advantageous in the initial
development and assessment phase of theory building (Fornell and Bookstein, 1982).
Furthermore, the PLS method is more robust since its does not require either a large
sample or a normally distributed data (Fornell and Larcker, 1981).
Convergent validity indicates the extent to which the measures of a construct that
are theoretical related are also related in reality. Convergent validity can be evaluated
by inspecting the factor loadings of the measures on their respective constructs (Chin,
1998; Hulland, 1999), and the reliability of the measures can be assessed using
composite reliability and average variance extracted (AVE). Table III shows the results
of the psychometric properties of the measurements. Most of the factor loading are
satisfactory with the cutoff value above 0.7, except that the factor loading of two items
are below the cutoff value but yet acceptable. Thus, overall measurement items have
adequate item reliability. Similarly, for convergent validity (also referred to as
composite reliability), the AVE should be at least 0.5 and the CR should be greater than
0.6 (Bagozzi and Yi, 1988). In all cases, the measurement model seems to have adequate
convergent validity and reliability.
Discriminant validity can be verified with the square root of the AVE for each
construct higher than any correlation between this construct and any other construct

Business description % Number of employees %

Component 60.3 Fewer than 50 –
Industrial electronics 22.3 50-100 13.2
Consumer electronics 17.4 101-250 18.4
251-500 39.5
501 or greater 28.9
Annual sales (million) % Operating experience (years) %
Less than 1 – Less 1 –
1-5 18.4 1-5 5.3
5-10 23.7 6-10 13.2
Table II. 10-50 34.2 10-15 years 39.5
Description of the 50-100 15.8 15-20 years 34.2
sampled firms More than 100 7.9 More than 20 years 7.8
 Supply chain
Construct and items Loading SE t-value
SSP, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.693
management
Organization considers quality as number one criterion in selecting practices
suppliers 0.906 0.011 81.223
Organization regularly solve problems jointly with its suppliers 0.900 0.009 90.345
Organization helps its suppliers to improve their product quality 0.851 0.055 9.976
Organization has continuous improvement programs that include its 845
key suppliers 0.615 0.125 6.991
Organization include its key suppliers in its planning and goal setting
activities 0.775 0.068 7.773
Organization actively involves its key suppliers in new product
development processes 0.777 0.033 8.855
CR, a ¼ 0.655, CR ¼ 0.787, AVE ¼ 0.692
Organization frequently interacts with customers to set its reliability,
responsiveness, and other standards 0.815 0.048 17.022
Organization frequently measures and evaluates customer satisfaction 0.804 0.054 15.989
Organization frequently determine future customer expectations 0.811 0.039 18.765
Organization facilitates customers’ ability to seek assistance from it 0.885 0.044 17.567
Organization periodically evaluates the importance of its relationship
with its customers 0.877 0.066 14.897
IS, a ¼ 0.774, CR ¼ 0.839, AVE ¼ 0.637
Organization informs its trading partners in advance of changing
needs 0.913 0.023 36.659
Organization’s trading partners share proprietary information with
your organization 0.768 0.065 18.222
Organization’s trading partners keep your organization fully informed
about issues that affect its business 0.816 0.044 21.677
Organization’s trading partners share business knowledge of core
business processes with your organization 0.749 0.066 18.678
Organization and its trading partners exchange information that helps
establishment of business planning 0.782 0.053 14.750
Organization and its trading partners keep each other informed about
events or changes that may affect the other partners 0.668 0.095 9.878
IQ, a ¼ 0.742, CR ¼ 0.825, AVE ¼ 0.707
Information exchange between organization and its trading partners
is timely 0.825 0.055 12.544
Information exchange between organization and its trading partners
is accurate 0.742 0.023 14.893
Information exchange between organization and its trading partners
is complete 0.882 0.047 12.672
Information exchange between organization and its trading partners
is adequate 0.767 0.036 14.436
Information exchange between organization and its trading partners
is reliable 0.876 0.062 12.725
POS, a ¼ 0.615, CR ¼ 0.773, AVE ¼ 0.834
Organization’s products are designed for modular assembly 0.928 0.453 2.833
Organization delays final product assembly activities until customer
orders have actually been received 0.743 0.339 2.987
Organization delays final product assembly activities until the last Table III.
possible position (or nearest to customer) in the supply chain 0.777 0.375 2.118 Psychometric properties
VIGOAL, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.611 of measures
Supply chain members have common, agreed goals for SCM 0.711 0.044 17.342 of independent and
(continued) dependent variables
BIJ Supply chain members are actively involved in standardizing supply
18,6 chain practices and operations 0.881 0.021 15.999
Supply chain members clearly define roles and responsibilities of each
others cooperatively 0.834 0.027 15.611
Know which supply chain members are responsible for what activity
within the supply chain 0.772 0.032 16.912
846 RR sharing, a ¼ 0.819, CR ¼ 0.864, AVE ¼ 0.654
Supply chain members share risks and rewards 0.838 0.439 6.839
Supply chain members share research and development costs and
results with each other 0.745 0.375 7.566
Supply chain members help each other financial capital investment 0.766 0.411 7.198
SCP, a ¼ 0.789, CR ¼ 0.869, AVE ¼ 0.803
More accurate costing 0.917 0.023 28.871
Increase in coordination between departments 0.967 0.009 34.082
Increase in coordination with suppliers 0.866 0.016 31.593
Increase in coordination with customers 0.867 0.021 29.822
Table III. Increase in sales 0.948 0.011 30.899

(Fornell and Bookstein, 1982; Fornell and Larcker, 1981). As shown in Table IV, each
construct shares a greater variance with its own measures than with any other construct.
This reveals that each construct is more closely related to its own measures than to those
of other constructs and thereby confirming the discriminant validity (Fornell and
Bookstein, 1982; Fornell and Larcker, 1981).

5. Results
In this section, we discuss the current SCMP among electronics firms in Malaysia
followed by the empirical results. Limited studies are available on the current SCMP
for the electronics industry in Malaysia. Nevertheless, these studies reveal that SCMP
are indeed significantly undertaken by MNCs and its suppliers especially in electrical
and electronics industry. Rajagopal et al. (2009a) using a case study approach
highlighted the efforts in improving supplier’s relationship, IS, and CR in two MNCs
and among its suppliers. However, the study also cautions that the level of SCMP
differs between the MNCs. Lacking the empirical evidence on the detail SCMP for the
entire electronics industry, we first discuss the current state of SCMP in the electronics
industry in Malaysia. Table V reports the mean values of all dimensions of SCMP.

SSP CR IS IQ POS VIGOAL RR SCP

SSP 0.832
CR 20.129 0.832
IS 0.201 0.083 0.798
1Q 0.178 0.037 0.372 0.841
POS 0.377 0.016 0.267 0.400 0.913
VIGOAL 0.307 20.134 0.378 0.277 0.299 0.781
RR 0.276 0.177 0.114 0.267 0.323 0.416 0.809
SCP 0.112 20.023 0.247 0.223 0.369 0.488 0.487 0.927
Table IV.
Correlations between Note: The italics items on the diagonal represent the square roots of the AVE, and off-diagonal
constructs elements are the correlation estimates
The results indicate that mean scores of SSP, IQ, and IS are much higher compared to Supply chain
other dimensions of SCMP. Relatively, mean scores of CR and PST were the lowest, management
indicating a lack in the use of such practices. However, consumer electronics firms
have relatively higher CR scores than component and industrial electronics firms. This practices
is consistent with previous studies (Rajagopal et al., 2009a; Omar et al., 2009;
Sambasivan and Jacob, 2008) that highlighted the significant use of many of the SCMP
among electronics firms in Malaysia. As a whole, we can conclude that electronics 847
firms in Malaysia are inclined to engage in SCMP. The electronics industry in Malaysia
is driven by few large MNCs that are export oriented. These MNCs increasingly engage
in SCMP to form a global supply chain (Sambasivan and Jacob, 2008) and also require
its suppliers (including local suppliers and producers) to do the same. Indeed, SCM is
seen as a tool to cope with intense competition and pressure to bring the product to
market faster (Rajagopal et al., 2009a). The government’s incentives and support also
prepares local industries to adopt SCM in Malaysia (Rajagopal et al., 2009b).
We used a bootstrapping procedure to test the effects and the statistical significance
of the parameters using t-test in the structural model (Chin, 1998). The variance
explained (R 2) and the significance of the path coefficient indicates the quality of PLS
model (Chin, 1998; Saadé, 2007). Table VI shows the results of the model. The R 2 value
was 0.469 and it indicates that the model explains a good amount of variance in SCP. The
results provide significant support for some of the hypotheses proposed in this study.
SSP, IS, IQ, POS, agreed vision and goals, and RR sharing were found to have significant
positive effects on SCP. However, CR, although positive, lacks the significance.
Managing CR require firms to extensively invest in enabling technology that supports

Electronics
(overall) Component Industrial Consumer
Construct Mean SD Mean SD Mean SD Mean SD

SSP 5.84 0.56 5.84 0.54 5.85 0.65 5.80 0.55

CR 3.92 0.76 3.92 0.78 3.73 0.89 4.10 0.46
IS 5.20 0.99 5.15 0.91 5.24 1.25 5.27 0.94
IQ 5.97 0.85 6.05 0.71 5.75 1.15 5.91 0.91
POS 3.68 0.83 3.71 0.73 3.45 0.95 3.83 0.25
VIGOAL 5.41 0.29 5.39 0.57 5.43 0.90 5.46 0.56 Table V.
RR 5.17 0.98 5.20 1.15 4.94 0.96 5.33 0.43 SCMP in electronics
SCP 5.28 0.87 5.24 0.84 5.37 1.14 5.30 0.57 industry in Malaysia

Dimensions Path coefficient (b) t-value Hypotheses

SSP 0.104 * 2.216 Supported

CR 0.013 0.355 Not supported
IS 0.176 * * 2.745 Supported
IQ 0.125 * * 2.978 Supported
POS 0.014 * 0.598 Supported
VIGOAL 0.377 * * * 7.459 Supported Table VI.
RR 0.144 * * 2.416 Supported Results of the PLS
analysis (path
Note: *p-value , 0.01, * *p-value , 0.05, and * * *p-value , 0.001, respectively coefficients, t-values)
BIJ customer interactions with firms ( Jean et al., 2008). Challenges in effective
18,6 implementation of such technology may have limited the building of better CRs that
reduces its significance. Moreover, CR may also have an indirect effect on SCP moderated
by technological initiatives (Jean et al., 2008). Indeed, Rajagopal et al. (2009a) lucidly
argued on the role of technology in enabling SCMP in two electronics MNCs in Malaysia.
In fact, it should be noted that the benefits of all SCMP, in this study, could have been
848 potentially more significant if firms pose considerable IT capabilities ( Jean et al., 2008).
We suggest that future studies in emerging markets consider the impact of IT in
facilitating the SCMP towards achieving greater performance.
Agreed vision and goals (b ¼ 0.377, p , 0.001), are the most influential factors in
determining the SCP suggesting that VIGOAL is a powerful predictor of SCP.
For instance, in Malaysia several firms share common goals like enabling the
notification of shipping documentation via RosettaNet. This has enabled members of
the supply chain to electronically correspond shipping documentation to the local
customs officials. The established mutual goals benefited all within the system. Agreed
goals also create mutual participation via planned collaboration and co-operation.
When one firm moves to achieve its goals, the other member of the supply chain should
do the same. Other factors having greater effects include IS (b ¼ 0.176, p , 0.01),
RR sharing (b ¼ 0.144, p , 0.01), and IQ (b ¼ 0.125, p , 0.01). Similar to previous
studies ( Jayaram et al., 2000; Mason-Jones and Towill, 1999), IS and IQ are found to be
significant factors in enhancing the SCP of electronics firm in Malaysia. Additionally,
Zhou and Benton (2007), also supported the proposition that good information
management can lead to right supply chain practices and eventually create an effective
and efficient supply chain. The findings of this study also concurs with the studies
from Cooper and Ellram (1993), Cooper et al. (1997a, b) that there is significant
relationship between RR sharing practices and performance.

6. Discussion and conclusion

This study has provided empirical justification for a framework that identifies seven
constructs of SCMP and describes the relationship among SCMP and SCP within the
context of electronics manufacturing in Malaysia. Previous studies supporting the
importance of SCMP mostly used case studies and relate SCMP to organizational
performance and not SCP. The major contribution of the present study is the
development of a set of SCMP constructs through comprehensive combination and,
accordingly, examining its impact on SCP. Based on a survey data of 110 electronics
manufacturing firms, the research framework was tested using PLS method, which is a
variance-based structural equation modeling approach. This study carries more weight
especially for generalization purpose due to the limited quantitative approach in the
extant literatures. As a whole, effective SCMP have important implications for SCP.
This study offers a number of managerial implications. First, it provides SCM
managers with an impeccable formula for evaluating the effectiveness of the new
combination of SCMP. Second, the analysis also indicates that SCMP might
directly influence SCP. Theoretically, this study offers empirical evidence suggesting
that even in emerging markets better SCMP can yield good performance. These
findings offer scholars new avenues for future research and consequently provide
managers important insights on the effectiveness of SCMP. In the long term, the
success of electronics manufacturing firms in Malaysia are heavily dependent on its
strategic supply chain factors such as agreed vision and goals, RR sharing, IS, and IQ. Supply chain
As such this study, inline with (Chandra and Kumar, 2000) concludes that the entire management
value chain along the upstream and internal process of the supply chain has to be
effective. Since there are practices which are not consistent in their impact towards practices
SCP, for instance customer relation, there is a need to test this practice for any indirect
impact on SCP. However, this test will need to take consideration of the role of
mediating effects of other variables such as IT initiatives, supply chain integration, 849
or supply chain competitiveness. Apart from this, future research can also consider
studying the synergies between total quality management practices and knowledge
management as well as measuring how practices of other disciplines in combination
with SCMP could affect the performances of supply chain. Future research can also
focus on expanding the research scope to different industries or investigate the
comparative implementation situations between different industries in terms of types
of business operations, ownership, and firm sizes.
Among the limitations of this study is the use of only one informant per firm, which
might be a cause for possible response bias. Thus, caution should be exercised when
interpreting the results. Future research should endeavor to collect data from multiple
members across the supply chain. Furthermore, this study reports from a questionnaire
survey at one point in time and lacks trends or changes. Since only the electronics industry
was considered, the conclusive evidence reported in this study is also industry specific.
Despite these limitations, however, the new insights of this study could potentially inspire
further empirical work within this area especially in emerging markets.

Notes
1. Details of the items measuring each construct are reported in Table III.
2. Data not reported due to space constraint but can be made available upon request.

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Corresponding author
V.G.R. Chandran Govindaraju can be contacted at: [email protected]

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