Strategic Fit of Supply Chain Management Information Systems: A Multiple Case Study Investigation

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Strategic Fit ofSupply Chain ManagementInformati
on SystemsA Multiple Case Study Investigation

• Tim McLaren, MBA, BScEngDeGroote School of
  BusinessHamilton, Ontario, Canada
• email mclarets_at_mcmaster.ca
• web http//merc.mcmaster.ca/mclaren

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Agenda

• What are Supply Chain Management Information
  Systems (SCM IS)?
• Research Motivation and Objectives
• Methods
• Emerging Model of Strategic Fit ofSupply Chain
  ManagementInformation Systems (SCM IS)
• Significance of Preliminary Findings

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Supply Chain Management Information Systems (SCM
IS)

• What? Information sharing within or between
  partners in a supply chain for
• material movements
• financial transactions
• supply and demand planning
• Why? Poor info requires excess inventory, time

partners in a supply chain
end-customer
tier 1 supplier
suppliers supplier
retailer
manufacturer
accuratedemand information
distorteddemand information
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The Problem How to Ensure a SCM IS Fits a Firms
Strategies

• Variety of SCM ISs, each with different
  capabilities
• e.g. Electronic Data Interchange is good for
  efficiency Electronic Marketplaces are good for
  flexibility, etc.
• Lack of theory of which capabilities are best for
  a specific organization (how to obtain strategic
  fit)
• Firms look at what has worked for others without
  understanding if it really fits their unique
  situation
• EDI works for Wal-mart, why wont it work for
  me?
• Why did Nikes trial of a best-in-class SCM IS
  fail?

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Research Questions and Objectives

• Questions
• Is the degree of strategic fit of a SCM
  Information System important?
• How can we determine if a SCM IS fits a firm?
• Objectives
• Explore the concept of strategic fit of a SCM IS
  and its role in supply chain performance
• Develop and evaluate a model and method for
  measuring strategic fit of a SCM IS

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Research Methods Alternatives

• Sample Size (n)
• Must be big enough to cover proposed theories
• Limited by large amount of supporting evidence
  required for new theories and measures
• Methods
• Statistical Confirmation? NO possible
  alternative explanations require support from
  qualitative evidence resulting low n not
  statistically powerful
• Ethnography? NO too detailed for required n
  interested in outcome rather than process
• Multiple Case Study? YES can explore and
  refine theory and measures iteratively using
  comparisons

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Iterative Theory-Building Research (after
Eisenhardt, 1989)
review previous studies
develop conceptual model
operationalize constructs
pilot test measures

• explore and validate model
• surveys, interviews, and documents to explore
  validity of model and measures

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Exploratory Multiple Case Study Method (after
Yin, 1994 Stake, 1995)

1 Managers had responsibility for SCM IS or
were at most senior level available Consultants
had previous work experience consulting for the
company Other Experts had knowledge of company
through published documents.
2 Former employee in IS department with
consulting experience in SCM IS implementation.
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This Study is at Intersection of Three Important
Disciplines
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Strategic Fit of a SCM IS Conceptual Framework

• 1) SCM IS capabilities are indicated by level of
  support for
• Operational Efficiency
• Operational Flexibility
• Long-term Planning
• Short-term Planning
• Internal Analysis
• External Analysis
• Internal Process Coordination
• External Process Coordination
• (supported individually in Strategic Management
  and IS studies this study provides additional
  empirical support)

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Strategic Fit of a SCM IS Conceptual Framework
(contd)

• 2) Differences in supply chain competitive
  environments are indicated by
• competitive strategy types
• (strong support in Strategic Management studies
  and emerging support in IS alignment studies
  this study provides additional empirical support)
• level of supply chain integration
• (emerging support in supply chain and IOS
  literaturethis study provides limited empirical
  support)

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Emerging Conceptual Model ofStrategic Fit of a
SCM IS
CompetitiveStrategyType
Level of Supply Chain Integration
Strategic Fit of Supply Chain Management Info.
System
Supply Chain Management Info. Systems Capabilities
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Measuring Strategic Fit of a SCM IS
1) Measure
Competitive Strategy Type
Level of Supply Chain Integration
Implemented SCM IS Capabilities Profile
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Measuring Strategic Fit of a SCM IS

• Product-Market Domain
• Success Posture
• Market Surveillance
• Market Growth
• Technology Goals
• Technology Breadth
• Technology Buffers
• Managerial Focus
• Planning
• Administrative Structure
• Control

1) Measure
Competitive Strategy Type
Level of Supply Chain Integration

• Supply Chain Strategy
• Processes
• Performance Management
• Decision-Making

• Operational Efficiency
• Operational Flexibility
• Short-term Planning
• Long-term Planning
• Internal Analysis
• External Analysis
• Internal Process Coordination
• External Process Coordination

Implemented SCM IS Capabilities Profile
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Competitive Strategy Types(after Miles and Snow,
1978)

• Defender - operational efficiency
• - Wal-Mart, ExxonMobil?
• Prospector - innovation
• - Nike, Leitch Technology?
• Analyzer - minimize risk through proven
  opportunities
• - Hewlett-Packard, Toyota?
• Reactor - quick response to immediate market
  demands
• - ???

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Level of Supply Chain Integration(after
Moncrieff and Stonich, 2001 Poirier and Bauer,
2001)

• Functional Focus
• Internal Integration
• Linked Network
• Integrated Network
• Network Optimization

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Measuring Strategic Fit of a SCM IS
1) Measure
Competitive Strategy Type
2) Determine
Theoretically IdealSCM IS Capabilities Profile
Level of Supply Chain Integration
Implemented SCM IS Capabilities Profile
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Measuring Strategic Fit of a SCM IS
1) Measure
Competitive Strategy Type
2) Determine
Theoretically IdealSCM IS Capabilities Profile
Level of Supply Chain Integration
3) Calculate
Profile Similarity Strategic Fit of SCM IS
Implemented SCM IS Capabilities Profile
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Quantitative Methods

• Survey questionnaire of firms for current
• Competitive strategy attributes (existing
  measure)
• Level of supply chain integration (emergent
  measure)
• SCM IS capabilities (combination of existing
  measures)
• Perceived strategic fit of IS capabilities (new
  measure)
• Quantitative analysis using deviation from
  theoretical profile (after Venkatraman, 1989 and
  others)
• Analyze relationships between research variables
  using a mathematical calculation (Euclidean
  distance)

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Strategic Fit as Distance Between Ideal and
Observed Profiles

• Distance or profile deviation calculated by
  Euclidean Distance between ideal and observed
  capabilities
• Benefits
• holistic instead of reductionist analysis (Van de
  Ven and Drazin, 1985 Sabherwal and Chan, 2001)
• suitable when multivariate analysis infeasible
  due to number of interactions (Venkatraman, 1989)
• Limitations
• better is same distance as worse
• capabilities are equally weighted

, for each i capabilities
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Qualitative Methods

• Exploratory case studies of firms for further
  evidence of
• Competitive strategy patterns
• Current and planned SCM IS capabilities and
  rationale
• Current and expected strategic fit and benefits
  of SCM IS
• Are there other factors that influenced
  satisfaction?
• Are there other factors that influence strategic
  fit?
• Are the findings from the survey measures
  significant and plausible?

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Preliminary Findings

• Initial model and measures gave inconsistent
  results I revised models and tested alternative
  measures iteratively until results were validated
• Model of Strategic Fit of SCM IS helped explain
  differences in satisfaction with a firms SCM IS
• Model and measures helped firms in study better
  understand their strategies and capabilities

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Theoretical Model and Case Study Reports Will
Answer

• Does evidence from interviews and documents
  corroborate with survey results?
• Does evidence support the constructs and
  relationships proposed in the model?
• Are there important variables missing in the
  model?
• Do readers reviewing the evidence arrive at the
  same theoretical model?
• Does theoretical model further our understanding
  of the concept of strategic fit of a SCM IS?

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Suggestions for Future Studies

• Statistical testing with large sample of firms
  from various industries
• Investigate giving different weights to each
  capability depending on type of firm/industry
• Develop decision-support system to provide
  strategic fit analysis and recommendations

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Methodologically Related Studies

• Reich, B.H., and Benbasat, I. Measuring the
  Linkage between Business and Information
  Technology Objectives, MIS Quarterly (201),
  1996, pp. 55-81.
• Reich, B.H., and Benbasat, I. Factors that
  Influence the Social Dimension of Alignment
  between Business and Information Technology
  Objectives, MIS Quarterly (241), 2000, pp.
  81-113.
• Broadbent, M., and Weill, P. Improving Business
  and Information Strategy Alignment Learning from
  the Banking Industry, IBM Systems Journal
  (321), 1993, pp. 162-179.

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References

• Research Methodology
• Eisenhardt, K. M. Building Theories from Case
  Study Research, Academy of Management Review
  (144), 1989.
• Yin, R. K. Case Study Research, 2nd edition, SAGE
  Publications, Inc., Beverly Hills, CA, 1994.
• Stake, R.E. The Art of Case Study Research
  Perspectives on Practice, SAGE Publications,
  Thousand Oaks, CA, 1995.
• Preliminary Findings
• McLaren, T. S., Head, M. M., and Yuan, Y. Supply
  Chain Collaboration Alternatives Understanding
  the Expected Costs and Benefits, Internet
  Research Electronic Networking, Applications and
  Policy (124), 2002, pp. 348-364.
• McLaren, T. S., Head, M. M., and Yuan, Y.
  Measuring the Strategic Fit of Supply Chain
  Coordination Systems, Quarterly Journal of
  Electronic Commerce (forthcoming), 2003.

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Research Summary

• Problem
• lack of theory to help decide which SCM IS
  capabilities are most important for a specific
  firm
• Importance to Practice
• reduces risk in IS planning by providing tools
  for analysis
• measures quickly highlight areas of misalignment
• Importance to Theory
• investigates alignment of IS capabilities and
  business strategy
• builds theory for understanding supply chain
  systems success with operationalizable constructs

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Questions or Suggestions?
Competitive Strategy Type
Theoretically IdealSCM IS Capabilities Profile
Level of Supply Chain Integration
Profile Similarity Strategic Fit of SCM IS
Implemented SCM IS Capabilities Profile
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1) Measure
Competitive Strategy Type(Miles and Snow,
1978) -Defender -Prospector -Analyzer -Reactor
2) Determine
Notes 1) A firms competitive strategy type
determines the level of support for the SCM IS
capabilities -Operational Efficiency -Operational
Flexibility -Short-term Planning -Long-term
Planning -Internal Analysis -External
Analysis 2) A firms level of supply chain
integration determines the level of support for
the SCM IS capabilities -Internal Process
Coordination -External Process Coordination 3)
The strategic fit of a SCM IS is the similarity
(Euclidean distance) between the theoretically
ideal and implemented levels of support for each
SCM IS capability. The ideal level of support for
each capability is determined by a firms
competitive strategy type and level of supply
chain maturity.
Theoretically IdealSCM IS Capabilities Profile
Level of Supply Chain Integration(Moncrieff and
Stonich,2001) -Functional Focus -Internal
Integration -Linked Network -Integrated
Network -Network Optimization
Implemented SCM IS Capabilities
Profile (Sabherwal and Chan, 2001Zviran, 1990
Venkatraman and Ramanujam, 1987 Bensaou,
1997) Level of Support for -Operational
Efficiency -Operational Flexibility -Short-term
Planning -Long-term Planning -Internal
Analysis -External Analysis -Internal Process
Coordination -External Process Coordination
3) Calculate
Profile Similarity Strategic Fit of SCM IS
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Supply Chain Information and Communication
Technologies
Uniqueness of Processes
Standardized
Customized
Tight
CollaborativeTradingExchange
SharedCollaborativeSystem
CollaborativePortal
Web Services
Degree of Interorganizational Integration(proces
ses, systems, and data)
EERP/EAI
eProcurementHub / Portal
Third-partyElectronic Marketplace
EDI
Web-basedOrder Entry
Email / Fax
OfflineTrade Exchange
Offline Auction
Phone
Loose
Many-to-Many
One-to-One
One-to-Many
Type of Relationship
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Success Factors for a SCM IS
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Developing the Survey Instruments

• Adapt survey instruments from previous studies
• Administer instruments to seven senior informants
  on three manufacturers
• Continuous revision of wording of instruments
  based on feedback.
• Use panel of 3 supply chain experts (2 senior
  consultants and 1 e-Business Director) to analyze
  validity and plausibility of instruments
  results.
• Replace invalid instruments repeat pilot tests
  until panel satisfied with validity of
  instruments.

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Phase I Study Informants and Panel of Experts
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Insights from Competitive Strategy Dimensions
Results

• Possible Interpretations
• Company A is overall positioned as a Defender
  (except for Retail unit) which has served it well
  but might be beginning to cause problems as
  market demand changes
• Administrative adaptive cycle strongly defender
  but entrepreneurial dimensions are more
  Analyzer, especially in Retail segment possible
  evidence of misalignment

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Pilot Testing of Measures
Informant had trouble deciding on paragraph to
choose her 2nd choice would have resulted in
complete agreement
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Pilot Testing of Measures cont.
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Pilot Testing of Measures cont.